After the resounding failure that was Project Merlin, George Osborne has again failed to live up to his tough rhetoric on the banks. The Chancellor has dropped his plans to prevent banks from offsetting their losses from the financial crisis against tax.
As Barclays recently admitted, this practice meant it paid just £113m in corporation tax on profits of £11.6bn in 2009. In a report last year for the TUC, the tax expert Richard Murphy warned that the banks will avoid paying £19bn of tax on future profits by offsetting their losses – the equivalent of more than £1,100 for every family in the UK.
It is standard practice for businesses to offset their losses against tax but in the case of the banks, which were the beneficiaries of a public bailout (or, in the case of Barclays, liquidity guarantees), there is an obvious moral objection.
With Osborne’s capitulation, the banks will receive a de facto double subsidy from the taxpayer.