Find a Way to Tax Bankers without Alienating Banks ; City Institutions That Had a 'Good' Financial Crisis May Tire of Osborne's Continuing Levies and Decide to Relocate
Ashton, James, The Evening Standard (London, England)
[broken bar] T LEAST George Osborne dresses properly. As befits a member of the infamous Bullingdon Club, the Chancellor is right at home in the black tie demanded by the Lord Mayor of London's Mansion House dinner.
It is a sharp contrast with Gordon Brown, who alarmed City burghers when he flouted tradition by turning up for his first Mansion House event as Chancellor in 1997 in a lounge suit.
Bankers should feel right at home with Osborne. The heir to a baronetcy, he makes little attempt to conceal his privileged background, which derives primarily from a stake in an upper-crust wallpaper firm. In the moneyed surroundings of the Square Mile, the 40-year-old fits in with ease.
Yet appearances can be deceptive. Although he dresses like them to suit the occasion, bankers can't be sure whether Osborne is a wolf in sheep's clothing. In one breath he praises them, in another he taps them for money to prop up the Government's troubled finances.
In Tuesday's Autumn Statement, Osborne said: "It is this Government's policy to ensure we remain the home of global banks and that London is the world's pre-eminent financial centre."
That's as it should be. For all the talk of rebalancing the economy, a lack of growth means it will take far longer than expected. And when it does happen, it should be about growing manufacturing, pharmaceuticals and creative industries, not taking a hammer to financial services, however much the sector remains in the doghouse with the public.
But Osborne's words need backing up with deeds. Moments later, at the despatch box, the Chancellor confirmed plans to hike a levy on banks' balance sheets for the third time in a year.
It isn't the absolute sum that has set bankers' teeth on edge. The Treasury still hopes the levy will bring in Pounds 2.5 billion annually. However, it needs to increase the percentage charge because some banks have shrunk their balance sheets, such as Lloyds and Royal Bank of Scotland.
The levy covers the worldwide deposits of banks that chose to call London their home, as opposed to just the UKbased liabilities of big international lenders. It is effectively a tax on keeping a headquarters here. In addition, overseas lenders have the flexibility to transfer business abroad to escape the charges, when such a move will have no effect for banks that are British.
Why shouldn't they pay? After all, billions of pounds were poured into propping up the banking industry when the credit crunch struck. Thanks to the turmoil inflicted by the eurozone crisis, the Government's stakes in Lloyds and RBS are heavily under water. Any hope of getting back taxpayers' money in time for the election has been extinguished.
Turning the screw is not going to get the money back any quicker - - not least because it is hitting those that had a good financial crisis. HSBC and Standard Chartered could both conceivably quit Britain as the cost of staying here escalates. Analysts think it could sting them for Pounds 450million and Pounds 200million respectively, with Barclays paying Pounds 400 million. …