You could not have a better test for ‘fairness’, a clearer test for being ‘all in it together’, than to compare post-CSR what is being granted to the bankers and what is being handed out to the victims of poverty. On the very same day we have just been told that the bankers are going to get £7bn in bonuses (yet again) this year while those picked out laser-like among the poorest are going to have their welfare payments cut by – you’ve guessed it – £7bn. But it’s not just over bonuses where the banks have wriggled free from being held to account for their recklessness and greed. Even over the bank levy just announced they’ve got a get-out-of-jail -free card.
The levy will raise no more than £2.5bn. It is a charge on a bank’s total balance sheet of just 0.04%. That’s like imposing on a man with £100 earnings a tax of precisely 4p! To be fair that will rise to 0.07% in order to reach the target of £2.5bn by 2013-4, i.e. a maximum charge of 7p per £100 over the next 4 years. No wonder bank shares rose on the news. They must have felt they’d been hit by a rubber kipper. But it gets worse.
The banks are still being allowed to lobby about the point at which they start paying the levy. Originally it was proposed that banks with liabilities exceeding £20bn would have to pay the tax on the whole of their balance sheet. But now the banks are being given a £20bn allowance below which they won’t be taxed at all. In addition, the levy rate, already about as near to zero as you can get without making the whole exercise a waste of time, is being cut further on uninsured customer deposits.
For a financial sector that nearly crashed the global economy and has cost UK taxpayers £68bn in bail-out and other support costs (according to my PQ answer of 13 October), this so-called levy is risible. It clearly serves no real purpose other than a figleaf to pretend that the banks are taking a whack like everyone else. The truth is the opposite. It won’t even be paid by the banks at all because they have £20bn of losses to bring forward to discount against chargeable tax, plus the huge benefits coming the banks’ way from the reduction in corporation tax from 28% to 24%.
The banks must be laughing all the way to the – banks. They are over-profitable because the implicit taxpayer guarantee (‘banks too big to fail’) allows them to be lower capitalised than they should be, which in turn allows them to pay massive bonuses which otherwise they couldn’t. On top of that, the Government have done nothing about over-concentration and hence lack of competition in the financial sector, nothing about bonuses, and nothing about requiring appropriate capital ratios. The banks must think the Government less a pushover than a partner in crime.