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Clause 1 — Main rate of corporation tax for financial year 2011

Part of Finance Bill – in the House of Commons at 7:15 pm on 12th July 2010.

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Photo of Kevan Jones Kevan Jones Shadow Minister (Veterans) 7:15 pm, 12th July 2010

That is true. The Government's drive to reduce public spending has very little to do with reducing the deficit. It is more an ideological move to reduce the size of the state. Unfortunately, like a boa constrictor, they have wrapped themselves round the Liberal Democrats, and will slowly squeeze the life out of them in the coming weeks, months and years. That is dawning on the hon. Member for St Ives, who does not want to be the mouse that gets squeezed at the end of the day. Let us hope that he will escape the clutches of the boa constrictor, which is slowly strangling the lifeblood from the modern Liberal Democrat party. I should not be too sympathetic to the Liberal Democrats, however, because I have spent a lifetime opposing them both in local government and nationally, so their demise might not be an unwelcome consequence of that strategy.

My hon. Friend the Member for Nottingham East has tabled an amendment that suggests that there should be a 28% tax on the profits of the banking industry, as defined by section 2 of the Banking Act 2009. The reason for that is supported very well in the Red Book. Paragraph 1.63 on page 26, which is entitled "Bank levy" says that

"the Government will introduce a levy based on banks' balance sheets from 1 January 2011, intended to encourage the banks to move to less risky funding profiles. The Government believes that the banks should make a fair contribution in respect of the potential risks they pose to the UK financial system and wider economy. Final details of the levy will be published later this year, following consultation. The levy will result in a rebalancing of the burden of taxation between banking and other sectors."

We have seen a very strange Finance Bill this year, with a very short preamble to be followed later by major changes. If we are going to have a major change which, in the Government's own words, is going to rebalance

"the burden of taxation between banking and other sectors",

I cannot understand why they are allowing the reduction in corporation tax for this year to apply to the banking sector. To me, it would seem right to wait for whatever the banking levy comes up with. That fits in very well with what my hon. Friend the Member for Nottingham East is proposing.

When people who are going to face higher rates of VAT and other taxation realise that this money is going to be given to the banking sector, they will find it very difficult to understand. Earlier, it was said that the banks will not get back all the money taken off them by the levy-no, but they will get a large portion of it back. [ Interruption. ] I will give way to Matthew Hancock if he wants to intervene. Is he suggesting that they should get the money back pound for pound? If we are talking about rebalancing, it is not much of a rebalancing act to take money away from them at one point and give the majority of it back through the back door.

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