Finance (No. 2) Bill — House of Commons, 2017-12-18
Topic: Domestic Commerce
Melvyn John Stride (Conservative, Centre-right): I congratulate the hon. Gentleman on the ingenuity with which he has shoehorned in that question, which is possibly a Department for Work and Pensions matter, although I am not sure. But I will certainly come back to him on that point, and if it is not for me to respond, I will make sure the appropriate Minister in the appropriate Department does so We expect to raise over £25 billion from the additional taxes that banks pay over this period, on top of the £19 billion that we have raised to date since 2011. By 2023 we will have raised more than £44 billion in additional bank taxes introduced since the 2010 election I will now turn to the changes made by the current Finance Bill, and set out the reasons for changing the scope of the bank levy. Hon. Members will be aware that the bank levy aims to reduce the risk banks pose to the wider UK economy. It is currently chargeable on the global balance-sheet equity and liabilities of UK-headquartered banks, but overseas banking groups only pay bank levy on UK activities. However, regulatory developments currently being implemented across the G20 as a result of the standards set by the Financial Stability Board and the Basel Committee on Banking Supervision will reduce the risk that overseas operations of UK banks pose to the UK economy, for example with stricter international standards on the need for subsidiaries to be independently capitalised We have also made it mandatory for the largest UK banks to separate core banking services from their investment banking activities by 2019. This ring-fencing will help to insulate UK borrowers and depositors from failures arising in banks’ overseas branches, before the changes to the scope of the levy take effect. As such, there will now be less need for the bank levy to address the risks posed by overseas operations of UK banks, and as the bank levy is less necessary to cover these risks, we have an opportunity to boost the competitiveness of UK banks by reducing its scope At present, UK-headquartered banks pay the levy on their worldwide operations, while foreign-headquartered banks only pay on their UK operations. We want the UK to stay at the forefront of global banking; we want banks based in the UK to compete and win business overseas, bringing jobs, prosperity and tax receipts with them. So we have decided that from 2021 the bank levy will apply only to UK balance-sheets for UK-based and foreign banks alike. This will allow UK banks to compete and win business on a more level playing field in these overseas marketplaces, and it is a change we are making as part of a package of reforms that secures revenue while boosting competitiveness The corporation tax surcharge, the reduction in bank levy rates, and changes to compensation relief restriction were legislated in 2015. Following detailed consultation, this clause and schedule implement the final element of our plan: changes to the scope of the bank levy. The clause and schedule narrow the scope of the bank levy so that from 2021 it will be chargeable only on the UK balance-sheet equity and liabilities of banks and building societies. Broadly, this means that overseas activities of UK-headquartered banking groups will no longer be subject to the bank levy. However, the levy will continue to apply to the UK operations of UK and foreign banks.