By Matthew Barrett
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Unfortunately Tuesday's main business, the reading (and passing) of the Finance (No. 3) Bill, was more like a left-wing meeting than a proper debate. Labour MPs proposed various ways of taxing banks, including a "Robin Hood Tax" (a tax on financial transactions), and attacked the Coalition's bank levy as too weak.
- The Minister first explained why the Government is introducing the levy: "The financial crisis demonstrated that fundamental reform was needed and that is what the Government are delivering. The Government firmly believe that banks should make a fair contribution to the public finances. In particular, banks should make an additional contribution in respect of the potential risks they pose to the UK financial system and wider economy."
- Mr Hoban noted the transparency of the bonus system: "We have one of the most transparent disclosure regimes for banking salaries anywhere in the world. The measures we introduced as part of Project Merlin were more transparent and provide more information than in any comparable regime across the world. The Government have made real progress on tackling that issue."
- On international support for the levy: "We decided that we would lead the international debate and act unilaterally if necessary on the bank levy. Since we made our announcement, France and Germany have joined us in announcing such levies, and others have followed, including Hungary, Austria and Portugal. The hon. Gentleman made reference to the fact that the Dutch had announced a similar thing. Apparently, they believe that our design for a levy should be followed."
- On Labour's lack of action: "While the previous Government talked a good story about tackling tax evasion and avoidance, we acted. By the end of November, all the top banks had adopted the code and by the time of the March Budget this year, 200 banks had adopted it. We have taken tough action to tackle tax planning issues and to ensure that banks pay a fair share in taxes to recognise the contribution they should make, given the risk they pose to the UK economy."
- Mr Hoban then explained why Labour's payroll tax is unworkable: "A Labour Member pointed out earlier the reduction in the proportion of remuneration from bonuses and the increased amount from salaries. That is the kind of behavioural change that happens. Those responses are important. Banks and bankers respond to such changes, but the world has moved on. Unlike when the payroll tax applied, the top rate of income tax is now 50p in the pound. "
- …and why a "Robin Hood Tax" is unworkable: "There is no shortage of reviews on the issue. The IMF has had a review and the EU has had reviews, but they all come back to the fundamental problem with the proposal: a tax would need to be applied globally to prevent the relocation of financial services. If implemented only at UK or EU level, the tax would simply prompt the relocation of financial services, and so fail to deliver the desired outcome in terms of revenue. In doing so, it would have significant adverse impacts on employment and the wider economy."
The Minister then concluded:
"…we think it is right that banks should make a contribution reflecting the risks they pose to the UK financial system and the wider economy. That is why we introduced the bank levy. We expect the levy to raise more each and every year than the bank payroll tax did under the previous Government. All the Opposition have to offer in the debate is a tax that did not work the first time round. We have put in place a clear strategy to reform the banking sector. I believe that the actions we are taking are right, and I ask my right hon. and hon. Friends to oppose the Opposition amendments."
The full debate can be read here.