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Banking: Bonuses

My Lords, I am disappointed in the response and the questions that we have just heard. My right honourable friend the Chancellor has made it clear that he is concentrating on what is really important: the big picture issue of getting rid of the former system of financial regulation, which was proven to have failed in the crisis. We are making fundamental changes to that. As I explained in repeating the Statement, there are ongoing discussions about what really matters, which is about treating customers fairly, making sure that lending is materially and verifiably more than the banks would otherwise be planning to lend and, in that context, ensuring that the banks pay smaller bonuses than they otherwise would have done. It is precisely the switch from bonuses towards lending, which the noble Lord, Lord Eatwell, is asking for, that we are concentrating on now. In answer to the noble Lord’s questions about taxation, far from introducing any cut in tax on banks, we have introduced a permanent levy rather than a one-year levy—a levy that raises in each individual year more than the previous Government’s one-off bonus tax did. Even the previous Chancellor, Alistair Darling, admitted that that bonus tax failed to change bankers’ behaviour, whereas the bank levy that this Government have introduced reflects the relative risk in different banks’ balance sheets. I am grateful to the noble Lord for rising to the challenge about the allowability of bankers’ bonuses or total remuneration against tax. It is an interesting suggestion. We look at the total package in the round and I am always grateful for interesting new ideas. In respect of taxation of non-domiciled individuals, whether they are bankers or others, I remind the noble Lord that it was my right honourable friend who, when in opposition, first raised the question of non-domiciled individuals making a proper contribution to tax in this country. We have taken the lead on that. The overall priority must be to make sure that the banks pay a fair share, as we believe they now will. At the same time, we recognise the need to keep a vibrant banking sector in this country and to keep the UK as a centre of global banking, with banks continuing to lend to all businesses, particularly the small and medium-sized businesses in this country. We will continue to work with our European partners to urge agreement, particularly on a disclosure regime by banding of remuneration. We will continue to work with our partners on consideration of a financial activities tax. The critical thing, as my right honourable friend set out today, is that the Government are working in a thoroughly practical, hands-on way to deliver results and, in particular, will continue to work with the banks to make sure that lending to the businesses of this country supports the recovery that this economy is on track for.