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

George Osborne thought 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.

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.

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.

48 Responses to “Osborne’s bank levy: The desperate action of a desperate chancellor”

  1. James Doran

    Osborne’s bank levy: The desperate action of a desperate chancellor //bit.ly/gkSchS

  2. House Of Twits

    RT @oranjd Osborne’s bank levy: The desperate action of a desperate chancellor //bit.ly/gkSchS

  3. sex cauldron

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

  4. chris star

    Osborne’s bank levy: The desperate action of a desperate chancellor…
    //j.mp/fQt4lf
    #ukuncut

  5. Broken OfBritain

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

  6. Nick H.

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

  7. Press Not Sorry

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

  8. Russ Noble

    Osborne's bank levy: The desperate action of a desperate chancellor //bit.ly/gyLdND

  9. John Turner

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

  10. jensmischief

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

  11. L DTUC

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

  12. 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.

  13. Jordan Hall

    Tory MEPs voted against Euro-Parliament report that overwhelming supported introduction of a financial transaction tax //bit.ly/fi5jTq

  14. Donald Vieth

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

  15. simpkins83

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

  16. Double.Karma

    RT @unitonehifi: Osborne’s bank levy: The desperate action of a desperate chancellor…
    //j.mp/fQt4lf
    #ukuncut

  17. Brutus Teabags

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

  18. Kevin Richards

    "Bankers are secretly smiling" – RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor //bit.ly/g1lilx

  19. Paul Wood

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

  20. 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?

  21. Nigel Gardner

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

  22. Wendy Maddox

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

  23. Staffordshire UNISON

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

  24. 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.

  25. Rocky Hamster

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

  26. Mark Stevo

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

    Growth.

  27. Anon E Mouse

    Usual drivel from Ben Fox…

  28. 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.

  29. 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.

  30. 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 […]

  31. cutsandgrazes dotcom

    RT @unitonehifi: Osborne’s bank levy: The desperate action of a desperate chancellor…
    //j.mp/fQt4lf
    #ukuncut

  32. RBS to cut bonus pool for investment bankers - Gadget World

    […] Osborne's bank levy: The desperate action of a desperate … […]

  33. Daniel Pitt

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

  34. Shamik Das

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

  35. Mabel Horrocks

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

  36. 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.

  37. Chris Clothier

    “limit” and “myself” – sorry for the typos.

  38. 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 […]

  39. Watching You

    On bank bonuses, see //t.co/ioWzj4kE & //t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs

  40. viv

    On bank bonuses, see //t.co/ioWzj4kE & //t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs

  41. CAROLE JONES

    On bank bonuses, see //t.co/ioWzj4kE & //t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs

  42. Catherine Sharpe

    On bank bonuses, see //t.co/ioWzj4kE & //t.co/UgQQ3TV7 4 evidence of how Cameron & Osborne r doing seet FA 2 rein them in #PMQs

  43. Martyne Hook

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

  44. Cochis

    RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor //t.co/Xz0oY9rp

  45. Kyron Hodgetts

    RT @leftfootfwd: Osborne’s bank levy: The desperate action of a desperate chancellor //t.co/Xz0oY9rp

  46. Ian Morton-Jones

    “@leftfootfwd: The bankers levy wasn't what Cameron spins it as: //t.co/N57LUMdD #PMQs”
    #saveusfromtheposhboys

  47. Abe

    “@leftfootfwd: The bankers levy wasn't what Cameron spins it as: //t.co/N57LUMdD #PMQs”
    #saveusfromtheposhboys

  48. Pink Humanist

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

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