The Government is using £35m raised from FSA fines to support the armed services, veterans and their families.
Speaking at the Conservative conference in Birmingham last night, prime minister David Cameron said it was not fair that fine money goes back to the banking industry in the form of fee reductions.
He said: “We don’t think it’s fair that the fines from scandal-hit banks go back into the banking industry. That is why we are directing £35m from banking fines this year to supporting our armed forces, veterans and their families.”
Defence secretary Phillip Hammond said the service pupil premium is increasing from £250 per pupil to £300, will include all pupils whose parents died in service since 2005 and last for six years after a serviceman leaves. The service pupil premium is extra money allocated to students with parents in the armed forces who face particular challenges.
For the 2012/13 year, £70.7m from FSA fines was used to reduce industry fees. The £38.6m levied on the fee block affecting most advisers would have been 21.7 per cent higher without fines from the previous year being redistributed.
In July chancellor George Osborne unveiled proposals to pay FSA fines into the public purse from 1 April after Barclays was fined £59.5m for Libor rigging in June.
He promised an amendment to the Financial Services bill to redirect FSA fines to the Treasury.
At the time, Osborne said multi-million pound fines will go to “the benefit of the public, not to other banks”.