Milliband calls to extend tax on bankers' bonuses

Mr Miliband said it was "unfair" that the banking levy being imposed by the Government this year would raise less than half that sum at a time when ordinary families are facing increases in taxes like VAT. The Labour leader said extending the tax on bonuses for a second year would provide money to support growth in the economy. His comments, at his first press conference of 2011, come as the banks prepare to pay out annual bonuses estimated to total as much as 7 billion. Mr Miliband said: "Last year, Labour's bonus tax raised 3.5 billion from the banks. This year, the Government's bank levy will raise just 1.25 billion. "It is unfair and it is the wrong economic judgment to be cutting taxes for the banks at a time when everybody else is paying more. "We believe the extension of the bonus tax for another year is not only fairer, but more responsible. This is because we would use the money raised to support economic growth." Shadow chancellor Alan Johnson said the money raised from re-imposing the tax on bank bonuses could be used to support jobs and help make up for the Government's lack of a growth strategy. He accused ministers of failing to implement their own commitment in the coalition agreement to take action to tackle "unacceptable" bank bonuses. "We have been expecting them to turn these words into action but they are either incapable of doing so or they have changed their mind and decided to abandon their coalition agreement commitments as easily as they have ditched other policies," he said. Instead, he said, the banks had effectively been given a tax cut as the tax on bonuses had raised 3.5 billion while the coalition's new bank levy was forecast to raise only 1.25 billion. "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 said. Mr Miliband said ministers should "take action" over RBS chief executive Stephen Hester, who is reportedly in line to receive a 2.5 million bonus, but refused to be drawn on what he should be paid. "They should exercise a judgment. They should not get the scale of bonuses that is being talked about," he said. "I am not going to sit in judgment standing here, not as a shareholder in the Royal Bank of Scotland, about his precise level of pay." Prime Minister David Cameron said yesterday that he wanted the banks to "do more to demonstrate their social responsibility", but said it was wrong to "scapegoat" the sector. Mr Cameron urged the largely state-owned Royal Bank of Scotland to be a "back-marker" in the bonus payouts, but insisted he would not attempt to "micro-manage" its activities. But Deputy Prime Minister Nick Clegg was more forthright this morning in his criticism of financial sector bonuses, which he said seem to come "from a parallel universe". Mr Clegg told the BBC Radio 4 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. "The people who run these banks should show extra sensitivity and transparency in the way in which they reward themselves." Mr Miliband today accused the coalition Government of "deceit" in claiming that the economic crisis was caused by overspending under the previous Labour administration. And he said this incorrect analysis of the causes of the crash had led Mr Cameron and Chancellor George Osborne to take "the wrong judgments about the future" and to construct an economic policy on spending cuts, rather than support for growth. "It matters for our public services, and it matters also for the speed of our economic recovery, forecast in Britain to be the lowest for 40 years," he said. "David Cameron wants you to believe that this would be a success, but sluggish growth should not be the benchmark for success in this country. It wouldn't just be bad for jobs and livelihoods now, but the lesson of history is it would be bad for the economy for the long term." The decisions on cuts taken in 2010 run "directly counter" to Mr Cameron's aim stated over the last week to boost jobs and growth this year, he said. "If he really cares about growth in our economy, he will have to revisit his entire economic strategy," said Mr Miliband. He called for the Government to reverse the VAT rise to 20 per cent introduced last week, to restore the Future Jobs Fund for young unemployed people, and to provide support to industry. Reports today suggest that the Government is proposing an "employers' charter" to make it easier to dismiss underperforming workers. Mr Miliband said: "The Government has had eight months to come up with a growth strategy and apparently all they can come up with is a proposal to make it easier to sack workers. "Here we see two different visions of how to improve Britain's economy - Labour's vision of supporting industry and grow our economy, and David Cameron's answer, which is simply to increase the insecurity that people already feel at work. "David Cameron is squeezing the living standards of ordinary families, he wants to make it easier to sack workers and he is letting the banks off the hook."