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.

Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little