Bank profits tax plan – is it enough to please public?

It would take a very generous observer of the Treasury not to see the oddities in this morning’s announcement from the Chancellor.

Park for a minute that this was a tax announcement made outside of a Budget.

Not in an aeon would a government committed to “Tax Simplification” want to introduce a new tax with three different rates in its first five months of existence. The bank levy kicked in 5 weeks ago at 0.05 per cent, it will change to 0.1 per cent in three weeks’ time, and then in May it will settle at 0.075 per cent. And all because the Chancellor worked out yesterday that the banks were now healthy enough not to need a phasing in of his bank levy.

The Coalition were clearly stung by Ed Miliband’s attack that bankers were getting a “tax cut” in this year, a year after the bonus tax but before the full implementation of the bank levy.

Officially this was signed-off yesterday at a meeting of the Quad +1: Cameron, Clegg, Osborne, Alexander and Cable. I’m told that the Chancellor had this planned for weeks, but had not told the banks until a round of phonecalls at breakfast time. I am told that this decision was totally independent of the discussions on bonuses and lending.

My reading on why they have gone through with this: is that talks on the long-overhyped amusingly-oversold Project Merlin will come up with nothing that could not be demolished within a day’s half decent journalism (as of course was the case with the lending agreement struck after the Labour Government bailed out the banks). On one level of course, for many in Britain, whatever they announce later this week will never be enough. On another, pre-election rhetoric is colliding with the grim reality of not wanting to press the ejector seat for a perilous but profitable high growth industry.

Remember the Government is comprised of two parties who earned vast political capital, votes, and at the margin House of Commons seats on the back of savage pre-election attacks on bankers and their bonuses. Here at C4 News we have a brimming vault of pre-election Coalition banker-bashing video archive from our news show and our Chancellors’ debate.

The net result, to be announced this week, will be some disclosure of the top eight bankers pay bands at each bank. Yet even at 84 per cent state-owned RBS we are set to see 200 bonus millionaires created. The “goose that lays the golden egg” argument reigns again.

Is an extra £800m bank levy enough to assuage public anger here? Or are Labour right that an extra £2bn bonus tax is appropriate?