The government would prefer silence on these issues but the damage was far from total. Budd was an interim figure and the spat that has developed around him is largely political – there is no question that Budd was ‘nobbled’. Robert Chote deserves his reputation but he is not infallible. And Treasury Chief Economic Advisor, Dave Ramsden, put paid to the criticism of the banking levy. He argued that £2.5bn across the sector will not bring insolvency of financial institutions, which something of an understatement. He also pointed out that the levy is brought on short-term investments, which is designed to moderate risk as well as make banks pay for the insurance that the taxpayer gave them.
The levy is welcome, but the Select Committee has raised an important issue. The consumer protection fund and the banking levy are a drain on banks’ capital bases. Aside from the competition issue, closing banks’ margins will affect lending and therefore the recovery, which is fragile enough at 0.3 percent in quarter one 2010. Great black balance sheets might look tempting amid stagnation, but long-term stability and the sale of taxpayers’ assets at a profit is far more important.