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  1. Politics
13 July 2010

Will the coalition go to war with the banks?

Ministers “actively exploring” plans for a permanent tax on bank pay and profits.

By George Eaton

If the banks were expecting a quiet life under the coalition they were wrong. After allowing them a lucky escape in the Budget (Deutsche Bank memorably described it as a “good outcome for banks”), ministers are now “actively exploring” plans for a permanent tax on bank pay and profits.

In a speech to the British Bankers’ Association last night, the City minister, Mark Hoban, warned guests that ministers are looking into the introduction of a “financial activities tax”, likely to raise at least as much as the £2.5bn the banking levy will bring in.

But rather than adopting the confrontational tone of his predecessor Paul Myners, Hoban is appealing to bankers’ self-interest. Here is an extract from his arrticle for the Guardian’s Comment Is Free today:

Now is the time for banks collectively to restore their reputation. That means taking an active role in the recovery and treating businesses, savers and borrowers — all of whom funded the bank bailout — fairly. Whether the public learns to trust the banks again is down to how banks behave. They must play their part — their fate is in their hands.

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The irony is that it may fall to a centre-right coalition to accomplish what a centre-left government could not. Ensuring that the banks pay their fair share and pushing through structural reform could be a Nixon-in-China moment for David Cameron.

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