Arundel and South Downs MP Nick Herbert: Move towards responsible banking is right

Arundel and South Downs MP Nick Herbert

Arundel and South Downs MP Nick Herbert

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We need successful businesses and wealth creators in our country. They generate the jobs and tax revenues to fund governments and public services.

Or do they? Recent cases involving companies like Starbucks, Amazon and Google who have not paid taxes, as apparently they should, have provoked anger.

They have shown that the international rules on cross-border taxation are hopelessly outdated in the era of the internet, where assets can be moved between jurisdictions.

So the Prime Minister’s move at the G8 summit this week to re-write the tax rules was welcome.

By 2015 the UK will have the lowest corporation tax in the G8. But the quid pro quo for this benign tax environment is surely that taxes must be paid.

This isn’t just a question of what’s lawful for businesses to do; it’s a question of what’s right.

A century ago, the great Republican President Theodore Roosevelt attacked vested interests in corporations and special privilege. He recognised that capitalism could not be unbridled.

The banks are a case in point. We need a thriving financial sector, which is a major component of our economy, although the collapse taught us that we also need to be less reliant on it. But we also need banking to be responsible.

I thought that the Archbishop of Canterbury was right to say that a culture of entitlement in banking was deeply damaging.

He sits on the Banking Commission, which under the chairmanship of Chichester MP Andrew Tyrie reported this week.

The Commission proposes a raft of measures to re-build trust and make individual responsibility in banking a reality.

I am sceptical about one of its recommendations, a new criminal offence of “reckless mismanagement of a bank”. I’m not sure that it’s workable. And why should it not apply to other businesses?

What about the politicians (we know who they are) who recklessly mismanaged the economy? Or appalling and costly mismanagement of public services?

But, overall, measures to ensure that individuals are properly accountable for activities which can affect the livelihood of millions of people are necessary.

The move towards responsible banking, including separating retail from more risky banking operations, is right.

As Teddy Roosevelt said: “The essence of any struggle for healthy liberty has always been, and must always be, to take from ... one ...class of men the right to enjoy power, or wealth, or position, or immunity, which has not been earned by service to his ... fellows.”

If you would like to get in touch with me, please write to me at the House of Commons, London, SW1A 0AA, or e-mail me at nick@nickherbert.com