Finance (No. 2) Bill

Debate between Mike Thornton and Chris Leslie

Wednesday 17th April 2013 Commons Chamber

[Chris Leslie]

As I was saying, Barclays has talked about confronting some of the necessary culture changes. It commissioned the Salz report after its involvement in the LIBOR scandal and the fines it received as a result, yet still that oil tanker of bonuses continued to float on, even in that particularly difficult year.

[Mike Thornton (Eastleigh) (LD)]

I sympathise, obviously, with the point about the overpayment of bonuses. I have three quick questions. First, how does the hon. Gentleman propose to prevent the banks from passing on the cost to their customers? Secondly, at what level of bonus would the tax start? I hope it would not affect ordinary retail staff earning their £50 bonus. And thirdly —no two will do!

[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.

--- Later in debate ---

[Mike Thornton]

The hon. Gentleman is discussing banks paying this tax. Why limit it to banks? Many other organisations, such as hedge funds and insurance companies, pay very large bonuses. I understand that at one point, we perhaps needed to punish them; by why not tax extra anyone that has a bonus of £25,000 or above?

[Chris Leslie]

Perhaps the hon. Gentleman will have a chapter in the pamphlet that the hon. Member for Bristol West (Stephen Williams) is writing; we would all be interested to read it. [Interruption.] From a sedentary position, I am offered a signed copy of that pamphlet. We are all interested in political memorabilia, and it would certainly be an historic document.

We wanted to retain the 50p top rate of income tax for this year. It should not have been cut, and we think that doing so is unfair. I know—well, I think I know—that in their heart of hearts, the Liberal Democrats do not really agree with the cut, which will of course apply to those earning £150,000 or more. We have to recognise the special responsibility that banks and banking executives have to wider society, given the massive cost to the taxpayer of the banking crisis and the resulting deficit, the consequences of which many of our constituents are still suffering. We still have not got justice for what happened in 2008, which is one reason why we think it important to take this step now.