Broken promises from Clegg and Cameron on the banks
Before the General Election the Prime Minister and Deputy Prime Minister talked tough on the banks but the talk has turned out to be hot air says Labour Treasury Select Committee member Chuka Umunna in reaction to Nick Clegg’s FT interview today.
Today the Deputy Prime Minister said in the Financial Times:
“The banks should not be under any illusion, this government cannot stand idly by. It is wholly untenable to have millions of people making sacrifices in their living standards only to see the banks getting away scot-free.”
The Prime Minister said to PoliticsHome.com:
“Of course we want to see restraint. Bankers have to realise that the British public helped to bail out the banks and it is very galling when they see bankers pay themselves unjustified bonuses. The bankers have got to think about their social responsiblities and wider responsibilities.”
However, both the Prime Minister and Deputy Prime Minister have already broken their promises to make the banks pay a full and fair contribution to reducing the deficit and to force disclosure of reckless remuneration practices in the City.
In the June 2010 Budget, the government announced a bank levy which it has since announced it would look to raise £2.5bn in revenue a year but:
• the levy gives banks a £20 billion tax-free allowance – all banks regardless of their size will not be subject to the levy on their first £20 billion of taxable liabilities;
• it will not apply to firms where 50% or more of activity is defined as ‘non-financial’ – because investment banks often have extensive and varied operations this could allow firms to avoid the tax; and,
• the levy is projected only to bring in £2.5bn from 2013 (some time after the government’s austerity measures begin to bite) and the IMF says it could raise more – in 2011-12 the levy will bring in £1.3bn, £2.3bn in 2012-13 and £2.6bn in 2013-14 and 2014-15.
Also, Sir David Walker’s review of the financial services sector recommended new rules on the disclosure of bankers’ remuneration within pay bands above £1 million in December 2009. Following this, in the June 2010 Budget the coalition government pledged to take forward these proposals with a consultation leading to the implementation of a banking sector remuneration disclosure scheme yet:
• the government has now u-turned and refused to move forward unilaterally with the scheme without agreement at EU level despite Stephen Hester, CEO of RBS, indicating that the unilateral introduction of a scheme by the UK does not rank highly in his list of concerns;
• because consultation on any proposals for a scheme brought forward would need to be consulted on for a minimum of twelve weeks, it will not be possible to put a scheme in place for the current bonus season, due to finish around March/April 2011; and
• meanwhile the Centre for Economics and Business Research estimates that £7 billion will be paid out in City bonuses in the coming weeks.
Commenting on the remarks today of the Prime Minister and Deputy Prime Minister, Chuka Umunna MP, Labour member of the Treasury Select Committee said:
“David Cameron and Nick Clegg talked the talk on clamping down on reckless City remuneration practices and on making the banking sector pay for the mess it created but all we’ve seen are broken promises – the pre election rhetoric has turned out to be hot air.
“In his comments today the Deputy Prime Minister seems to have forgotten that he co-heads a government that is responsible for introducing a bank levy which is a walk in the park for the City and could have raised much more whilst he has stood idly by.
“The Business Secretary – who called bankers ‘spivs and gamblers’ – is reportedly at loggerheads with the Chancellor over the banking remuneration disclosure scheme which the Treasury has run scared of introducing when the head of one of the country’s biggest bank says it is not high up in his list of concerns – they should stop arguing and get on and implement it.”
