First it was the big banks that complained; now the little ones are up in arms. At issue is the Chancellor’s profits surcharge, which will eventually replace the banking levy.
Big banks, notably HSBC, hated the latter because it was charged against their global balance sheets rather than just their UK operations, thus having the biggest impact on those with lots of global operations.
Challenger banks hate the surcharge, and will today be in the Treasury to put their case, which is that it squeezes them and prevents them from competing with the big boys by constraining their ability to lend.
Taxing banks more than other businesses is perfectly justified: despite what the regulators would have you believe, we will all be on the hook if one of them once again looks like going under. The extra tax they pay as a result of that can therefore be likened to an insurance premium paid to us.
However, the problem with any new tax is that it will inevitably hurt someone disproportionately. Ditching the levy is generally held to have been a concession to HSBC because its imposition is one of the reasons behind the bank’s decision to review its corporate location.
It would be rather a shame if that had been done at the expense of the creation of a genuinely competitive banking sector in the UK.
