Clause 73 — The bank levy

Part of Bill Presented — Police (detention and bail) bill – in the House of Commons at 6:30 pm on 5 July 2011.

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Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury 6:30, 5 July 2011

I would like to give way to the hon. Gentleman, but I want to try and wind up the debate because there are other important matters to be discussed this evening.

On Government amendments 32 to 50, since our proceedings in Committee, it has been brought to our attention that in one area the legislation as drafted may not fully achieve the intended policy ambition. These are the rules relating to netting and in particular the rules concerning multi-lateral netting agreements in groups. These are essentially agreements that allow different members of the same banking group to enter into a net settlement agreement with the same counterparties.

We have sought as a public policy objective to ensure that banks should be able to net off certain liabilities against assets, and that the levy is charged only on the remaining balance of liabilities. The amendments clarify the purpose of the legislation and ensure that the netting rules apply so that some banks are not adversely affected. We want to make sure that we keep the provisions under review. That is why we have put into the amendments a power to allow the Treasury to amend the rules applying to netting arrangements going forward.

The hon. Member for Nottingham East asked whether there would be an impact on yield as a consequence of the amendments. There is no impact on yield, as the amendments reflect the policy objective that we have pursued.

In conclusion, we think it is right that banks should make a contribution reflecting the risks they pose to the UK financial system and the wider economy. That is why we introduced the bank levy. We expect the levy to raise more each and every year than the bank payroll tax did under the previous Government. All the Opposition have to offer in the debate is a tax that did not work the first time round. We have put in place a clear strategy to reform the banking sector. I believe that the actions we are taking are right, and I ask my right hon. and hon. Friends to oppose the Opposition amendments.