We don't expect always to agree with young George around here, but he's got this one right. If there is to be a Europe-wide special levy on banks, its application should be to general funds at the national level - by way of repayment for the bailout, if one likes to see it that way - rather than as a communal rescue fund for future bailouts. Even the Grauniad agrees on this one.
A year ago, the Turner Review mused on the idea that fully 'socializing' the ultimate risks of bank collapse might be "the optimal and only defence against system failure".
It isn't, and it couldn't be. As we said at the time:
"Conventional risk management can do much better than this without recourse to ‘state insurance’ ... What ‘society’ should demand is not the dubious privilege of socializing ultimate risk, but the proper implementation of conventional risk management between the consenting adults involved"
This is basic conservative philosophy. If you absolve anyone of taking care of their own business, they will at very least tend to be more casual about their affairs. We require property owners to confront the risks of fire personally, to arrange their own fire prevention, on pain of burning to death. The fire brigade (funded from general funds) is primarily there to stop fire spreading. Likewise, we must require banks, and their stake- holders, to confront their own capital adequacy - and the cost thereof - on their own. That is how risk will be driven out.
Michel Barnier, the EC commissioner responsible, is using the wrong analogy. "I believe in 'the polluter pays' principle", says he - and thinks that the payment should be into a government-held reserve. He should remember how this works in the realm of environmental pollution: unless firms are forced to curb their emissions specifically, they evaluate whether the fine is cheaper than the clean-up, and often opt to pay the fine.
You will not be surprised to learn that in the long run M. Barnier, statist froggie that he is, wants the reserve funds to be held by the EU itself. There is nothing more important for Osborne to resist than EU-wide (or even worse, UN-wide) tax-gathering, for banking, environmental, or any other purpose.
Hang tough, George, and you'll win C@W round yet.