The claim
“The bank bonus tax raised net £2.3bn…the bank levy will raise £2.5bn each year when it is fully up and running. And with the magic of addition if you have a bank levy every year – which we supported, he opposed – we will raise £9bn compared with his £2.3bn. Even the Shadow Chancellor can work out that 9 is bigger than 2.3.”
David Cameron MP, Prime Minister’s Questions, January 12 2011
The background
The Commons chamber came over all bingo hall today – with numbers called left, right and centre. The first PMQs of the year saw the Labour leader ask the Prime Minister if banks would be paying less tax this year. Once David Cameron had got the numerical jibes out the way – “we’ve ended up with a shadow chancellor that can’t count and a Labour leader who doesn’t count” – he listed figures that he said showed the Treasury would be raking it in from the banks. Ed Miliband begged to differ. So, how much did bankers pay under Labour, and how much will they pay under this government?
The analysis
Labour has called for another year of the bank bonus tax – a one off tax which the previous government introduced – and which pulled in £3.5bn gross last year.
But the Prime Minister quoted the net figure today – £2.3bn. The Office of Budget Responsibility explained to FactCheck that the Treasury has stripped out £1.2bn, because that’s what they think was lost in National Insurance and income tax payments last year due to banks lowering their bonus payouts. But that very big number does seem to rely heavily on Treasury guess work, as the FT Westminster blog also pointed out today.
But even if we accept that the bank bonus tax raised £2.3 billion, how does that compare to the Coalition’s proposals? The bank levy – which taxes the financial institution’s balance sheets – will raise £1.2 bn next year. Less than half the £2.5 bn Mr Cameron claimed today. Although as the levy increases, it will bring in more. The OBR forecast it will bring in £2.5 billion in 2013/14, and by the end of the Parliament it will have raised a total of £8.8 billion (which Mr Cameron rounded up to £9 billion today).
So as Mr Miliband said “In anyone’s language that is a tax cut for the banks.” And it’s true the banks will pay considerably less on the bank levy this year and next year, than they paid on this bonus tax last year.
It is worth remembering of course that banks do pay lots of other taxes. They will pay £20bn in corporation tax this year, up from £18bn last year.
The verdict
To use a smattering of bingo lingo, the PM was “up to tricks” today, because bankers will pay considerably less on the bank levy this year and next than they paid on the bonus tax last year.
And as for comparing £9bn over this parliament with the £2.3bn raised in 2010 – “man alive” he wasn’t comparing like with like. Downing Street defended this to FactCheck, saying the levy is permanent, whereas the bonus tax was temporary.
In the court of public opinion, what counts here is whether this government is tougher on the bankers than the last one was. And based on these numbers, it seems the Labour leader’s well within his rights to press the coalition to “ask for more”.
