On Wednesday, Chancellor of the Exchequer George Osborne made his
annual address to Mansion House, in which he outlined the Government’s strategy for reducing the national debt.
In the weeks running up to the speech, many in the financial services sector voiced concern about the impact of the bank levy, the annual charge on UK lenders’ balance sheets to counterbalance the cost of the financial crisis for taxpayers. Those opposing the levy warned that a continuation or rise might deter banks from operating in the UK, and called for a rethink.
Over the weekend,
The Sunday Times seemed confident that Osborne would use Wednesday’s speech to announce a review of the levy in a bid keep Britain’s banks onside. But he chose not to respond to industry calls and sidestepped the issue altogether.
Urgent need for review In the week preceding Osborne’s speech, former Barclays Chairman Sir David Walker cited several reasons for opposing the levy, in an exclusive comment piece for the
Telegraph.
Sir David explained there was “an urgent need” for the Government to review a levy that would “irrevocably damage its banking system” and effectively force lenders to pay for any implicit subsidy of their investment banking.
His first argument for scrapping, or at the very least reassessing, the existing policy was the cost of its implementation – which the Treasury has estimated to be around £2.5bn, with ongoing annual costs totalling more than £4bn. Sir David pointed out that banks would not be the only ones bearing the brunt. “It is inevitable that a large part of these extra costs will fall, one way or another, on bank customers,” he argued.
“This unique structure risks preventing UK banks from competing on equal terms with their foreign counterparts”
“We also now know that no other country is likely to impose such extra costs on banks or customers,” he continued. “This unique structure risks preventing UK banks from competing on equal terms with their foreign counterparts and may even see some operations moved abroad.”
Telegraph comment No big surpriseBut while many echoed Sir David’s pleas and anticipated a sympathetic response on Wednesday, others had more measured expectations.
In a piece for the
Financial Times published just hours before Osborne’s speech, Martin Arnold, George Parker and Patrick Jenkins agreed that the bank levy was “top of the worry list for many City executives”, but also noted that it was unlikely Osborne would use the Mansion House address as a platform to propose reform.
“While Mr Osborne might be prepared to cede some ground in the coming months, the mood in the Treasury is that this is a time for a ‘stable settlement’ with the banks — not a moment for a big retreat,” they wrote.
Financial Times article Remaining optimisticHowever, in his column for the
Huffington Post, posted the morning after the speech, Paul Waugh suggests that Osborne’s failure to mention the levy shouldn’t necessarily spark cause for concern.
“Osborne didn’t give the City everything it wanted on the vexed issue of the bank levy last night: but he talked about wanting to keep firms like HSBC in the UK and didn’t rule out a review of the levy,” he wrote.
Rather than focusing on Osborne’s failure to review the levy, Waugh instead considers the significance of Carney’s conviction that the “age of irresponsibility” for banks is over. Waugh believes that this statement gives Osborne the opportunity to change tack on ‘banker bashing’, which could lead to future levy cuts.
Huffington Post review
Seen a blog, news story or discussion online that you think might interest CISI members? Email
joanna.lewin@wardour.co.uk