Parliament officially returns from its Easter recess today and Labour’s number crunchers are already causing mischief for George Osborne. The party has accused the Chancellor of handing banks a £2bn tax cut after releasing new figures showing that the coalition’s bank levy has raised significantly less than expected in the last two years.
David Cameron pledged that the levy would raise £2.5bn a year and offset the gains to banks from the cuts in corporation tax. But figures from the OBR show that the levy raised just £1.6bn in 2012-13, while banks received a corporation tax cut of £200m, leaving the Treasury with a net gain of £1.4bn – £1.1bn less than promised. The previous year (2011-12), the levy raised £1.8bn, while the banks gained £100m from the corporation tax cut, a net gain of £1.7bn, or £800m less than promised. In total, then, the banks have paid £3.1bn in tax, £1.9bn less than pledged by Cameron (see table below).
|
|
2010-11 |
2011-12 |
2012-13 |
|
Labour bank bonus tax (£bn) |
3.5 |
n/a |
n/a |
|
Tory-led Government bank levy (£bn) |
n/a |
1.8 |
1.6 |
|
Corporation Tax rate (%) |
28 |
26 |
24 |
|
Corporation tax cut for banks from 2010-11 level (£bn) |
n/a |
0.1 |
0.2 |
|
Net amount raised from banks (£bn) |
3.5 |
1.7 |
1.4 |
|
Amount raised compared to £2.5bn promised by govt (£bn) |
n/a |
-0.8 |
-1.1 |
Chris Leslie, the shadow financial secretary to the Treasury, plans to raise the figures when the Commons debates the second reading of the Finance Bill later today. He said:
On top of last week’s tax cut for millionaires, this is effectively a tax cut of nearly £2 billion for the banks at a time when millions of working people are being forced to pay the price for this government’s economic failure.
Whether it’s on tax or watering down reforms to separate retail and investment banks, David Cameron and George Osborne have repeatedly failed to stand up to the vested interests of the banks.
Labour is still urging the coalition to repeat Alistair Darling’s bank bonus tax, which raised £3.5bn in 2010-11, in order to fund a jobs guarantee for every young person unemployed for more than a year (a measure the party is particularly keen to highlight as the benefit cap and other welfare reforms take effect).
The Treasury has responded by stating that the “fragility of global financial markets” means it is unsurprising that the levy has raised less than by expected and by promising to review it this year “to ensure it is operating efficiently”.
As for the bank bonus tax, we can expect Osborne to point out that Darling himself described it as a “one-off” on the grounds that “the very people you are after here are very good at getting out of these things and will find all sorts of imaginative ways of avoiding it in the future”. To most voters, however, that will sound like an argument for tackling avoidance, not for cutting taxes. And the banks’ toxic reputation, combined with the image of a government devoted to the rich, means this remains fertile political territory for Labour.
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