I beg to move, That the clause be read a Second time.
New clause 6 is a technical amendment designed to give a belt-and-braces protection to prevent any possible attempt to avoid the incidence of the bank levy on the part of banks in a particular respect. Paragraph 70 of schedule 19 of the Finance Act 2011 specifies that high-quality liquid assets held by banks are not liable for the levy. This is to make sure that there is no disincentive for banks to hold assets that give liquidity protection in the event of a crisis. By their nature, the return on such assets is small, and without relief the bank levy would reduce the margins, making it uneconomic to hold such assets. It was always envisaged that the definition of assets covered would be the same as that of the high-quality liquid assets recognised by the regulator —now the Prudential Regulation Authority.
It has come to the attention of HMRC that some banks were contemplating arguing that a wider definition of assets might apply, against the intention of the original legislation. In fact, the Government do not believe that the current legislation can be interpreted in this wider way, and HMRC could and would make a legal challenge against any bank engaging in this. However, such a challenge would take some time to be heard, and in the meantime other banks could follow suit and attempt to use a wider interpretation. I hope that the House will agree that the most straightforward way to proceed is to amend the relevant Act to put the matter beyond doubt by defining high-quality liquid assets explicitly as
“assets that are eligible for inclusion in a firm’s regulatory liquid assets buffer”.
It is right that the new clause should be applicable from the introduction of the bank levy in 2011, as the Government have been clear from the outset that this was the intention. For example, the Government’s consultation document in October 2010 stated that the deduction would be for those assets
“which meet the FSA definition of high quality liquid assets for the purposes of inclusion in the liquidity buffer”.
I hope that the House will agree that it is right to move quickly to close the scintilla of a possibility that ingenious lawyers could help any bank to avoid paying its full contribution to the levy.