In Focus: A wizard idea?
Just how much of the government’s announcement that it will raise the levy on the banks is genuine and how much is it a smokescreen to hide the fact that it is forcing huge cuts on the public sector? This is a question that has been vexing many in and outside of the banking industry over the last few weeks, as both sides moved towards the oddly-titled Project Merlin.
George Osborne’s breakfast announcement that he’s going to increase the levy on banks to £2.5bn this year, raising an extra £800m, has led to differing views from the banking sector. Whilst an extra £800m might not seem much when you compare it to the amount paid out in bonuses to high-flying bankers, Osborne is obviously hoping that, against a background of cuts and the failure of the Big Society to embed itself in the nation’s consciousness, that it might be seen as symbolic.
Views are polarised. As expected, the big four banks are outwardly seething, whilst Unite thinks the £800m is a drop in the ocean and is sniffing blood.
But there needs to be a more measured approach, I think. What about the small businesses which are starved of finance, and who are supposed to be at the heart of any recovery the East Midlands? Will any Project Merlin agreement mean that the banks will start lending again, or will they use the increase in the levy as an excuse that they must balance their books even further?
Furthermore, can the banks start lending to each other again with any degree of confidence? Will they take a punt on smaller businesses again, or are they too afraid of the criticism that came their way when they failed to undertake proper risk assessment of such businesses before the bubble burst in 2008? So many questions, not enough answers.
The bankers’ threat that the increase in the levy will see them move their headquarters overseas might not be a case of crying wolf after all. For an economy that has relied so heavily on the financial sector over the last 15 years, this would be a disaster for London, and by extension the East Midlands.
The temptation for the government is that in order to appease the clamour from the media and sections of the public, it goes for a blitz on the banks. It might win short term plaudits from those tired of hearing about bonuses, but in the long run it’s small businesses who will undoubtedly suffer.
Comments? Sam Metcalf, Insider
Recent Posts
Services
Dealmakers Services Directory
Directory Find an advisor to help you buy, sell or invest
Property Services Directory
Find an advisor across property services
Commercial Property Finder
Full commercial property listings in the Midlands
Guides
Midlands City View
The news, features and analysis that matter for your city
International Trade
Our guide provides expert analysis on a range of trade destinations
42 under 42 Members
The latest class of the Midlands brightest young business people
- Contact us
- Midlands
- North West
- South West
- Wales
- Yorkshire
- Other regions
- 0121 232 0980
- 0161 907 9711
- 0117 906 5900
- 02920 434500
- 0113 220 4410
- 0161 907 9718
- Insider regions
- Central & East
- Ireland
- Midlands
- North East
- North West
- South East
- South West
- Wales
- Yorkshire