It’s squeaky bum time for the banks ahead of the budget
It’s what Sir Alex Ferguson might describe as “squeaky bum time” for the banks tonight.
Just a few weeks after awarding themselves billions more pounds in bonuses in the very year when the banking system was being supported by hundreds of billions of pounds of taxpayers cash, we are hours away from a budget. Not just any budget, but one that precedes an election by six weeks and a day.
As I have repeatedly predicted, we already have the start of a Dutch auction between the main parties on bank taxes that seeks to tap into enduring public anger for electoral purposes. It’s the 2010 dog whistle.
Tomorrow, I understand, and much of this was reported by the FT on Saturday, we will get an outline shape of the government’s preferred option for raising money from the banking system.
The Budget Red Book will focus on a so-called “pollution tax” for banks, that is to say, a tax on the riskiest activities. It will mainly fall on investment banks, it will have to be internationally coordinated, and it won’t be formally costed in the budget.
Bankers may be relieved, however, to hear that the current thinking is that this will raise hundred of millions of pounds rather than tens of billions. Bankers have been less relieved, however, by the confirmation today that David Cameron would proceed with a similar tax, whether or not international support is forthcoming.
All the parties have been far more supportive of the Robin Hood tax campaign than would be expected for a policy that was ridiculed up until a year ago, and that’s a testament to the likes of the development charities, and Caribbean Pirate Bill Nighy, who did a great interview for me that’s worth seeing.
George Osborne has offered support for its aims (though I imagine does not back the means). Vince Cable could include it in the Lib Dem manifesto. The Labour party is hesitating on it.
At the moment there is a holding position of waiting for a key IMF report due next month, after pressure from Gordon Brown. (Eight years ago, I managed to get George Soros to admit his support.)
It is unlikely to happen, but that hasn’t stopped the government from co-opting the celebrity-and-celebrity-economist filled campaign into its plan for something a little different.
Tomorrow’s government plan will see the money raised not going to development charities, or even an insurance fund to fund future bailouts, but instead into general taxation.
The government will already claim a mini-windfall from the banker bonus tax. It had been predicted to raise £550m at the PBR, tomorrow that will, I believe, be upped to £1.5 billion net or lower corporation tax receipts (£2bn gross). So that £1bn will be stretched out to pay for a variety of good growth green job causes, rather than pay down the national debt.
One wonders why they don’t just repeat the banker bonus tax. The fact that the Chancellor received an expletive-laden phone call from one of the world’s top bankers may be a factor. There may well be other ways to squeeze banking.
Certainly, whatever one thinks of bankers, they are smart enough to realise that Gordon Brown will not be able to conjure his traditional pre-election budget white rabbit. The question is whether, in keeping with the public mood, the Chancellor conjures a pre-election sacrificial lamb. And bankers that I talk to can see the logic.