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Osborne faces wrath of challengers after placing himself in big banks' pockets Osborne faces wrath of challengers after placing himself in big banks' pockets
(about 2 hours later)
George Osborne has cut state support for Britain’s working families and imposed a pay freeze on public sector workers. But when it comes to Britain’s big banks, the chancellor has proved himself to be a pushover.George Osborne has cut state support for Britain’s working families and imposed a pay freeze on public sector workers. But when it comes to Britain’s big banks, the chancellor has proved himself to be a pushover.
That much was evident from the strong hints by Standard Chartered that it was no longer thinking of removing its head office from the UK and relocating to east Asia. Why? Because Osborne kindly did what was asked of him and announced deep cuts in the Government’s bank levy that will halve the tax take for the exchequer by the early 2020s. That much was evident from the strong hints by Standard Chartered that it was no longer thinking of removing its head office from the UK and relocating to east Asia. Why? Because Osborne kindly did what was asked of him and announced deep cuts in the government’s bank levy that will halve the tax take for the exchequer by the early 2020s.
Rarely has the lobbying power of the established banks been more obvious. In the run-up to the election, HSBC said it was reviewing whether to keep its HQ in London. Standard Chartered let it be known that it, too, was so unhappy about the bank levy that it might up sticks. Rarely has the lobbying power of the established banks been more obvious. In the runup to the election, HSBC said it was reviewing whether to keep its HQ in London. Standard Chartered let it be known that it, too, was so unhappy about the bank levy that it might up sticks.
The result was that Osborne beat a hasty retreat in his summer budget. He announced changes to the taxation of banks, cutting the bank levy while at the same time announcing an additional corporation tax of 8% for those banks making profits of more than £25m.The result was that Osborne beat a hasty retreat in his summer budget. He announced changes to the taxation of banks, cutting the bank levy while at the same time announcing an additional corporation tax of 8% for those banks making profits of more than £25m.
This had the effect of shifting the tax burden from global UK-domiciled banks like HSBC, Barclays and Standard Chartered to the smaller challenger banks, because the levy was related to the size of a bank’s balance sheet, not just in Britain but anywhere in the world. Smaller banks such as Metro, Tesco and Aldermore were not big enough to pay.This had the effect of shifting the tax burden from global UK-domiciled banks like HSBC, Barclays and Standard Chartered to the smaller challenger banks, because the levy was related to the size of a bank’s balance sheet, not just in Britain but anywhere in the world. Smaller banks such as Metro, Tesco and Aldermore were not big enough to pay.
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Despite the cave-in, this is not mission accomplished for the chancellor. He has solved one problem – the risk that London’s reputation as a global banking hub might be damaged by the departure of HSBC or Standard Chartered – but created another.Despite the cave-in, this is not mission accomplished for the chancellor. He has solved one problem – the risk that London’s reputation as a global banking hub might be damaged by the departure of HSBC or Standard Chartered – but created another.
The challenger banks are now faced with paying higher corporation tax in order to keep HSBC and Standard Chartered sweet. Predictably, they are furious about it and are lobbying Osborne to raise the profits’ threshold for paying the supplementary corporation tax to £250m. The challenger banks are now faced with paying higher corporation tax in order to keep HSBC and Standard Chartered sweet. Predictably, they are furious about it and are lobbying Osborne to raise the profits threshold for paying the supplementary corporation tax to £250m.
More competition in high street banking is a good idea. It is forcing the established players to treat their customers with a bit more respect. Osborne wants HSBC and Standard Chartered to stay in the UK but not at the expense of the challenger banks. It won’t be long before a second climbdown is announced.More competition in high street banking is a good idea. It is forcing the established players to treat their customers with a bit more respect. Osborne wants HSBC and Standard Chartered to stay in the UK but not at the expense of the challenger banks. It won’t be long before a second climbdown is announced.