A political Golden Goose?
Taxing banks profits seems to be in vogue; however we should be careful before expecting too much of the stories suggesting it is in the pipeline. This article from The Times in 2005 shows that the idea floats around on occasion and usually in practice is the plant of the Treasury in regard to forcing the banks hands in some negotiations or other. This time around the stories that Alistair Darling is ‘seriously considering’ such a tax is probably a warning to the restive board of RBS to toe the line and at least make sure they are at least not so publically and visibly dipping their snouts so clearly in the trough filled with taxpayers money.
However, the idea of a windfall tax on banks profits strikes me as something of the political equivalent of a golden goose. Not only is it going to raise money it will also without a shadow of a doubt be actually very popular. Of course, the usual objections will be trotted-out but one really expects better of Sky News;
If Britain’s banks thought they had enough of a raw deal from Government already (and despite the hundreds of billions of pounds poured into the financial system to ensure their survival, there are many within the banking industry who do feel that way).
If you view a bailout worth a reported £850 billion as a ‘raw deal’ then I think it’s fair to say that you must be in an industry which has completely lost its sense of perspective. This is the great big elephant in the room when the Conservatives make a song and a dance about the national debt; they complain greatly about it but it’s hard to see them letting their ‘Friends in the City’ go under.
As The Guardian points out;
The government has not had a good war on bankers’ bonuses.
Hopefully this is the start of a significant counterattack. It can, however, not be the be-all and end-all due to the usually one-off nature of a windfall tax and has to be coupled with radical structural changes to mean anything in the long-term. However, like I said at the top…don’t hold your breath…