asked the Chancellor of the Exchequer when his consideration of the imposition of a special tax on the windfall profits of the leading clearing banks will be completed.
asked the Chancellor of the Exchequer when he expects to complete his consideration of a special tax on the windfall profits of the clearing banks.
I have nothing to add to what my right hon. and learned Friend said in his Budget Statement.
The recent massive profits announced by the four leading banks and those of British Petroleum, which exceed £3 billion, exceed the total savings from public expenditure cuts. Is this the unacceptable face of capitalism? Will the Chancellor of the Exchequer urgently consider the TUC's call for a windfall tax on such obscene and exorbitant profits?
As a general proposition, one issue that divides the Chamber is that Conservative Members would like to see higher profits, in the interests of a healthy economy, whereas Opposition Members would like to see profits disappear down the plug hole. When such bank profits occur, partly as a side effect of Government policy, the question of special taxation measures relating to the windfall element will arise. It would be foolish to rush into hasty decisions which might have undesirable side effects.
Does not the Financial Secretary, with his well-known capacity for witch-hunting those on social security, realise that those profits are so exorbitant and unexpected that people will want to see whether this enthusiasm for taxation applies to the big boys as well as to the tiny ones? Will he consider taxing profits of £4,000 million when ordinary people are being grossly overtaxed?
I have already answered that question. The banks are taxed. In his Budget Statement the Chancellor made it clear that he would consider whether it would be appropriate to introduce a windfall tax on the windfall element of the banks' profits. It is absurd to talk about witch hunts. We are trying to ensure that the economy becomes healthier and that the balance between taxation and expenditure is right. We seek to diminish the public sector borrowing requirement, and that will be one of the main uses of revenue from North Sea oil. We also wish to bring down inflation. To talk in the emotive language that the hon. Gentleman has used is to demean the Chamber.
In view of the recent wage agreements negotiated by the clearing banks, does not my hon. Friend agree that there is a little bit of evidence to show that the clearing banks are a tiny bit monopolistic? Does he not think that it would be a good idea to look at that problem?
My right hon. and learned Friend the Chancellor of the Exchequer is looking at that problem. The pay increases that are being negotiated by the banks are a matter for them. However, they are fully aware of the consequences of unnecessarily high pay increases.
What is the Treasury definition of a " windfall "?
In this context, a " windfall " is something that accrues to one section of the business community, not as a result of its efforts but as a result of the side effects of specific Government policies. That is why we have a petroleum revenue tax.
Will my hon. Friend confirm that many of those windfall profits go back into industry and are of benefit to it? May I press my hon. Friend further about the differential rates which I earlier proposed? They may well be used by and be made available to industry. Is it not correct that many of the countries with which we compete—including some of our European colleagues—are adopting differential interest rates for the benefit of their industries?
Although I am not an expert on the subject, I understand that some countries have two-tier interest rates, with greater and lesser amounts of success. However, to shelter one sector of the economy at the expense of another would undermine the effectiveness of the Government's overall monetary policy. It would be subject to leakages, and it is highly unlikely that it would be effective.
Is not the Financial Secretary aware that the Government's failure to act demonstrates their fear of the City and of offending the Bank of England? Does he agree that there is no problem about taxing excess profits and that one could have an excess profits tax? If the hon. Gentleman were to introduce such a clause into the Finance Bill, we would support it.
There are considerable practical difficulties. If the right hon. Gentleman takes a little more time to reflect on the subject, he will, with his experience, appreciate that.
How does the Financial Secretary think that the public will react—in a climate of social security cuts, £l prescription charges and so on—when they see those bank profits? Does he accept that they arose as a direct result of Government policy and were not the result of demands for increased production? Does he further accept that even the Daily Mail found them unacceptable?
The right hon. Gentleman must be aware that bank profits tend to rise when profits in the rest of the economy are not doing well and when interest rates are rising. The reverse is also true. Bank profits tend to fall when the rest of the economy is doing well. One should look at the behaviour of bank profits and other profits over the cycle as a whole.