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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Angela Eagle is set to challenge Jeremy Corbyn. But many still hope for Tom Watson

Labour's deputy leader is the potential candidate most feared by Corbyn's supporters. 

The vote of no confidence came. But Jeremy Corbyn didn't go. As anticipated, the Labour leader declared just 20 minutes after his defeat that he would not "betray" his supporters "by resigning". Having never enjoyed the confidence of MPs to begin with (as few as 14 voted for him), he is unfazed by losing it now. His allies are confident that he retains the support of a majority of Labour's selectorate. 

The likeliest resolution is a leadership contest in which Corbyn is challenged by a single "unity candidate": Angela Eagle (as I predicted on Monday). Labour's former shadow first secretary of state, who impressed when deputising for the leader at PMQs, has been ready to stand for months. MPs speak of her enjoying support "across the span" of the Parliamentary Labour Party, from the "soft left" to "moderates" to "Blairites". A source told me: "It is no surprise that colleagues are turning to her. She is very much considered a tough, Angela Merkel-type figure who can lead the party through this difficult period." There is no sign that the backing of her own constituency party (Wallasey) for Corbyn will deter her. 

Other potential candidates such as Dan Jarvis, Yvette Cooper and Chuka Umunna have relinquished their ambitions for now. But two names still recur: Owen Smith and Tom Watson. Smith, who first revealed his leadership ambitions to me in an interview earlier this year, would run as a competent, soft left alternative to Corbyn. But it is Watson who the Labour leader's supporters fear most. He comfortably won last year's deputy leadership election and is renowned for his organisational abilities and trade union links. For these reasons, many regard him as a more formidable opponent than Eagle. "Fourth in the deputy leadership election to first in the leadership election in 10 months is a big challenge," an MP noted. 

But as deputy leader, Watson has long regarded it as his duty to preserve party unity above all. A challenge to Corbyn, pitting him against most current members (including a significant number who voted for him), unavoidably conflicts with this role. For this reason, Watson's supporters hope that a combination of pressure from MPs, some unions (who are expected to meet the Labour leader today), council leaders and members (who are "absorbing" the no confidence vote) could yet persuade the leader to stand down. Under this scenario, Watson would automatically become interim leader, either steering Labour through an early general election or presiding over a multi-candidate leadership contest. 

Should Corbyn refuse to resign today (as most of the rebels expect), some still hope that Watson could be persuaded to run. But assuming the Labour leader automatically makes the ballot paper (a matter of legal dispute), a contest between himself and Eagle is likely to ensue. Having won the backing of just 40 of Labour's 229 MPs in the confidence vote, Corbyn would struggle to achieve the 50 MP/MEP nominations required to qualify. 

A final, little-discussed scenario involves Corbyn agreeing to step down in return for a guarantee that John McDonnell, the shadow chancellor and his closest ally, would make the ballot. This would ensure the far-left representation in the contest and reduce the possibility of a split. But it would run the risk of merely replicating the present schism in a new form.  

George Eaton is political editor of the New Statesman.