Time to stop scapegoating the banks
ACCORDING to a report published just before the turn of the year, politicians have used the financial sector as a scapegoat for the global economic crisis.
In the case of Labour leader Ed Miliband and Shadow Chancellor Alan Johnson, they still are.
But Mr Miliband’s demand for the coalition Government to repeat the previous Labour administration’s corporate tax on bank bonus payments would be counter-productive.
Were last year’s one-off cash raid on the banks to become an ongoing vendetta, some of them would inevitably opt to relocate their head office registrations elsewhere, resulting in a long-term net loss of revenue to the Treasury.
On the face of it, the fact that the banks are, once more, paying out hefty bonuses might seem hard to stomach but, on cold, sober analysis it is in the national interest that they do so as it is a sign that some semblance of normality is starting to return.
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It will also, of course, increase the Income Tax payable by those who receive the bonuses.
In the case of Royal Bank of Scotland and Lloyds Banking Group, which to a greater or lesser extent are now state-owned, a certain amount of restraint is certainly called for.
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Arguably, however, the bonuses they will pay are even better news for the taxpayer as the more money these banks make the quicker the Government will get back the money it poured in to bail them out at the height of the crisis.
The report referred to above, published by the Legatum Institute and the Taxpayers’ Alliance, warned that policymakers around the world were in danger of learning the wrong lessons from the crash of 2008.
It claimed that, in a rush “to channel public anger away from themselves and on to the financial sector”, politicians had promoted policies which, far from reducing the risk of similar crises in future, could actually make them more frequent, and deeper.
The report was not targeted specifically at British politicians (the US government came in for the most severe criticism) but it is of concern that the Labour Party, which sees itself, not entirely unrealistically, as the next government in waiting, appears to be in denial three times over.
Its refusal to accept that its own spending policies contributed to the UK debt crisis (an absurd position repeated by Mr Miliband yesterday) has been dealt with in this column previously.
But Labour also seems unwilling to face up to the full extent of its failure in terms of banking regulation while in government, and equally reluctant to recognise that the way forward is to restore the prosperity of the banking sector rather than to punish it indefinitely.