So No.10 is worried that despite technically coming out of recession in the last quarter of 2009, the recovery may yet stall and the economy shrink again in the first quarter of this year, just before the election. But even if that were to happen, there’s still a measure that the Government could take in the March Budget which is eminently necessary and justifiable and would be highly popular with the electorate. People might think that as the banks now announce massive profits once again, at least they’ll be paying tax again. But they won’t. Tax law at present allows the banks to spread their colossal losses indefinitely forward offsetting them against tax, so that they won’t be paying tax again for years if not decades. Merrill Lynch actually applied its £16bn sub-prime losses to the UK in order to pay no British corporation tax for 60 years!
Other countries limit the spreading of losses to only 3 years; why not the same in Britain? Even in the UK a major change of ownership (e.g. RBS, Lloyds, Northern Rock) leads to a company forfeiting its former tax losses. But it doesn’t apply if the losses were in their subsidiaries; why then don’t we close that loophole? That would bring in at least £10bn a year for the Exchequer – a nice little earner that could hansomely reward electors who have suffered as victims of the downturn.

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