Finance (No. 3) Bill

Andrea Leadsom Excerpts

Tuesday 5th July 2011 Commons Chamber

[Mr Hoban]

We have one of the most transparent disclosure regimes for banking salaries anywhere in the world. The measures we introduced as part of Project Merlin were more transparent and provide more information than in any comparable regime across the world. The Government have made real progress on tackling that issue.

We decided that we would lead the international debate and act unilaterally if necessary on the bank levy. Since we made our announcement, France and Germany have joined us in announcing such levies, and others have followed, including Hungary, Austria and Portugal. The hon. Gentleman made reference to the fact that the Dutch had announced a similar thing. Apparently, they believe that our design for a levy should be followed.

The hon. Gentleman talked about international comparisons. Even allowing for the larger size of the UK banking sector, the UK levy is larger than that of France or Germany. Different levies cannot be compared by looking just at headline rates; for example, the UK levy is focused on balance sheet liabilities, while the French levy is on risk-weighted assets. Furthermore, unlike the UK levy, the French levy does not apply to branches of foreign banks. Consequently, the French levy is expected to raise between €500 million to €1 billion a year, much less than the £2.5 billion we shall raise in the UK, a difference that cannot simply be explained away by the different sizes of our banking sectors. Moreover, unlike the UK, the French levy is deductable from their corporation tax liability. The hon. Gentleman said that the Government will not review the banking levy. If he looks carefully at the documentation, he will see that we are committed to reviewing it in 2013.

The levy is not the only tough action we have taken to ensure that banks pay their fair share of tax. The right hon. Member for East Ham (Stephen Timms) was a member of the Treasury team when the previous Government introduced the code of practice on taxation for banks, but they utterly failed to get all the banks to sign up to it; only four of the big 15 banks had signed up to it by the time they left office.

While the previous Government talked a good story about tackling tax evasion and avoidance, we acted. By the end of November, all the top banks had adopted the code and by the time of the March Budget this year, 200 banks had adopted it. We have taken tough action to tackle tax planning issues and to ensure that banks pay a fair share in taxes to recognise the contribution they should make, given the risk they pose to the UK economy.

With amendment 13, tabled by the shadow Chancellor, the Opposition seek to reintroduce the bank payroll tax, which was introduced in the previous Parliament as a one-off interim measure ahead of changes in remuneration practices from corporate governance and regulatory reforms, and the previous Chancellor conceded that it could not be repeated. The net yield for the tax, accounting for the impact it would have had on income tax and national insurance contribution receipts, was £2.3 billion, which is less than we will raise from the bank levy this year, and less than we will raise from it next year, the year after and the year after that.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend agree that the unintended consequence of the payroll tax was to push up salaries versus bonuses in the City, which is something that no Member wants to see?