Osborne’s bank levy: The desperate action of a desperate chancellor

George Osborne was probably hoping for some bouquets after he told the press he was planning to increase the bank levy to £2.5 billion in 2011/12. That was probably because he thought that his failure to secure any agreement on bank bonuses and lending plus his cynical ruse to give banks a massive corporation tax cut had been missed. Bad luck, George: you’ve been rumbled.

Greedy-fat-cat On Radio 4 this morning, the chancellor said he would be able to increase the bank levy to £2.5bn this year, a figure that will be matched in the remaining years of this Parliament. He said that this was because banks’ performance had been stronger than expected (hardly a surprise when the banks have benefited from easy access to cheap money on the wholesale money markets), and added that he wanted the banks to be aware of the increase in the levy so that he could negotiate new rules on bonuses and lending in “good faith”.

Mr Osborne added that the increased levy was part of the government’s commitment to “more lending, more tax, a bigger contribution to society and less bonuses” – conveniently ignoring the fact that he has failed abjectly on all of these counts.

Shadow chancellor Ed Balls immediately pounced on the statement, accusing it of being a “panicky announcement” in order to distract attention from the failure of ‘Project Merlin’, the government’s attempt to secure commitments from the banks on lending, transparency and bonuses which has apparently collapsed.

Besides, as the Office of Budget Responsibility’s own figures show the bank levy will only bring in £1.2bn when you include the £100m corporation tax cut the banks will receive in 2011/12, a figure that will increase every year during this Parliament. Indeed, the bailed-out Royal Bank of Scotland, 84% of which is owned by the UK taxpayer, is not expected to pay any corporation tax until the end of next year owing to a £6bn tax credit it holds as a result of the losses it has made since the financial crisis.

This compares with the £3.5bn raised by Labour from last year’s bonus tax and the further billions in extra revenue that would be drawn from a financial transaction tax which Labour supports.

Conveniently, Mr Osborne failed to reveal the actions of his own MEPs, who last week voted against a European Parliament report that overwhelming supported the introduction of a financial transaction tax.

Until now, he has remained quiet on the issue of a financial transaction tax, save for criticising Labour for supporting a tax that, he said, could only be workable if it secured widespread international agreement. With the European Parliament and the French and German governments re-affirming their strong support both for a global and an EU specific financial transaction tax, it is now clear that the Tories will oppose it even if such agreement exists.

Meanwhile, not content with being rumbled on bank taxation, the chancellor’s crude attempt to change taxation law so that multinational companies, including Britain’s banks, pay a fraction of the corporation tax they currently pay on earnings made by their non-UK based subsidiaries was brutally exposed by the Guardian’s George Monbiot this morning.

At present, an institution which pays a lower rate of corporation tax on overseas earnings is required to pay the difference between that rate and the UK rate of 28%. Under the Tory-led government’s legislative proposals, institutions will not be required to make up this difference with the government saying that it expects “large financial services companies to make the greatest use of the exemption regime”.

It’s almost possible to feel a bit sorry for Britain’s embattled chancellor. He and his spinners probably thought today’s announcement would bring some cheer to a government with flagging poll ratings on its economic competence and willingness to take on the banks; little did he know that the sheet had already been whipped from under him.

http://twitter.com/oranjd/status/35042399914823680 James Doran

Osborne’s bank levy: The desperate action of a desperate chancellor http://bit.ly/gkSchS
http://twitter.com/houseoftwits/status/35045277970731009 House Of Twits

RT @oranjd Osborne’s bank levy: The desperate action of a desperate chancellor http://bit.ly/gkSchS
http://twitter.com/sex_cauldron/status/35046920187686912 sex cauldron

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/unitonehifi/status/35049308331970561 chris star

Osborne’s bank levy: The desperate action of a desperate chancellor…
http://j.mp/fQt4lf
#ukuncut
http://twitter.com/brokenofbritain/status/35053435887812608 Broken OfBritain

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/nickbloke/status/35054333099773952 Nick H.

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/press_not_sorry/status/35054875058511872 Press Not Sorry

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/nobleaccounting/status/35057013830451200 Russ Noble

Osborne's bank levy: The desperate action of a desperate chancellor http://bit.ly/gyLdND
http://twitter.com/jodatu/status/35058539965845504 John Turner

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/jensmischief/status/35064993263128576 jensmischief

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/ldtuc/status/35065592461402112 L DTUC

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
Robert

Looks more like Labour ex what was his name oh yes Gordon Brown, but of course he could not see anything, just let it happen see what happens. Since the Days of Thatcher Blair and brown this country has changed, it’s changed because the leaders decided to attack anyone who does not work or cannot work, now we have a country in which people think money is all thats left, you even have MP’s who’s greed became to much for them, one Pratt even though to tell us about welfare cheats, he himself is now guilty of that problem.
http://twitter.com/jordanbhall/status/35066986237005824 Jordan Hall

Tory MEPs voted against Euro-Parliament report that overwhelming supported introduction of a financial transaction tax http://bit.ly/fi5jTq
http://twitter.com/lawsolicitoruk/status/35071138757345280 Donald Vieth

Osborne's bank levy: The desperate action of a desperate chancellor: This compares with the £3.5bn raised by Lab… http://bit.ly/ezYKbA
http://twitter.com/simpkins83/status/35072391872782336 simpkins83

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/double_karma/status/35076292281901057 Double.Karma

RT @unitonehifi: Osborne’s bank levy: The desperate action of a desperate chancellor…
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#ukuncut
http://twitter.com/brutus_teabags/status/35078984790179840 Brutus Teabags

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/cllrkrichards/status/35083627171676160 Kevin Richards

"Bankers are secretly smiling" – RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor http://bit.ly/g1lilx
http://twitter.com/superretroid/status/35088324850884608 Paul Wood

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
Mr. Sensible

“Until now, he has remained quiet on the issue of a financial transaction tax, save for criticising Labour for supporting a tax that, he said, could only be workable if it secured widespread international agreement.”

Ben, I seem to remember that in opposition Osborne and Cable criticized Labour for waiting for international agreement on a bank levy?

At any rate, how is this effective cut in Corporation Tax going to cut the deficit?
http://twitter.com/njgard/status/35100706264461312 Nigel Gardner

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/mswigsy/status/35101525298642944 Wendy Maddox

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor http://bit.ly/g1lilx
http://twitter.com/staffsunison/status/35111221548023809 Staffordshire UNISON

RT @MsWigsy: RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor http://bit.ly/g1lilx
http://www.stephenwigmore.blogspot.com Stephen W

Wow, and the award for crude partisan hackery goes to Ben Fox. Your well-paid life long role at the Guardian spewing out equivalent rubbish awaits you.
http://twitter.com/rockythehamster/status/35144010821541888 Rocky Hamster

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor http://bit.ly/g1lilx
Mark Stevo

“At any rate, how is this effective cut in Corporation Tax going to cut the deficit?”

Growth.
Anon E Mouse

Usual drivel from Ben Fox…
Mr. Sensible

“4.“At any rate, how is this effective cut in Corporation Tax going to cut the deficit?”

Growth.”

You hope…
Not guaranteed to start banks lending though, is it.
Mark Stevo

You’re not hoping for growth? I rather suspect your persistent negative outlook on Q1 is going to be proven quite wrong.

As for increasing lending, there’s clearly no guarantees, but I rather prefer banks to be lending in an improving economic environment than a contractionary one. Recall that our banks found themselves in trouble by making bad lending decisions, I don’t think government is well placed to make those decisions for them.
http://www.leftfootforward.org/2011/02/tory-links-to-city-exposed/ Tory dependence on City money should come as no surprise | Left Foot Forward

[...] doing it? Looking at the kid-glove approach of Messieurs Osborne and Cameron to the City, from the limp banking levy to their failure to take action on bonuses, coupled with the revelation last week that, in [...]
http://twitter.com/ukcuts/status/35325725837893632 cutsandgrazes dotcom

RT @unitonehifi: Osborne’s bank levy: The desperate action of a desperate chancellor…
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#ukuncut
http://www.jamiehogg101.co.cc/rbs-to-cut-bonus-pool-for-investment-bankers.html RBS to cut bonus pool for investment bankers – Gadget World

[...] Osborne's bank levy: The desperate action of a desperate … [...]
http://twitter.com/myinfamy/status/35360680685076480 Daniel Pitt

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor: http://bit.ly/fi5jTq
http://twitter.com/shamikdas/status/124123806162890753 Shamik Das

Now Osborne's bigging up the bank levy – here's why it's a complete dud: http://t.co/N6GvK0BF
http://twitter.com/isdancing/status/124165521628340224 Mabel Horrocks

Now Osborne's bigging up the bank levy – here's why it's a complete dud: http://t.co/N6GvK0BF
Chris Clothier

I disagree with this article in two ways, actually more than two but I will limite myseld to commenting on two.

First is the assertion that, just because one levy raise more money it is better. The impact of the bonus levy is a massive increase in bankers base salaries. This increases their fixed cost base and makes them riskier entities. A bad idea for all sorts of reasons.

Second, is the idea that RBS which is 84% owned by the tax payer is not going to pay any tax because of prior year losses. Surely we should be indifferent to that precisely because it is 84% owned by the tax payer. That means that the majority of those “tax free” profits come back to the tax payer. It would also set a hideous precedent to change the tax laws for a company just because it happens to be largely state owned.
Chris Clothier

“limit” and “myself” – sorry for the typos.
http://www.leftfootforward.org/2011/11/david-cameron-ed-miliband-pmqs-02-11-11/ Miliband fails to nail Cameron on bankers, greed and regulation | Left Foot Forward

[...] introduction of the bank levy, which, according to the OBR’s own figures will bring in only £1.2 billion (down from an initial estimate of £3.9bn) when you include the £100m corporation tax cut the [...]
http://twitter.com/nhsspy/status/139316020530782209 Watching You

On bank bonuses, see http://t.co/ioWzj4kE & http://t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs
http://twitter.com/vsb69/status/139316058254348290 viv

On bank bonuses, see http://t.co/ioWzj4kE & http://t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs
http://twitter.com/c_a_jonestechno/status/139322270945525760 CAROLE JONES

On bank bonuses, see http://t.co/ioWzj4kE & http://t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs
http://twitter.com/sharpteach/status/139330562899984384 Catherine Sharpe

On bank bonuses, see http://t.co/ioWzj4kE & http://t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs
http://twitter.com/tinilubes/status/146928125924745216 Martyne Hook

The bankers levy wasn't what Cameron spins it as: http://t.co/ioWzj4kE #PMQs
http://twitter.com/cochis3/status/146928139547836417 Cochis

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor http://t.co/Xz0oY9rp
http://twitter.com/poutingpou/status/146932165526028288 Kyron Hodgetts

RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor http://t.co/Xz0oY9rp
http://twitter.com/mjian/status/147085310923247618 Ian Morton-Jones

“@leftfootfwd: The bankers levy wasn't what Cameron spins it as: http://t.co/N57LUMdD #PMQs”
#saveusfromtheposhboys
http://twitter.com/abesoddworld/status/147110475526713346 Abe

“@leftfootfwd: The bankers levy wasn't what Cameron spins it as: http://t.co/N57LUMdD #PMQs”
#saveusfromtheposhboys
http://twitter.com/pinkhumanist/status/147673350926381057 Pink Humanist

The bankers levy wasn't what Cameron spins it as: http://t.co/ioWzj4kE #PMQs