Finance (No. 3) Bill

I agree with my hon. Friend. Clearly, the sector of the economy that has lost out the most is construction. If the Government intend to contribute only the homes bonus and changes to the planning regulations to the construction industry—they are creating uncertainty up and down the country—I foresee a bleak future for the construction sector in the next two to three years. I urge the Government to consider that carefully. They say they have a growth strategy but they do not, and we are now suggesting one. It would repay them to listen to what people are saying and to address the inadequacies of their response, particularly in the construction sector. I was speaking about lending to SMEs. The failure of Project Merlin is risible, and it is a sad reflection that all the Government could get from the banking industry was a gross figure of an additional £10 billion of lending. If, as someone said earlier, figures are to be released to show how things are developing and to ensure transparency, I suspect they will show that the banks are not coming up to par. However, I hope I am wrong, so I ask the Minister to reassure me on that. The cut in corporation tax is another reason why the Government should have been firmer in how they introduced the bank bonus tax. I understand that the cut is worth £100 million a year. If there are now to be two reductions in corporation tax—the Budget includes a further 1% reduction—the cut will be worth £200 million, which seems to me a good reason why the Government should have been tougher. They are giving back in corporation tax, so they should have been tougher on the bank bonus tax. There is confusion in the Government about what they are suggesting the financial services sector ought to do. On the one hand, we are asking banks to lend more, and on the other, we are asking them to hold more capital and, into the bargain, to pay more tax, as the right hon. Member for Wokingham said. That is not a coherent policy. Banks have to lend to keep the economy going, but they also need to increase their capital. One of the major advantages of the bank bonus tax was that it incentivised the retention of profits, which would have helped to build up banks' capital base. The real failure of tonight's proposal, however, is that it does not live up to the Chancellor's own expressed reason for its introduction. When pressed on the matter, he said that equity was the reason. He had to prove to the public that he was looking to get from the banks their contribution to the austerity measures that had to be introduced as a result of the banking sector's failures. In my view and that of other Opposition Members, however, he clearly has not done that. Although we look forward to him agreeing to the review that will tell us whether he has done it, perhaps the Ministers could gives us some reassurance. That brings me to the bank bonus tax. I would like to refer to an earlier intervention. If, as is likely, we pass the bank levy in its present form, despite the amendment, we simply will not raise enough money to do all the things the economy needs if it is not to bump along the bottom, as someone characterised it earlier. If we are not to bump along the bottom for the next few years, we need to do something. I commend the work done on the bank bonus tax and how it would have been used. That was a tax of 50% only on bonuses over £25,000, so it did not tax the smaller end of the bank bonus market. The particular merit of the bank bonus tax was that the bank paid, not the employee. I mentioned earlier that the bank bonus tax raised £3.5 billion. Why did we introduce it? First, it should be noted that it had widespread support among the public, who felt that we were directly addressing bonuses and the bonus culture. Taxpayers kept saying, ““Why have you guaranteed the banking sector and not any other part of the economy?”” We in this House know why that was, but they needed a justification for it. One justification for that implicit guarantee was that we wanted to rescue the economy. We did not give that guarantee so that we could enrich bankers a year later. That was not the idea. We were doing everything we could to reflect public concern, as well as ensuring that the system was stable and that bankers paid their fair whack. However, the bonus tax was described by the bankers—these are direct quotations—as ““populist””, ““political”” and, believe it or not, ““penal””. There were also threats to leave the country. We have been looking out for additional electoral registrations in Zurich, Paris and New York, and although there is a flow backwards and forwards, to and from those countries, the reality is that the bankers did not leave. They did not leave because the banking industry recognised that we made the correct and appropriate response, which I would commend to the Minister. Finally—this comes back to the earlier intervention—let us look at what the Government have brought forward in what they call their growth zones. Enterprise zones? I mean, come on! As for the idea that they are an appropriate growth strategy, we need only look back at the experience of previous enterprise zones to know that creating jobs under such a regime is prohibitively expensive. The national insurance holiday is another centrepiece of what the Government said they wanted to do. However, although they will not release any concrete figures, it was already clear from an article in the Financial Times in January that, far from 400,000 businesses being helped over the four or five years of the policy, at that time only 1,500 had been helped.