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Wednesday, February 09, 2011

Coalition Government delivers on the banks

Following on from yesterday's news that the Chancellor of the Excchequer is to increase the levy on bank profits to £2.5bn this year, raising an extra £800m, and will be making it permanent, there is more welcome news today.

A long-awaited agreement with the largest UK banks on lending, bonuses and transparency has been announced by the government. As a result of this agreement the UK’s biggest high street banks have agreed to lend more to businesses this year than last, increasing lending to SMEs by 15%.

They will ensure that pay and bonuses will be lower this year than last year and lower than they would have been prior to this agreement. They will create the most transparent pay disclosure regime in the world and they will invest an extra £1.2 billion in the new Business Growth Fund aimed at helping SMEs in the regions, and the Big Society Bank to help funding for third sector organisations.

Although it has taken some time to get to this point, this agreement is a vindication of the Government's softly softly approach to this issue.
For "softly,softly" read "climbdown", I'm afraid - and no wonder given the level of political donations provided by the financial sector. Whatever happened to the bonus tax which Nick Clegg mentioned to Andrew Marr more than once a few weeks back? Ministers talk tough on the subject of banking regulation but there is little real difference as a result of Merlin other than a lot of credit that should already have been available to business and manufacturing has suddenly "appeared".
You obviously missed yesterday's announcement on the bank levy. As for the extra credit for business that was a significany achievement that the heavy handed approach taken by Ed Ball would not have produced.
I read somewhere else that the bank levy represents less than a fifth of what an encompassing bonus tax would provide for the Exchequer each year. Which is probably explains why Lord Oakeshott, Lib Dem treasury spokesman has branded the deal as "pitiful" and resigned.
I think you need to appreciate that there is a balance to be struck here. Like it or not the economy is dependent on the banks being healthy and solvent. If you drive them into penury by taxing them excessively then the amount of money available for businesses will be severely curtailed. You have to decide whether you want revenge or a viable economy. That is something Lord Oakeshott needs to decide as well.
"increasing lending to SMEs by 15%"

No small thing. Have to write: WELL DONE!
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