Andrea Leadsom is the Conservative prospective parliamentary candidate for South Northamptonshire and former head of Barclays' Investment Banks team.
Vince Cable thinks that banks should be forced to cough up 10% of their profits to the Inland Revenue to help plug the hole in public finances. He is right in part - the taxpayer deserves compensation for saving the banks.
But contrast the fate of the banks with that of the employees of Woolworths. Woolies' staff paid the full cost of business failure with their jobs at the beginning of the year. No taxpayer bailout for them.
Yes, the taxpayer deserves compensation, but not in the form of a vengeful windfall tax seen by the banks as punishing success and potentially driving them offshore. That will benefit nobody, particularly as the British economy until two years ago received billions in tax revenues from the sector, and we hope it will do so again the future.
What banks should be paying is a one off compensation payment to the taxpayer in recognition that it is only our munificence that has ensured their survival, and allowed banks like Barclays to return to £4.5 billion of profit this year. A 10% tax is just about right as a one-off compensatory payment to the taxpayer.
And banks should be paying an insurance premium in future to the Government in return for the implicit taxpayer guarantee. These premia can be adjusted to reflect the risk at different economic periods.
Such fees would encourage banks to rearrange their businesses so that they would only pay a fee for those parts of the group that would necessarily be bailed out in the event of another banking crisis. And it is this rearrangement within banks that is critical in the battle to avoid another devastating crisis in future.
Banking groups must be split up. Over the last decade, mergers and takeovers have led to vast financial institutions – often to the benefit of board member incentives, rather than showing any benefit to the customer. The poor perception of customer service in the banking sector is testament to the failure of the supposed economies of scale.
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