Our excellent banks

From time to time I have found myself shouting at the radio. Yesterday I was listening to a discussion about banks on Radio 4’s Today programme. The topic was the new tax on banks that has been announced in the Chancellor’s Spending Review. A chap called Paul Myners, ennobled by the labour government, was there to explain what a bad tax this was. Mr Myners was the City minister in the last government and he put forth the following propositions before I had breakfasted:-

  • Banks won’t pay this tax; they will simply pass it on to small businesses and private individuals
  • As a result banks’ profits will remain unchanged
  • The tax of about two and a half billion a year was a small amount of money in context of the banks’ balance sheet
  • There was little competition in banking sector and this tax will not improve competition particularly for small businesses for whom Mr Myners is expressing a fondness that was not evident when he was City Minister
  • The new tax has nothing to do with bonuses

So far there was nothing to get hung about. Mr was a small item in a bank’s balance sheet but nevertheless would be passed on to the customers who could least afford it. I shall not dwell on that; I never expect justice or fairness from greedy bankers.

His propositions should be seen in the financial context; in the past three years the United Kingdom Banks have enjoyed a public subsidy of 60 billion pounds which I can express as £60,000,000,000. Those figures make your eyes water; they will be covered not by the banks paying two and a half billion pounds a year, but by the labour and toil of every United Kingdom taxpayer.

So far Mr Myners said nothing new, nothing to get hung about. We have long gotten used to the fact that the banks have been rescued, rightly or wrongly by the taxpayer and the taxpayer, having made that decision through its elected government will have to lump it or like it.

Mr Myners then said “we are looking at taxing an industry in which we excel and I know that we have had problems with the banks but the UK leads the world in international banking and it is a nonsense (sic) to penalise this industry in the way that has been proposed”.

I admit at that stage I shouted at the radio.  I have since apologised to the radio. It was not the radio’s fault that this piece of self serving sophistry was served up to me for breakfast.

I suppose the banks have been above the law for ten or so years. When the last government decided that we could trust the banks to manage their own affairs without government regulation we put them above the law and once you put any group of people or institutions outside the law and public accountability it is difficult to recover the position quickly. You risk damage to the system.

Some politicians now talk about the recession as being caused by a banking crisis; in fact the banking crisis was a symptom, not a cause; the cause was lack of proper regulation.  People believe what they want to believe, allowing their prejudices to overcome rational judgement. In the case of the banks bankers believed their gambles and speculations were good banking becasue they were enriched by them, and not penalised when things went wrong.

Their behaviour was and remains outrageous. It is typified by the severence package Mr Myners awarded to Fred Godwin of the Royal Bank of Scotland – £12 million for his pension fund and a tax free payment of £2.7 million as compensation for a man under whose stewardship the bank suffered losses of £24.1 billion since made good by the taxpayer.

This reward and power without responsibility  reminds me of the outrageous behaviour of trade unions forty or so years ago. Like the trade unions banks are important institutions and like the trade unions when they consider themselves above the law they should be brought firmly within the law, like the rest of us.

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