It is the politics of shooting oneself in the foot. The difficulty is that the Chancellor does not even understand that his strategy is making his task far harder in the long run. It is not just the fact that people on lower and middle incomes are suffering as a result; it is the unfairness when they compare it with what the Government are doing for those parts of the economy and of society that they favour. The banks are still getting away with not paying their fair share. A tiny corner of the country is doing very well out of the Chancellor. The banks, whose actions created the deficit, are not contributing their fair share towards repairing it. In fact, astonishingly, they are benefiting from the Chancellor’s generosity. This Bill fails to get a grip of the contribution the banks ought to be making. It is still too weak on the very institutions that had to be bailed out by the taxpayer because of their perilous self-indulgence. We have debated in the past, and we will do so again, the fact that Ministers have failed lamentably when it comes to tackling bonuses. In opposition, the Prime Minister promised:
“Where the taxpayer owns a large stake in a bank, we are saying that no employee shall be paid a bonus of over £2,000”.
My hon. Friends probably remember that comment. However, when I express my dismay about the Bill’s weakness, I am not just talking about the lack of a bank bonuses tax. The Government said that the bank levy, as a charge on bank balance sheets, was their answer to clawing back some of the costs for the taxpayer.
The Prime Minister said in 2011 that once the levy was “fully up and running” it would raise £2.5 billion each year—in fact, he said that it would raise £9 billion over the spending review period. We now see that the Government have totally failed to live up to their promise and that the banks have swerved the bank levy; they have not paid anything like the amount mentioned. In fact, the Chancellor has raised nearly £2 billion less from the banks since the Prime Minister made that promise just two years ago. Those are not my figures, but the latest figures from the Office for Budget Responsibility and HMRC.
The Government repeatedly claim—the Minister did it again today—that the bank levy will raise £2.5 billion a year and that the cuts in corporation tax will not benefit the banks; the Minister said that those corporation tax cuts would be offset by increases in the levy. However, the OBR figures, published alongside the Budget, estimate that in the financial year that has just ended, 2012-13, the bank levy will raise just £1.6 billion—a massive shortfall. We have then to deduct a further £200 million because of the generous corporation tax cut. All in all, the banks have paid £1.1 billion less than Ministers promised. That is even worse than in the previous financial year of 2011-12, when the combined shortfall was £800 million less than the Minister promised.
What on earth is going on? Why cannot the Minister get a grip of the issue? The bank levy strategy is haemorrhaging money when it should be boosting the Exchequer far more significantly. I ask my hon. Friends to think of what that nearly £2 billion could have achieved in the past two years. This is the third or fourth
attempt by the Government to get the issue right, but each time they have failed to raise what they promised. The Minister has to go back to the drawing board now and come up with a policy that will actually work rather than something designed to pass a press release test.
The Chancellor is making bad decisions because he is getting deeper into difficulty, proving time and again that saving his own skin comes before getting the judgment right. It did not take long for the world to see, for example, that the Government had not properly thought through their flagship Help to Buy scheme after it was announced in the Budget. That was hailed as the boost that we needed for housing, but focusing only on demand without any corresponding action to supply more affordable homes is only a half-policy partially thought through.
I hope that the scheme succeeds, but why on earth cannot the Government ensure that funds are not siphoned off for second-home purchases? By contorting the scheme so that it does not count against the deficit figures, do they not realise that they have added complexity that might hinder take-up? After all, the Government promised that 100,000 people would have used last year’s NewBuy scheme by now, but only 1,500 people have become involved so far.