Money is tight, so the Chancellor keeps telling us, but Rishi Sunak has found a few billion quid down the back of the sofa for the City.
Reports this morning suggest that Sunak will announce a bumper tax cut for banks in next week’s budget. A surcharge on bank profits will drop from 8% to 3%, we are told.
The move is bound to raise eyebrows in some corners, given that former hedgie Sunak is handing bankers a windfall at the same time as the Government is cutting Universal Credit for the country’s poorest. But, setting aside decisions elsewhere, a tax cut for the City is the right thing to do.
Finance was totally overlooked in Brexit negotiations and has found itself worse off as a result. Share trading volumes have fled elsewhere.
A failure to secure equivalence with the EU means doing business with our biggest neighbour will remain expensive.While jobs haven’t been lost at anywhere near the rate initially forecast by some, foreign bank bosses say future hiring is likely to focus on places like Paris and Frankfurt at the expense of London.
The City has an opportunity to reinvent itself as a global centre for green finance. Developing expertise in this area will help London win mandates from Jakarta to Calgary.
But the City needs support if it is to stay competitive with the likes of New York and Hong Kong, which are also vying for that market.
Banks already pay their fair share of tax. The financial services sector employs around 3% of the UK’s workforce but pays 10% of the country’s total tax bill.
A tax break can help grow the City — and the tax take — in the long run even if the reduction does look like a reward for fat cats in the moment.
The Chancellor should take bold decisions like these: it will pay dividends for the country, and the Treasury, down the line.
