On a week when the governments own Office of National Statistics have released figures showing the banking bail out cost the UK economy £1434 billion, George Osborne this week announced the terms of the ‘Project Merlin’ deal finalised with the banking industry on reform and pay. The verdict – a cop out. Not only have the Tories handed the banks a tax cut from £3.5bn last year to £2.5bn, despite Osborne claiming they’ve increased the levy, but they’ve reneged on pre election promises to force bankers to reveal identities of anyone earning bonuses of over £1 million. On top of this, the definition of a banking group has been redefined so many financial institutions won’t have to pay the tax.
Osborne has also claimed that the banks will be forced to lend more - £190 billion to be exact. What he declined to mention was that this figure was gross, not net, a situation Business Secretary Vince Cable described pre-election as ‘completely letting the banks off the hook’. Lending to small businesses will be increased by £10 billion, but much of this money will be in the renewal of existing loans. To top all of this off, these lending requirements are non-binding, and the banks can opt out ‘if in the interests of their shareholders’, meaning the banks can just sack them off anytime they wish.
When the Lib Dem Treasury spokesman Lord Oakeshott spoke out against the deal, he was fired. Oakeshott believes ‘the banks have taken the Treasury for a ride’, and that the Treasury officials were ‘arrogant and incompetent’ during the negotiations. Osborne and the Treasury have clearly been subject to intense lobbying by the banking sector in recent months during Project Merlin negotiations, including by the banking spokesperson Angela Knight, a former Tory MP. As figures revealed that the 51% of Tory party funding comes from bankers and financiers, it would seem that Osborne has caved into the demands of the very people who finance his party.
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