The Treasury gets £200m for Christmas

Let's hope it doesn't spend it all in one place.

The Treasury is set to receive a spectacular belated Christmas present this year: over £200m in banking fines. Under new regulation introduced last October, the money raised from punishing banks’ misdemeanours, of which there were many in 2012, will not go to the FSA, but to the Treasury. Hopefully, this move will not encourage the government to hand out fines indiscriminately solely for the purpose of boosting its balance sheet.

At present, the debris-strewn financial landscape of 2012 is set to benefit the Treasury to the tune of £312m. But before the end of the financial year in April, this figure is likely to be much higher, with RBS expected to settle over Libor by paying a fine of about £350m.

What is the government going to do with this money, which comes on top of the annual banking levy of £2.5bn? So far, it has promised to hand £35m to armed forces charities; once the FSA’s investigation fees are deducted, around £172m will be left. After it receives its chunk of RBS’s fine, the final figure for the Treasury will far exceed £200m.

Financial iniquity, it would seem, now means profit for the government. At the end of last year, I argued that fines are not an effective way in which to punish banks and bankers for immorality or incompetence. The danger of handing the money they raise to the Treasury rather than an independent regulator is that the government might be less inclined to look at other ways of addressing the City’s misdemeanours.

This article first appeared in Spear's magazine.

The money has been raised from punishing banks’ misdemeanours. Photograph: Getty Images

Mark Nayler is a senior researcher at Spear's magazine.

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Could Labour lose the Oldham by-election?

Sources warn defeat is not unthinkable but the party's ground campaign believe they will hold on. 

As shadow cabinet members argue in public over Labour's position on Syria and John McDonnell defends his Mao moment, it has been easy to forget that the party next week faces its first election test since Jeremy Corbyn became leader. On paper, Oldham West and Royton should be a straightforward win. Michael Meacher, whose death last month triggered the by-election, held the seat with a majority of 14,738 just seven months ago. The party opted for an early pre-Christmas poll, giving second-placed Ukip less time to gain momentum, and selected the respected Oldham council leader Jim McMahon as its candidate. 

But in recent weeks Labour sources have become ever more anxious. Shadow cabinet members returning from campaigning report that Corbyn has gone down "very badly" with voters, with his original comments on shoot-to-kill particularly toxic. Most MPs expect the party's majority to lie within the 1,000-2,000 range. But one insider told me that the party's majority would likely fall into the hundreds ("I'd be thrilled with 2,000") and warned that defeat was far from unthinkable. The fear is that low turnout and defections to Ukip could allow the Farageists to sneak a win. MPs are further troubled by the likelihood that the contest will take place on the same day as the Syria vote (Thursday), which will badly divide Labour. 

The party's ground campaign, however, "aren't in panic mode", I'm told, with data showing them on course to hold the seat with a sharply reduced majority. As Tim noted in his recent report from the seat, unlike Heywood and Middleton, where Ukip finished just 617 votes behind Labour in a 2014 by-election, Oldham has a significant Asian population (accounting for 26.5 per cent of the total), which is largely hostile to Ukip and likely to remain loyal to Labour. 

Expectations are now so low that a win alone will be celebrated. But expect Corbyn's opponents to point out that working class Ukip voters were among the groups the Labour leader was supposed to attract. They are likely to credit McMahon with the victory and argue that the party held the seat in spite of Corbyn, rather than because of him. Ukip have sought to turn the contest into a referendum on the Labour leader's patriotism but McMahon replied: "My grandfather served in the army, my father and my partner’s fathers were in the Territorial Army. I raised money to restore my local cenotaph. On 18 December I will be going with pride to London to collect my OBE from the Queen and bring it back to Oldham as a local boy done good. If they want to pick a fight on patriotism, bring it on."  "If we had any other candidate we'd have been in enormous trouble," one shadow minister concluded. 

Of Corbyn, who cancelled a visit to the seat today, one source said: "I don't think Jeremy himself spends any time thinking about it, he doesn't think that electoral outcomes at this stage touch him somehow."  

George Eaton is political editor of the New Statesman.