The latest bank-bashing wheeze comes from Lib Dem Treasury spokesman Vince Cable: he reckons they should be forced to shell out 10% of their annual profits in tax to the Revenue for the next few years, in return for all the taxpayer support they’ve been given lately – thus raising £2bn a year to help plug the great big hole in the public finances. OK, so it’s not technically a windfall tax, because it won’t be a one-off, but it’s the same principle: a temporary revenue-generating measure on big companies’ profits. And although the banking lobby says this will just drive the City’s finest to Zurich et al, perhaps the temporary nature of this levy might persuade them not to bother?
The issue for banks is that some of them seem to be returning to ‘business as usual’ a little too quickly – take Barclays, which has already made £4.5bn in profit this year. Those that haven’t directly tapped the Treasury for funds – like Barclays – will argue that this is down to their own brilliance. But Cable insists that all the banks have effectively been propped up by the state: ‘It's the only industry in the UK where the taxpayer automatically underwrites these companies because if they go bust they drag down the economy,’ he told the BBC. So, unless they want to spin off their ‘casino-type’ investment banking divisions: ‘it's right the banks should pay a fee for the fact that the taxpayer protects them.’
Thus far most of the politicians’ point-scoring has been on the subject of bonuses, which each party looking to out-do the other. After the Tories’s daft suggestion of a £2,000 limit on all cash bonuses, the Government this weekend trumpeted a series of measures to protect us against ‘reckless bankers’, to include giving the FSA power to cancel bonuses (erm, which - as Nils Pratley points out in the Guardian today - it can do already).
So at least Cable’s latest wheeze is a bit less reactionary. Although we’re not generally keen on windfall taxes (insofar as they punish successful companies), it’s hard to dispute Vince’s point that banking receives a fundamentally different level of taxpayer support relative to other sectors – so perhaps they should pay for the privilege. The problem is, will a regular tax just drive what’s left of the sector out of the country, as the British Bankers Association suggests?
In today's bulletin:
Vince Cable demands windfall tax on banks
EasyJet profits nosedive as fuel gamble back-fires
Britain has too many pubs, says Enterprise
'The worst storm in real estate history'
Lady Geek: Is technology different for girls?