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Playing to the gallery does not always pay; George Osborne's budget may have been popular with many, but he may learn to rue treating the banking sector as a cash cow. Peter Starkey reports.

POLITICIANS love nothing better than debating topics such as 'hard-working families' or 'our NHS' (have you noticed how 'passionate' they are about them too?), safe in the knowledge that, unless they're unadvisedly critical of either, they're bound to draw rapturous applause.

Playing to the audience is rarely a career-ending ploy, which is why attacking easy targets, particularly during an election campaign or in the wake of a Budget speech, is another, stock-in-trade of our elected members.

And just how easy is it to attack those anonymous, disgracefully overpaid bankers - the men and women responsible for bringing the economy - nay, capitalism itself - to the very brink of destruction? The answer, of course, is 'very', even for those whose own economic profligacy contributed significantly to Britain's near-disastrous lurch towards the financial abyss.

I'm no apologist for those bankers whose excitable, ill-conceived strategies would nowadays verge on the very cusp of legality. Masters of the universe? Most weren't masters of their own living rooms as they had no idea of just what the implications would be once complex derivative contracts began unravelling. It remains a sore point with many folks that some of these guys are still at liberty rather than held at Her Majesty's pleasure.

But the banking sector was forced to see the light. Capital ratios have been raised, while new blood and reams of fresh legislation have been introduced to prevent a repeat of what happened in 2008.

Unfortunately, however, the Treasury now views the banking sector (and other parts of the nation's financial services industry) as an enormous, disparate, cash cow, ready to be milked with little more than a whimper each time a few hundred million pounds more is required to make the nation's profit and loss ledger appear a little less appalling.

In his Budget, George Osborne raised the bank levy for the eighth time in four years, increasing it to more than four times the rate proposed in 2010. At the same time, he (sensibly) withdrew corporation tax relief on bank fines - they are, after all, supposed to be penalties. The combined effect will yield an estimated PS9 billion extra in tax from the banking sector during the next parliament.

"The banks got support going into the crisis," declared Mr Osborne after the measures were announced, "now they must support the whole country as we recover from the crisis."

Few objected to the Chancellor's assertion, nor his 35 per cent increase in the bank levy. Should the next parliament run for five years, banks will hand over at least PS18.5 billion in tax to the Treasury. Indeed, as Mr Osborne believes they should "support the whole country", it's reasonable to assume that figure will rise significantly before 2020.

The sector might be disparate and unloved, but there will come a point at which those banking institutions with little allegiance to the UK say 'enough' and disappear to Paris, Frankfurt or New York. Timorous cash cows can be extremely useful assets, but as the next Chancellor is likely to discover, they can also bite.

The banks got support going into the crisis. Now they must support the whole country as we recover from the crisis.George Osborne


The Chancellor George Osborne found raising the bank levy a very popular move with everyone other than the banks of course
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Publication:The Birmingham Post (England)
Date:Sep 17, 2015
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