THE ANGER AGAINST THE BANKS IS UNDERSTANDABLE, BUT THE SOLUTION IS MORE COMPLICATED

Don’t you just hate those bankers? They’re the parasites of our society, the folks who get bailed out by the government and then pay themselves massive bonuses. Aren’t they?

Well it’s not quite as simple as that. True, the banking world has played a big part in the mess we’re in by its reckless lending and paying out of obscene bonuses. And of course it’s galling when banks that were bailed out with public money are found to be still paying big bonuses just a few months after receiving state help.

But there’s a simple truth in all this – if bashing the banks were straight forward, you can be sure the government would have done it long ago.

The problem is that taxes from banking make such a sizeable contribution to the money governments have to spend – one estimate I read put it at 12 per cent – that if we bash the banks, we will find there’s less money available for many of the things we take for granted that the state currently funds.

So how do we get round the problem? The task is to find a solution that keeps the banks contributing to the economy without them enjoying a position where they effectively hold the government to ransom.

Labour’s approach has been to introduce a tax on bonuses. That sounds all very reasonable, except it doesn’t work as there are so many ways round it.

We’re not exactly sure what the Conservatives would do if they got into government. I can understand David Cameron keeping his cards close to his chest, but it does mean he’s asking voters to take a leap of faith in supporting his party, and given the close links between Conservatives and bankers, I have no confidence that any action a Tory government would take would amount to more than tokenism.

The Lib Dem approach is to concentrate on taxing bank profits, not bank bonuses. That way the overall operations of a bank get taxed rather than just bonuses. Apart from being fairer, it would have the additional benefit that we’d avoid discriminating against people working at the lower end of the banking industry who get a large part of their modest pay in bonuses.

We have other finance policies too that are relevant to the bank issue, such as breaking up the banks that are in state ownership so they don’t become massive units that can’t respond to changing conditions; insisting that state ownership should mean an obligation to lend to solid British companies; and closing tax loopholes for the very rich so everyone pays the amount of tax they should be paying.

Despite the understandable public anger, dealing with the banks is a balancing act. What the Liberal Democrats have is a policy that aims to build a banking system of the future that is viable for the country as well as the banks themselves. That is more constructive than policies that offer a sop to popular anger, or offer nothing of substance at all.