Following today’s budget, Ed Davey has slammed the Chancellor for giving twice as much away in tax cuts to bankers as extra catch-up funding to help children make up for lost learning during the pandemic.
Analysis by the Liberal Democrats shows that reducing the banking surcharge will cost the Treasury over £3.8 billion over the next four years. This compares to just £1.8 billion of additional catch-up funding in today’s Budget. That is the equivalent of £1 of extra catch up funding per child every school day, compared to a £6 a day tax cut for each banker.
Liberal Democrat Leader Ed Davey said:
This was an out of touch Budget that is taking ordinary families for granted, hiking up people’s taxes while failing to help them with soaring energy bills this winter. We’ve seen a lot of spin but very little on the three big crises we face: the cost of living, the climate emergency and children’s lost learning.
Parents are crying out for the catch-up funding our children desperately need. The Chancellor let them down today, offering less in extra catch up funding than his tax cut for the big banks.
Rishi Sunak has sent a clear message to children and parents across the country: they are worth less to him than his investment banker chums in the City. We can see clearly what his priorities are, and they are not those of the British people.
He is offering a measly pound a day of extra catch up funding for each child, six times less than the tax cut being offered to the Conservatives’ banker buddies.
Notes
The Chancellor let down parents today, providing less in extra catch up funding than his tax cut for the big banks. He is offering just an extra £1 of extra catch up funding for each child, compared to a £6 a day tax cut for each banker.
The £4.9 billion total catch up funding (including £1.7 billion announced in 2020, £1.4 billion in June 2021 and £1.8 billion announced today) divided amongst 8.3 million students over three years comes out at £200 per child per year. Over the course of 180 school days in a year, each child will be given just £1.11 each school day to catch up on vital learning.
According to the Treasury’s policy costings, the cut to the Bank Surcharge will cost £3.82 billion in the four years from 2023-24 to 2026-27. In 2026-27 alone, it will cost £1.02 billion. According to the latest figures from UK Finance, total employment in the banking sector stands at 475,825. This means that in 2026-27, the Bank Surcharge cut will amount to £5.87 spent per banker per day.
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17 Comments
I really have never been to get excited about the budget. Completely forgot it was on today as we had two of our grandchildren for the day. I suppose it says a lot about me.
As they say in France; “Plus ça change, plus c’est la même chose”.
I think the headline for this article is misleading. Corporation tax is to rise from 19% to 25%. At the same time, a surcharge in corporation tax that is paid only by banks is being reduced from 8% to 3%. That means that banks will see an increase in their effective corporation tax from 27% to 28%. It’s plain not true to say that bankers are getting at tax cut.
After all the leaks and tra la la, we have never received a clear explanation of where we are on the public finances. Like the Chancellor used to give in days of old. On the one hand we are told that he has more headroom, etc. On the other the OBR tells us that Brexit is hitting GDP by 4% a year? I am not feeling the optimism and most local authorities are in dire straits. They are the ones financing the mushrooming social costs of care.
But perhaps the bankers should be paying more in tax overall in the hope that less of the burden might fall on the less well-off?
@Nonconformistradical: Are you saying that someone who works in banking should pay a higher tax rate than someone earning the same salary/etc. who works in another industry?
For the majority of us, life goes on without any noticeable difference!
@Simon R
I’m making the assumption that this is about higher paid bankers – investment bankers etc.
But actually I feel the banking industry sometimes forgets that its services are essential to the rest of us human beings and overfocusses on making large profits so I admit to not being terribly sympathetic to them (but that doesn’t include staff in what local bank branches we may have left).
>I’m making the assumption that this is about higher paid bankers
The budget surcharge change was about the Banks, which are colloquially being referred to as ‘bankers’, leading to some confusion with individual bankers who will be paying PAYE and NI just like the rest of us.
However, with tax going digital, it does become much easier to implement profession-based taxes…
I think the picture is actually a little worse than the one you paint, with bankers getting 10 times more money than schoolchildren rather than six times. Doing the figures based on a per year figure, I get children receiving nearly £200 and bankers getting nearly £2100 a year on a per employee basis.
Having said that, I have to question whether reducing the banking surcharge is the same as putting money in individual bankers’ pockets. Although it’s true that banking executives have done a superlative job of capturing ownership of their industry over the years, some of the benefits still do manage to flow through to the shareholders.
The chancellor is of course wrong to reduce the banking surcharge. Banks exist within an extraordinary envelop of state protection, and in generating their wealth, bankers often seem to forget the extent to which they rely on an invisible social and governmental infrastructure. Underfunding everything from roads and sewers to schools and social care erodes the fabric of the very society on which they depend. But it’s hard to squeeze that into an annual report.
@Nonconformstradical “I’m making the assumption that this is about higher paid bankers – investment bankers etc.” It’s as @Roland says. BankERs – as in, the people who work in banks etc. pay income tax and NI etc. on their salaries, exactly the same as everyone else. The change we are discussing affects banks – the companies.
Companies pay corporation tax on their profits. As an example, if a company earns – say – £11 Million, but pays out £10 Million in expenses, salaries, etc., then it’s made a profit of £1 Million. It has to pay corporation tax on that profit. Currently, it pays 19%, but banks have to pay 27% because of a surcharge that George Osborne introduced. Rishi Sunak is increasing those rates to respectively 25% and 28%. (I’m simplifying a bit because there are some allowances etc. and differences for very small companies but those figures are broadly true)
@Tom Reeve – bankERs are not being given anything. Banks are not only not being given anything, but – as I’ve (hopefully) just explained – are facing a small tax increase. As far as the banking surcharge we’re discussing is concerned, it is completely false to claim that the Government are giving money to either banks or bankers.
This budget should have focused on educational catch up and providing more for skills and adult education. If we want a high skills economy we need to invest to create it. The best thing would be to put the Lib Dems in control for six months.
Nonconformistradical “I’m making the assumption that this is about higher paid bankers – investment bankers etc.”
That’s obviously the intention of the headline, but if “total employment in the banking sector stands at 475,825” then there are probably a lot of cleaners and other low paid workers in this definition of a “banker”.
Looking at the “analysis by the Liberal Democrats”, this seems to be a very feeble attempt to push an attention-grabbing headline by Ed Davey.
It’s disappointing and depressing if this is the best stick he can find with which to hit the Tories and their budget.
Davy attacking bankers in the budget is vindictive, ignorant and wrong.
Firstly the banks are owned by investors – like our pension funds – not bankers.
Secondly the corporation tax of banks is being increased to 28%, 35 more than other companies.
Thirdly bankers will have their national insurance increased the same as other employees.
Fourthly there are many hundreds of thousands of bankers who are voters and just been gratuitously and wrongly insulted by our leader.
What’s wrong with us?
3% not 35 above.
Davy attacking bankers in the budget is vindictive, ignorant and wrong.
Firstly the banks are owned by investors – like our pension funds – not bankers.
Secondly the corporation tax of banks is being increased to 28%, 3% more than other companies.
Thirdly bankers will have their national insurance increased the same as other employees.
Fourthly there are many hundreds of thousands of bankers who are voters and just been gratuitously and wrongly insulted by our leader.
What’s wrong with us?
@ David Evershed I believe Sir Edward was referring to ‘investment bankers’, Mr Evershed, not to those helpful people in my local Bank of Scotland branch.
I still suggest you should rest easy though. Your investment banker friends (including billionaire Rishi) will all receive the UBI under current Lib Dem policy so they won’t be rushing off in a hurry to the local food bank.
David Raw
Under tax law there is no difference between investment bankers and commercial bankers. They are all employees and subject to the increase in national insurance.
Our Pension Funds are free to invest in commercial banks and investment banks and it is they, not the bank employees, who would benefit from any reduction in corporation tax, which for large banks was anyway increased from 27% to 28% in the Budget, 3% higher than for other types of company in the Uk and higher than for banks incorporated in many other countries.