Osborne’s bank levy is still a damp squib

The Chancellor hasn’t lived up to his tough rhetoric in opposition.

Ahead of his first Commons bout with Ed Balls this afternoon, George Osborne has moved to shore up a weak flank for the Tories. The Chancellor has announced that the coalition's bank levy will be increased to £2.5bn this year, raising an extra £800m and allowing him to neutralise the charge that the Tories have handed a de facto tax cut to the banks.

Labour's 50 per cent tax on bonuses over £25,000 raised £3.5bn last year but this figure falls to £2.3bn if one assumes that the Treasury lost income tax due to the banks paying lower bonuses (NB: this remains a highly speculative assumption). As the FT's Jim Pickard suggests, Ed Miliband deserves much of the credit for Osborne's move. Had he not raised the issue at PMQs last month, it is unlikely the Treasury would have acted so swiftly.

But with the banks due to announce another round of bumper bonus payments this month, Osborne's announcement does little to bridge the gap between the Tories' tough rhetoric in opposition and their inaction in power. In 2009, Osborne called for a ban on bonuses at banks that had received any sort of government guarantee (including Barclays). He later promised to block all cash bonuses over £2,000.

Even the recent coalition agreement pledged to tackle "unacceptable bonuses in the financial services sector". But the government is set to tolerate a £9m payout to the Barclays head Bob Diamond (once accurately described by Peter Mandelson as "the unacceptable face of banking") and a £2.4m bonus to Stephen Hester, head of the 83 per cent state-owned RBS.

Meanwhile, the IMF, not renowned as a bastion of leftism, has urged Osborne to triple the bank levy to £6m. It calls for the G20 to impose a co-ordinated levy on the undertaxed banking sector to curb industry excesses and guard against "the future failures from which no country can regard itself as immune".

When even the IMF is calling for higher taxes on the banks, it's no wonder that the City is celebrating what it regards as another victory over the British state.

George Eaton is political editor of the New Statesman.

How Jim Murphy's mistake cost Labour - and helped make Ruth Davidson

Scottish Labour's former leader's great mistake was to run away from Labour's Scottish referendum, not on it.

The strange revival of Conservative Scotland? Another poll from north of the border, this time from the Times and YouGov, shows the Tories experiencing a revival in Scotland, up to 28 per cent of the vote, enough to net seven extra seats from the SNP.

Adding to the Nationalists’ misery, according to the same poll, they would lose East Dunbartonshire to the Liberal Democrats, reducing their strength in the Commons to a still-formidable 47 seats.

It could be worse than the polls suggest, however. In the elections to the Scottish Parliament last year, parties which backed a No vote in the referendum did better in the first-past-the-post seats than the polls would have suggested – thanks to tactical voting by No voters, who backed whichever party had the best chance of beating the SNP.

The strategic insight of Ruth Davidson, the Conservative leader in Scotland, was to to recast her party as the loudest defender of the Union between Scotland and the rest of the United Kingdom. She has absorbed large chunks of that vote from the Liberal Democrats and Labour, but, paradoxically, at the Holyrood elections at least, the “Unionist coalition” she assembled helped those parties even though it cost the vote share.

The big thing to watch is not just where the parties of the Union make gains, but where they successfully form strong second-places against whoever the strongest pro-Union party is.

Davidson’s popularity and eye for a good photo opportunity – which came first is an interesting question – mean that the natural benefactor in most places will likely be the Tories.

But it could have been very different. The first politician to hit successfully upon the “last defender of the Union” routine was Ian Murray, the last Labour MP in Scotland, who squeezed both the  Liberal Democrat and Conservative vote in his seat of Edinburgh South.

His then-leader in Scotland, Jim Murphy, had a different idea. He fought the election in 2015 to the SNP’s left, with the slogan of “Whether you’re Yes, or No, the Tories have got to go”.  There were a couple of problems with that approach, as one  former staffer put it: “Firstly, the SNP weren’t going to put the Tories in, and everyone knew it. Secondly, no-one but us wanted to move on [from the referendum]”.

Then again under different leadership, this time under Kezia Dugdale, Scottish Labour once again fought a campaign explicitly to the left of the SNP, promising to increase taxation to blunt cuts devolved from Westminster, and an agnostic position on the referendum. Dugdale said she’d be open to voting to leave the United Kingdom if Britain left the European Union. Senior Scottish Labour figures flirted with the idea that the party might be neutral in a forthcoming election. Once again, the party tried to move on – but no-one else wanted to move on.

How different things might be if instead of running away from their referendum campaign, Jim Murphy had run towards it in 2015. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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