City & Business: Who can we clobber to fill the coffers?

"There is ... a limit at which forbearance ceases to be a virtue," a notable Chancellor of the Exchequer once said in exasperation at booming bank profits. Not Denis Healey, Roy Jenkins, James Callaghan, Sir Stafford Cripps. It fact it wasn't any Labour Chancellor, but a Conservative knight, the then Sir Geoffrey Howe, quoting from that eminent Tory philosopher Edmund Burke.

The occasion was the 1982 Budget speech, in which he warned Britain's top bankers that rough treatment of their lovely loot was still very much at the top of the Treasury agenda.

Acres of print has been devoted to Labour's plans for a windfall tax on utility profits. In 1981, though, the Tories had just clobbered the banks for pounds 315m via a special levy on spiralling profits. Hardly in the same league as Labour's will-it-be-pounds 2bn, will-it-be-pounds 4bn, who-knows-how- much utilities tax, but a penal windfall levy from a Conservative government none the less.

And clobber them again it did in 1984, for much more, by abolishing capital allowances that let banks shelter profits behind the booming industry in huge equipment leasing deals done primarily for lucrative tax allowances.

Last week, Britain's top banks emerged from the twice yearly reporting ritual in ruder health than ever before. Profits from the country's top five reached pounds 6.2bn in the first half of the year, with more than pounds 12bn on the cards for 1996 and perhaps pounds 14bn for next year.

Real returns on equity have reached historic levels - more than 30 per cent in the case of Lloyds - against sector highs of around 22 per cent in the1970s and1980s. Rising income and margins, falling bad debts and aggressive cost-cutting have also left dividends surging forwards.

And to rub salt in the wounds, Barclays and NatWest have just given a bumper pounds 920m back to lucky shareholders, making nearly pounds 1.5bn in the last year, as they throw off cash by the bundle.

True, that may be more disciplined than than splurging the money on ill- judged Third World lending or the property bubble, as before. But personal customers and small businesses still reckon they are getting a raw deal in the low-inflation, supposedly low-interest rate 1990s.

There is no suggestion that Kenneth Clarke has even considered a Sir Geoffrey levy. But with the Treasury bare, election tax cuts beckoning and the Government needing a populist boost, market speculation is returning that the banks may just be looking too cushy for their own good.

Consider the five charges for the prosecution:

o Barclays: profits up 15 per cent to pounds 1.3bn; dividends up 15 per cent; and a special share buyback of pounds 470m.

o NatWest: underlying profits pounds 879m, up 23 per cent; dividends up 14 per cent; share buyback pounds 450m.

o Lloyd's TSB: a 12 per cent profits rise to pounds 1.14bn; dividends up 15 per cent; possible buybacks on the way.

o HSBC (including Midland): profits up a third to a staggering pounds 2.32bn; and a 62 per cent dividend hike.

o Abbey National: profits up 16 per cent to pounds 558m; dividends up 20 per cent.

Now for the defence. In the early 1980s, banks argued that profits needed to be high in inflationary times to maintain a strong capital base. Also, they had to store up surpluses for bad times ahead. But with the inflation outlook low and banks voluntarily parting with cash, neither case holds water now.

That old bogey of increased competition ahead is also not much in evidence, with margins increasing, mergers all the rage and the high street leaders behaving like the cosy oligopoly of old.

So what about the final consideration in any arraignment: the public interest and chances of a successful prosecution? Banks might be able to dodge a levy by accounting tricks, lifting bad debt provisions and the like. Retrospective, one-off windfall taxes like Sir Geoffrey's in 1981 are not so easily avoided. The threat of them could be a stick with which to beat charges down.

For many in the markets, the final objection comes down to a gut feeling that it is unfair to single out specific sectors for punitive measures. But, again, there is a strong argument that the banks, like utilities, have imposed a selective tax through increased charges - on all but large corporates - to make good their own past squander.

There is no evidence,either, that Gordon Brown has weighed the pros and cons. Unlike the utilities, the public outcry against banks has largely quietened. Another tax would hark back to a darker, dinosaur past and raise the hackles of a City that Labour has been eager to court. It would also bring intriguing conflict with the unions, who voted resolutely against the levy back in 1981.

With the coffers bare and lots of spending priorities to juggle, however, it could be a card for Mr Brown to keep up his sleeve. He could certainly point to Tory precedent, especially if Mr Clarke deals the populist ace first.

SFO landing

It HAS been a busy week, thankfully in dull August, for the boys (and girls) in blue suits at the Serious Fraud Office.

There were raids on Wednesday morning on the homes of Ashley Levett and Charles Vincent, "Mr Copperfingers" himself, as part of the inquiry into the pounds 1.2bn copper trading losses made by Sumitomo and rogue trader Yasuo Hamanaka. Followed by search warrants on Stephen Hinchliffe and Christopher Harrison in the Facia affair.

In a barely noticed move on Wednesday former City trader Terry Ramsden was indicted on nine charges of allegedly failing to disclose assets to the Official Receiver. He was released on bail and will appear in court in December.

We report opposite on the latest moves in the Hinchliffe saga. On Tuesday receivers KPMG and Grant Thornton, which have done a good job in realising assets, will give creditors the next clue as to the extent of their grief. As for the SFO involvement, more developments are keenly expected.

Deja vu

So Somerfield has finally got its troublesome flotation away. After cutting the offer price twice, and last-minute sale attempts by advisers Kleinwort Benson, the shares closed at 159p, a 14p gain, on their Friday debut.

After driving the price down, City institutions seem to have had it both ways: juicy underwriting and a hefty premium on the shares that is likely to go further. Sounds like a few privatisations we could name.

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
PROMOTED VIDEO
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
i100(and it's got nothing to do with the Great British Bake Off)
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
News
news It's not just the world that's a mess at the moment...
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Scientist (SQL,Data mining, data modelling, PHD, AI)

£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone