Passions are easily aroused by banks and bankers, sometimes to the detriment of good policy and the best interests of taxpayers. HSBC’s announcement of 8,000 job cuts in the UK and threat to redomicile itself in Hong Kong if the Government doesn’t do what it says is a particularly enraging piece of arrogance.
It wants the Chancellor to ease the bank levy and water down plans to separate investment (so-called “casino”) banking from the high street business. It’s like blackmail. This, after all, is an institution that has been propped up by the UK taxpayer through the various injections of “liquidity”; it has admitted various incidents of aggressive tax avoidance, if not evasion; has had its share of PPI mis-selling claims; and has been accused of money laundering. HSBC is hardly the only bank to have gone awry. We should also concede that it did not perform so disastrously that it had to be nationalised. Still, it does win this week’s prize for cheek.
The Chancellor is likely to give some ground in his Mansion House speech. He stated in March that the bank levy, which is expected to raise more than £3bn next year, will remain part of Britain’s tax system. But Standard Chartered may join HSBC in upping sticks, and the Chancellor has since signalled in recent days that there may be a review on the levy. How far can he bend? There is some wiggle room. He could, for example, gear the levy to the banks’ UK rather than international assets.
But what George Osborne, the Treasury, and the Labour front bench for that matter, need to do first of all is to ask this cold, empirical question: is the current regime of levies, taxation and regulation serving the best interests of the British economy and taxpayers?
On this score, HSBC has plenty of power and leverage. If it redomiciled to Hong Kong we might say good riddance, but we would lose jobs, tax revenue and some of the City and Canary Wharf’s infrastructure, a world-class financial centre that has created wealth – as well as destroying it on a prodigious scale during the financial crisis. Mr Osborne should forget the politics and find a way to rationalise the taxation regime for banks. He might also ask the Bank of England to look again at the mechanics of the separation of investment and retail banking. We should bear in mind that institutions as parochial as Northern Rock and the Dunfermline Building Society – both badly run but far off the “casino” world of global investment banking – went bust just as surely as Lehman Brothers did. Banks and bankers have been conflated in the public consciousness, and that has not helped. Banks themselves are simply businesses, albeit engaged in an extraordinarily risky enterprise that holds wider risks for the economy. That is why they need to be regulated and taxed sensibly, but not prevented from helping markets function, firms invest and citizens to buy homes.
Chastising banks is not an end in itself, and becomes absurd when taxpayer-owned banks are fined by the authorities on behalf of those self-same taxpayers. Chastising – and punishing – renegade bankers is another matter. What is infuriating is that so few bankers of any description have been put before a court for their negligence, frauds and other misdemeanours. Bank-bashing, then, has probably run its course; banker-bashing, apart from some windy rhetoric from the politicians, actually never happened, in the sense of crime and punishment. They got away with it, and it is no use taking out our frustrations on the banks themselves. Weak banks do not make for a strong economy.Reuse content