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.

Getty Images.
Show Hide image

Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.