Finance (No. 2) Bill

Charlie Elphicke Excerpts

Wednesday 17th April 2013 Commons Chamber

[Chris Leslie]

I can tell the Minister that in this financial year it would be necessary for us to repeat that bank bonus tax. We will set out our tax and spending proposals when we write the manifesto for the general election. Heaven knows what kind of mess we will have to untangle after a further two years. It would be invidious to make decisions at this point in the cycle when the Minister will not tell us what is in the spending review in just two months’ time. We will make an assessment in two years’ time. I can certainly tell him that, from our point of view—this is a serious policy distinction—a bank bonus tax would be necessary now, particularly to help fund a compulsory jobs guarantee for young people. That is a necessity, given the unemployment figures we saw earlier today.

[Charlie Elphicke (Dover) (Con)]

Can the hon. Gentleman tell the Committee exactly how much extra he wants his proposal to raise?

[Chris Leslie]

We feel that £2 billion could be raised this year from a repetition of the bank bonus tax. That would be an important contribution from those who are doing particularly well. I do not know whether the hon. Gentleman moves in those circles and whether he has seen, as though nothing much has changed in the world, how high bonuses continue to be. Yes, changes from the European Union and elsewhere are being forced on to the bonus culture, but bonuses are still excessively generous to the very lucky few. There are a number of reasons why the bank bonus tax would be good not just for the taxpayer, but in changing the culture in the sector itself. The tax raised £3.5 billion when it was last tried in 2009.

[Chris Leslie]

I was anticipating that question from the Minister. This is the Minister who has tweaked and changed the rate, I think, five or six times in various Finance Bills, all to fit the £2.5 billion figure that he has totally failed to address. We need to go back to the drawing board on the bank levy and find a way of calculating it so that it properly yields the sums that we envisage. Of course, the bank levy has to be thought through, so that we get that resource in. It is totally unacceptable to have lost nearly £2 billion for the taxpayer in the past two financial years. Just think what that £2 billion could have achieved in that period. This is not small money. There is the classic chancellorial phrase, “A billion here, a billion there and very soon it starts to add up to real money”, but this is significant resource. It is to the great shame of Ministers that they have allowed that money to slip away from them.

[Charlie Elphicke]

I thank the hon. Gentleman for giving way again; he is being generous with his time. I just want to understand one thing. If, say, he raised £2 billion in the way he proposes, what would he say to the person who finds it harder to get finance for the borrowing that they need, because of the regulatory requirements on banks and because he had taken a whole load of money out of the banking system, reducing the ability of the banks to lend money?

[Chris Leslie]

Why should a constraint on the bonus pool have a constraint on the lending capacity of banks? The hon. Gentleman seems to be suggesting—this is the classic Conservative attitude to banking—that the one inviolate part of a bank’s balance sheet is remuneration, or “compensation” as they sometimes like to call it: “Do what you like to the banks, but for goodness’ sake don’t affect that bonus pool and don’t change that compensation pool.” Well, I am sorry, but we take a totally different point of view. In fact, if there is one area of bank finance that needs a culture change, and which proves that stronger capital adequacy is not anathema to bank lending, it is management remuneration. It is too bloated and needs to change.

--- Later in debate ---

[Chris Leslie]

Well, that is still more than we normally get in one intervention. You are very generous in the Chair, Mr Amess. I do not think there was any evidence of the bonus tax being passed on to customers before, because regulation can ensure constraints on how the remuneration pool works. The Bank of England itself, through the Financial Policy Committee, is now sending the strong message that banks should stop prioritising that bonus pool and level of compensation. The world has changed, and the banks have to recognise that their behaviour also has to change.

We want specifically to target the highest-paid individuals in the banks, not the clerks or ordinary staff. The tax would be aimed at large, discretionary bonuses above £25,000, which continue to be paid out even in the state-owned banking sector. RBS and NatWest paid out bonuses worth £607 million in 2012, despite making a £5 billion loss. Of course, it was the Prime Minister who promised to ensure that any state-owned bank did not pay out a bonus of more than £2,000.

[Charlie Elphicke]

Will the hon. Gentleman give way?

[Chris Leslie]

I am sure that the hon. Gentleman remembers that promise from his great leader.

[Charlie Elphicke]

The hon. Gentleman is right: we all want to see pay restraint on the part of banks and the banking system. However, that is a separate argument from the issue of imposing taxation. If he took £2 billion out of the banking system at this time, it would mean less finance or pricier finance, which would be bad for the economy and bad for the recovery.

[Chris Leslie]

We are repeating the intervention and the response I gave earlier. I just disagree with the hon. Gentleman. I do not think it is an inalienable right of bankers to continue to receive multi-million pound bonuses. The world has changed, as even many Government Members recognise. Defending the indefensible will not do him any good.