David Prosser: More pain all round but the banks survive to fight another day

Outlook Here is is how Vince Cable – then just a humble Treasury spokesman for the Liberal Democrats – described the voluntary tax avoidance code for the banking sector when the Labour government first launched it last December: "A terribly limp-wristed response to a serious abuse". By yesterday, that same code had become the centrepiece of the Government's latest effort to reassure people that banks will take their fair share of the pain as we pay down the deficit.

We have known for some time that the levy announced by the Chancellor would be permanent, so yesterday's promise to ensure all of the 15 biggest UK lenders sign the code before the end of November (only four have done so as of now) represents the only new bit of stick-waving at the City.

Mr Osborne presumably does not share the view taken by the Business Secretary of the tax avoidance code, but it is plain how the banks see it. Their share prices did not flicker as the Chancellor delivered his warning yesterday.

Perhaps they are not sure what the code will mean to them. It is certainly difficult to find a copy of it. HM Treasury referred me to HM Revenue & Customs yesterday – its officials first professed ignorance of it and, finally persuaded that it did indeed exist, were unable to locate the precious document. Eventually, a helpful soul pointed me towards a two-page paper that consists mostly of statements no-one would have a problem agreeing. Just one clause, "the bank should not engage in tax planning other than that which supports genuine commercial activity", is controversial.

Broadly speaking, the idea is to stop banks dedicating sizeable resources to departments set up to identify tax loopholes and arrangements that enable them to save very sizeable sums for both themselves and clients.

Mr Cable knows all about such practices. It was to him that a whistleblower leaked documents purporting to show that Barclays was making £1bn a year in this way. The bank denied the claim and took legal action to prevent publication of the documents.

The problem is that avoidance is a horribly difficult concept to police, not least because there is no legal definition of the term. It is not even clear how Mr Osborne plans to force the banks to sign up to the code, other than vague talk of HMRC inspectors planting their size nines all over the accounts of those banks that don't.

This was a policy statement that did not caused the City a jot of anxiety. And though Mr Osborne said he quite understood "public anger", he has not come near defusing the inevitable row that awaits us in January when bonus season returns.