My advice for Burnham’s first budget? Hit the banks – and hit them hard | Polly Toynbee
Bankers have barely begun to repay the billions they cost the country after 2008. In this PM they may have met their match Vibes matter. We live by how we feel – an idea that orthodox economics gets wrong and Andy Burnham’s first budget looks set to get right. This walking good-vibes maestro is spreading a confetti of small good deeds. These may not shift the dial yet on 40 years of neoliberal…
My advice for Burnham’s first budget is to target the banks, and hit them with a strong hand. The economic impact of the 2008 financial crisis is still evident as bankers have only just started repaying the billions they cost the country. Andy Burnham’s inaugural budget appears to be the perfect moment for a change in approach. It’s not about dramatically altering the course of 40 years of neoliberal economics, but about the small deeds that can create a ripple effect.
Small but impactful changes include capping bus fares and reducing VAT on electricity bills by £45. These initiatives are designed to encourage conversations and show Burnham’s direction. A tax increase on banks stands out as the most notable and resolute measure in his first budget. After years of no accountability, no apologies, and no payback for the bailout they received due to their role in the 2008 crash, banks are now facing a tax rise.
The Conservatives' cuts to the bank levy and bank profits surcharge were left untouched by Rachel Reeves, but Burnham plans to change that.
The banks have amassed UK profits of £13bn in the first half of the year, a 16% increase from the previous year. However, the threat of a tax rise shouldn't be underestimated. Banks may move to more tax-friendly countries like Ireland, where corporate taxes are lower. Jamie Dimon, CEO of JP Morgan, threatened to abandon plans for a £3bn London headquarters and warned about the loss of over 23,000 UK staff if the tax increase goes through, only to retract his stance after Reeves' departure from the budget process.
Bankers have a history of intimidating those in power, as seen when Dimon threatened Alistair Darling in 2009 when the then Chancellor imposed a 50% levy on bankers' bonuses over £25,000. Darling stood firm and JP Morgan continued operating in the UK. Dimon's visit to No 10 last month to warn against a tax increase went ignored.
Burnham's decision to raise the bank tax to its original 8%, from the current 3%, will only raise £2bn, but it's a start. This act of defiance sends a strong message and shows that Burnham is willing to confront the power of the financial sector.
Burnham's budget also includes other progressive measures like raising the corporation tax surcharge back to its original 8%, which could generate £2bn. The support for higher taxes on the wealthy, such as gambling and wealth taxes, is evident in TUC polling. Additionally, raising the capital gains tax remains popular. Burnham is also considering merging national insurance and income tax, with no exemptions for pensions, rent, and share income. This approach is backed by the Institute for Fiscal Studies and the Resolution Foundation.
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