Media and Public Affairs
Emergency Budget
On the 22 June, the Chancellor, George Osborne MP, delivered his emergency Budget to the House. Issues of interest to members include:
Bank Levy
The Government will introduce a levy based on banks’ balance sheets from 1 January 2011. The levy will apply to institutions where relevant aggregate liabilities (total liabilities excluding Tier one capital, insured retail deposits, repos secured on sovereign debt, and policyholder liabilities of retail insurance businesses within banking groups) amount to £20 billion or more. The levy will be 0.04 per cent in 2011, rising to 0.07 per cent thereafter.Bank bonuses
The Government will consult on a remuneration disclosure scheme and explore the costs and benefits of a Financial Activities Tax on profits and remuneration.Support for Mortgage Interest
From October 2010, support for Mortgage Interest payments will be paid at the level of the Bank of England’s published Average Mortgage Rate.Stamp duty land tax
The Government will review stamp duty tax relief for first time buyers and will examine the rules on stamp duty on high value properties to prevent tax avoidance.NS&I Net Financing Requirement in 2010-11
NS&I will retain a zero net financing requirement in 2010-11.ISAs
Annual ISA subscription limits will be index linked from 2011-12.Child Trust Fund & Saving Gateway
As had already been announced, the Child Trust Fund scheme will be reduced and then stopped. The Saving Gateway will no longer be introduced.Capital gains tax
Effective 23 June 2010, capital gains tax will rise from 18 to 28 per cent for those with total income and taxable gains above the higher rate threshold. Basic rate taxpayers will continue to pay an 18 per cent rate on their gains.
Select Committee Chairs appointed
The new select committee chairs were announced on 16 June after a ballot of members. As mentioned above, Adrian Bailey MP has been appointed the Business, Innovation and Skills chair. Clive Betts MP becomes chair of Communities and Local Government Committee and Andrew Tyrie takes charge of the Treasury Committee.
Chancellor reaffirms commitment to strengthening building societies and mutuals
The Chancellor of the Exchequer, George Osborne MP, has restated his commitment to strengthening and supporting mutuals and to considering turning failed banks into mutuals.
In a debate on 16 June, following an emergency Parliamentary question on financial services regulation, the Chancellor was asked by Rachel Reeves MP whether failed banks such as Northern Rock would be turned into mutuals with focus on long term return rather than short term profit. Mr. Osborne replied; “we (the government) are prepared to consider lots of options. Sir John Vickers’ commission is going to look at the competition in the banking industry. It has become incredibly consolidated in the past couple of years and that is not necessarily the best thing for bank customers.” The Chancellor also stated that the government needed some time before deciding how they will dispose of the shares they have Lloyds and RBS and how they will dispose of Northern Rock. At present, he said, the British taxpayer would make a loss on these. He finished his answer by stating that, “It is sensible to look at what Sir John Vickers and his commission have to say about this.”
Mr. Osborne was later asked by Jeremy Lefroy MP whether he recognised the “importance of building societies and mutuals to the financial sector.” The Chancellor replied “building societies and mutuals have an important role to play in the future. We want to strengthen them and support those who want to create mutuals.” He stated that plans of how the government will do this would be set out in the next few weeks.
The Chancellor’s responses reaffirm commitments made in the final coalition agreement published on 20 May. The full debate can be viewed here http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm100616/debtext/100616-0004.htm#10061674000003
Sir John Vickers to Chair the Independent Commission on Banking
HMT announced that Sir John Vickers will chair the Independent Commission on Banking. The Commission will formulate policy recommendations with a view to:
• Reducing systemic risk in the banking sector, exploring the risk posed by banks of different size, scale and function;
• Mitigating moral hazard in the banking system;
• Reducing both the likelihood and impact of firm failure; and
• Promoting competition in both retail and investment banking with a view to ensuring that the needs of banks’ customers and clients are efficiently served, and in particular considering the extent to which large banks gain competitive advantage from being perceived as too big to fail.
Queen’s Speech 2010
The Queen delivered her speech in the House of Lords chamber on 25 May, setting out the Coalition Government's legislative programme for the next 18 months. Bills of interest to members include Pensions and Savings Bill and the Financial Reform Bill.
