Miliband calls for bank bonus tax to be extended
- 10 January 2011
- From the section UK Politics
Labour leader Ed Miliband has urged the government to extend the tax on bankers' bonuses.
He said it had raised £3.5bn, while the coalition's replacement "levy" on banks would bring in only £1.25bn - meaning a "tax cut" for the financial sector.
Mr Miliband said it was "unfair" not to continue the bonus tax at a time when people were being hit by the VAT rise.
But the Conservatives played down Labour's demand, saying the levy would eventually raise £2.6bn a year.
Banks are thought to be preparing to give out annual bonuses totalling £7bn.
It is reported that Stephen Hester, chief executive of the state-owned Royal Bank of Scotland, is in line to receive a £2.5m payment.
At his monthly press conference Mr Miliband said: "It cannot be right that, when workers face below-inflation pay increases, if they get any rise at all, and families see prices on the high street rising, senior bankers keep raking in bonuses that are more in one year than most people can earn in a lifetime."
He urged ministers to "take action", adding: "They should not get the scale of bonuses that is being talked about."
Mr Miliband said Labour's one-off bonus tax measure - which has now expired - had raised £3.5bn in a year, while its Conservative-Liberal Democrat replacement levy would make just £1.25bn.
He argued that extending the tax on bonuses for a second year would provide money to support growth in the economy.
However, the prime minister's spokesman played down the prospect, pointing out that Labour's measure had been a "one-off" and that, if repeated, it would be open to avoidance.
The Conservatives disputed Mr Miliband's figures, saying the Treasury had found the bonus tax had raised just £2.3bn and that the coalition's levy would gather £2.6bn a year by the end of this parliament.
No 10 has insisted the government will not dictate to banks what level of bonuses they should pay.
But a spokesman said the body in charge of managing the taxpayer's stake in Royal Bank of Scotland and other banks bailed out in 2008 would discuss bonus proposals with the firms concerned in its role as a responsible shareholder.
Mr Cameron said on Sunday that he wanted the banks to "do more to demonstrate their social responsibility", but warned it was wrong to "scapegoat" the sector.
On Monday, his Liberal Democrat deputy, Nick Clegg, told BBC Radio 4's Today programme: "I totally accept that the sky-high numbers that are bandied about in the City of London seem to come from a parallel universe to many people.
"But I think the key issue of principle is this - for those people running state-owned banks, they have to be sensitive to British taxpayers, who are the shareholders of these state-owned banks, so we are entitled to say that should be reflected in the sensitivity with which bonuses are awarded."
At his press conference Mr Miliband also defended shadow chancellor Alan Johnson after he appeared not to know the rate of National Insurance paid by employers.
On Sky News on Sunday Mr Johnson said the "secondary class one-rate [National Insurance contributions] for employers" would have gone up 1% to 21% had Labour won the general election. But he was later reminded that the current rate was 12.8%.
Asked whether this threw into question the ability and judgement of the shadow chancellor, Mr Miliband said: "Alan clearly knows about these things."
He added: "It's the big things that matter in politics. The things that matter are your instincts and why we stand up for your judgements. I take his judgements over [Chancellor] George Osborne's any day."
Mr Miliband also defended his party's financial record in government, saying it had been borrowing "within acceptable limits" before the global economic crisis hit.
He repeated his criticism of the coalition that it was cutting "too far, too fast", which could damage economic growth.
Mr Miliband added that he and Mr Johnson agreed that the 50p income tax rate for top earners "should stay for this parliament and it is very unlikely that our priority after the next general election would be to cut the 50p tax rate".
He said: "There are lots of other priorities that will take precedence."