Banking (Responsibility and Reform)

Gareth Thomas Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Hoban]

I was going to discuss the bank payroll tax a little later, but let the hon. Gentleman just ponder for a while why the person who introduced that tax, the former Chancellor, described it as a “one-off” and something that was not workable because it did not change the behaviour. What we have done is introduce the bank levy, which the Labour party opposed when it was in government, and every year that is raising £2.5 billion more than the bank payroll tax raised in a single year. That is the product of well-thought-through taxation policy. We have gone ahead and imposed that bank levy, but the Labour party, when in government, opposed it.

Let me discuss the interaction of bank bonuses and capital. We agree with the interim Financial Policy Committee that capital levels, not bonus payments, have to be the priority. Banks must strengthen their balance sheets as a foundation for lending to families and businesses. That is why the FSA is rigorously scrutinising bank distribution plans, and it will not approve plans unless they are consistent with required capital levels, ensuring that banks maintain the capital they need in order to finance businesses. It is because of our leadership that bonus levels have already started to fall. According to the Centre for Economics and Business Research, City bonuses tripled under Labour, and when the shadow Chancellor was Minister for the City they were £11.6 billion. At the time, the shadow Business Secretary was carefully drafting the contracts to ensure that people could earn those bonuses. Last year, bonuses were almost half that figure, at £6.7 billion, and we fully expect them to fall further this time. Thanks to the action we have taken, bonus pools have come down and Labour’s cash bonus culture has been ended.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

The Minister may be aware that the number of bank branch closures is beginning to rise again, as is the number of branches with restricted opening hours. Will he tell the House what decisive action he has taken to reverse those trends?