City bonuses collapse

 

       The Centre for Economics and Business Research forecasts that this year City bonuses will be down to £2.3 billion.   This contrasts with their peak of £11.5 billion in 2007-8, and with £7.3 billion in the last Labour year.

       The Coalition can show that on their watch the problem of City bonuses has been well and truly tamed. The UK is in this way now a more equal society. As CEBR point out, it also means a big reduction in tax revenue, (more than £4 billion) so we can now afford less public service.

        So I would like to know, are people today much happier because City  bonuses are likely to be down by  80% on peak levels? What benefits should we now expect from this development? How should we replace the lost tax revenue?  Should the government now claim victory and move on, or should we expect them to remove more of these  bonuses?

           I do think the government should offer a lead on linking pay for top executives clearly to performance.  Rewards should go for returning a  bank in receipt of state shareholdings and subsidy  in whole or parts to the private sector, getting taxpayers money back and generating susbstial cash profits to reward  shareholders. Shareholders have been without dividends now for a long time, and should have priority.

 

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

131 Comments

  1. lifelogic
    Posted May 14, 2012 at 5:39 am | Permalink

    Shareholders have indeed been robbed by highly dubious rights issues and over payment of, often incompetent, executives. Real and effective power needs to go back to shareholders and by an effective mechanism let us hope cable can do this. A cap on pay offs for workers in needed. Three months is plenty, anyone competent can find another job anyway.

    I see that Lord Neuberger, the Master of the Rolls, has said an alternative to hourly billing for legal work is needed urgently. He said businesses that base their charges simply on costs “do not deserve to succeed” or even “survive”. Certainly the legal profession and court system need a huge shake up. So they are run in the interest of clients and the public for a change rather than the courts and the lawyers.

    The heads you win tales you lose and the lawyers and claimant always win (or cannot lose) has to go and the huge ambiguity on any issue needs to go. Together with absurd laws like Cameron’s absurd no retirement and gender neutral insurance which both add new absurd ambiguities. The will both cost the country a great deal in jobs and growth for nothing.

    The Euro collapse will have huge impact on UK says Cable (and Darling warns we’ll have to feed starving Greeks). Is this not the inevitable outcome of the Libdem position on the Euro and not just for Greece. Is he now going to admit the Libdem policy on the Euro and pigis bailouts was absurd?

    While he is at it he could address the coalitions absurd position of green energy too. He did I understand study some Natural Sciences and Economics at Cambridge – so he should know it is scientific and economic nonsense.

    • Robert K
      Posted May 14, 2012 at 8:52 am | Permalink

      A couple of points
      1) Shareholders, by definition, can’t be robbed by a rights issue.
      2) Shareolders have all the rights they need – they can vote against executive pay at AGMs and if they don’t like the direction of travel of a company they can sell their shares altogether. It’s only recently, unbelievably, that institutional shareholders have woken up to their rights and have become active in their relations with managment
      3) It should be up to companies and employees to decide on how much to pay out in redundancy. Firms that offer attractive redundancy packages are likely to be those that look after their employees well and therefore will attract the best people.

      • lifelogic
        Posted May 14, 2012 at 6:17 pm | Permalink

        1. If they are encouraged to throw more good money after bad – due to a misleading prospectus of course they can be robbed and many have been.

        2. They can vote against but this is a nuclear option and almost never happens.
        What is needed is some shareholder input to the negotiation and detail of it all before it is presented at a shareholder meeting. Small companies with a few shareholder do not have this problem it is ones with many shareholders that directors can get away with it.

        3. “It should be up to companies and employees to decide on how much to pay out in redundancy” and who to hire and fire – I agree fully so get rid of the absurd legal requirements other than for say 3 months pay – which is plenty as a minimum.

        • Bazman
          Posted May 16, 2012 at 4:59 pm | Permalink

          Not if you have been there for years and have helped make the company profits for years it is not. If you want self employed employees then it’s going to cost as you will be billed for everything.

    • norman
      Posted May 14, 2012 at 11:06 am | Permalink

      If politicians ruled out policy because it was nonsense what would they do all day?

    • lifelogic
      Posted May 14, 2012 at 1:01 pm | Permalink

      Perhaps a period of silence for Alastair Darling would be welcome after he signed away billions on PIGIS bail outs just after he lost the election (with ones assumes) Osborne’s approval.

      Rather a morally repugnant (and certainly very stupid and self defeating) action I would have thought. How much lost so far can Osborne let us all know please?

    • lifelogic
      Posted May 14, 2012 at 3:20 pm | Permalink

      If Vince Cable does manage to sort out a good efficient mechanism for shareholder’s to control executive pay he will surely deserve at least to be a Viscount (this despite his absurd stance on the green religion). A good lasting mechanism for this would be a huge benefit to the country.

      The current nuclear option is useless in practise. Also interesting to hear that there seems to be little correlation between executive pay and real company performance in recent studies. (from More of Less on radio 4). This also looked at how taxis are cheaper than the Greek railway and the very dangerous topic, for the BBC, of women and their relative performance at chess. (only one in the top 100)

      I think woman just have more sense than to waste all their time on such a silly game.

    • Vanessa
      Posted May 14, 2012 at 3:23 pm | Permalink

      Well said on the green energy issue. Did you read Booker in the Sunday Telegraph on how our water is now controlled by Brussels? They keep shouting about how we must save water and use it sensibly but nothing about increasing reservoirs and stopping leaks which they seem to believe is OK.

      • lifelogic
        Posted May 14, 2012 at 6:19 pm | Permalink

        Yes that is certainly believable a few dry reservoirs and stand pipes to convince us all of global warming!

      • uanime5
        Posted May 15, 2012 at 5:36 pm | Permalink

        Actually the EU recommends trying to conserve water, rather than make new reservoirs. It doesn’t prevent new reservoirs being built and it encourages fixing leaks because it will save water.

        • lifelogic
          Posted May 16, 2012 at 3:23 pm | Permalink

          Save water for what – so it goes straight in to the sea down a river rather than through a leaky pipe first?

    • uanime5
      Posted May 14, 2012 at 4:12 pm | Permalink

      There already was a huge change to try to speed up court cases by having the judge be more involved in the cases. This has led to speedier trials and fewer delays by lawyers.

      No win, no fee was introduced as a alternative to legal aid. It is currently cheaper as a lawyer won’t get paid unless they win, unlike under legal aid where they got paid whether they won or lost.

      I’m unsure how effective Lord Neuberger’s fixed-fee agreements will be. If there isn’t enough competition these fees will remain high.
      http://www.legalfutures.co.uk/latest-news/neuberger-abss-herald-death-of-hourly-billing

      Given the problems a euro collapse will have on the UK economy it would be wisest to try to prevent of mitigate this collapse.

    • Susan
      Posted May 14, 2012 at 5:13 pm | Permalink

      lifelogic,

      Interesting to learn today, that the Coalition think people like yourself, who are in business, are just not pulling your weight when it comes to increasing the UKs growth. William Hague suggests that business should stop blaming politicians for the lack of growth and work harder themselves. Apparently, Government can only set the conditions to encourage growth the rest must be done by business itself.

      So there you are, you have it all wrong lifelogic.

      • APL
        Posted May 14, 2012 at 10:11 pm | Permalink

        Susan: ” So there you are, you have it all wrong lifelogic.”

        William Hague has finally got something right?

        No, I thought not either.

      • lifelogic
        Posted May 14, 2012 at 10:20 pm | Permalink

        Clearly I should just work harder to sell my products at twice the rate of non UK producers as I have to carry the state sectors circa 50% taxes. I will try and explain it all to my customers – I am sure then they will be happy to pay double for the same product.

        • APL
          Posted May 15, 2012 at 9:15 pm | Permalink

          lifelogic: “Clearly I should just work harder to sell my products .. ”

          Of course you should, or you could take a leaf from willies book and just exagerate your achievements.

          You know, sixteen pints a day before breakfast.

  2. lifelogic
    Posted May 14, 2012 at 5:50 am | Permalink

    “are people today much happier because City bonuses are likely to be down by 80% on peak levels?”

    I doubt it most do not know and probably would not believe it anyway. What does Cameron’s the absurd happiness index have to say.

    How should we replace the lost tax revenue? Hopefully the company profits will thus increase and the benefits will go to shareholders and taxes still thus paid. I suspect however that many high bonus earners will go abroad and take bonuses and their pay and taxes with them. We should not replace it just stop wasting taxes on the pigis, the IMF, green tosh, MP’s ipads, a dis-functional NHS, pointless wars, carbon capture and all the rest of the Cameron nonsense. The money is best left and spent by clever (and even some dim) individuals than wasted by the coalition in general.

    • lifelogic
      Posted May 14, 2012 at 6:59 am | Permalink

      I see William Hague has said of businesses: “They should be getting on with creating more jobs and exports rather than complaining.”

      Well they are doing exactly that. They are, however, doing it with one or even both hands tied behind their backs by his government. The lack of banking, absurd employment laws and tribunals, over taxation and over complex taxation, no retirement rules, equality nonsense, maternity law nonsense, gender neutral insurance insanity, inability to fire the useless, slow and inefficient planning rules, high rates, work place parking taxes, high “green” fuel and water charges, OTT health and safety, OTT environmental laws, poor road and infrastructure and all the rest of the obstacles his government so helpfully arranges for them.

    • lojolondon
      Posted May 14, 2012 at 8:29 am | Permalink

      Ditto to all that, and I have one more – an article at the weekend quoted a figure to look after a troubled child as £250,000 per annum. So logically we could pay people £50k a year to foster and save £200k per child. Simples!

      • lifelogic
        Posted May 14, 2012 at 9:54 pm | Permalink

        Are yes but it would cost at least £1M for the state sector to vet potential parents, supervise and train them, check they have the right gender and race neutral toys, and health and safety approved homes and the “right” ethnic background before they could possibly be allowed to adopt even a gold fish let alone a child.

    • Susan
      Posted May 14, 2012 at 4:53 pm | Permalink

      lifelogic,

      I would have thought that a lot of the shareholders in Global banks are not in the UK, so a lot of the money will just go out of the Country if they are paid more.

      • lifelogic
        Posted May 14, 2012 at 9:55 pm | Permalink

        Yes but there is corporation tax before the distributions.

    • JT
      Posted May 14, 2012 at 7:02 pm | Permalink

      Companies aren’t making money
      which is why they are not paying out bonus
      nor are they making money abroad – where “high earners” can migrate to
      The City is in the doldrums .. it’s relatively dead
      It would be a politcial con to suggest it had anything to do with co-alition
      Just like it was a lie to think it had anything to do with nuLabour
      The economic cycle turns … boom and bust
      The government just inherits the cycle, and puts a little tweak on it

      Replace the tax revenue — just cut spending
      Front line spending on things that don’t matter // are a luxery // can’t be justified.

    • Bazman
      Posted May 14, 2012 at 7:45 pm | Permalink

      Who is going to be daft enough to pay them this money?

  3. Nick
    Posted May 14, 2012 at 5:58 am | Permalink

    How should we replace the lost tax revenue?

    ==================

    Since when was the aim of government taxation?

    That’s the philosophy of the fraudster, whose aim is to get as much money out of the mark as possible.

    As for moving on, you won’t. Politicians need a villain to deflect from their fraudulent activities.

    e.g. Why aren’t you reporting all the debts that have been run up? No reporting of the state second pension debts. The reason is clear. Since you’re going to get rid of it ripping off the people who have paid in, you need to avoid telling people how much they are being robbed by.

    • Single Acts
      Posted May 14, 2012 at 8:37 am | Permalink

      That was a very salient observation if I may.

    • Bob
      Posted May 14, 2012 at 9:14 am | Permalink

      The elephant in the room is why such a huge proportion of shareholders are disenfranchised.

      The answer is that the tax system forces them to hold their shares in pension funds and ISAs.

      Simplify the tax system, and just give the tax exempt threshold to the individual as in the case of CGT and personal allowance thresholds and then the individuals can hold their shares directly and thereby would have the power to control excessive greed on the part of the executives.

      • Bob
        Posted May 14, 2012 at 9:29 am | Permalink

        It just occurred to me that the greedy executives are probably the decision makers when it comes to significant donations to political parties, so I suppose they would not allow politicians to change the system that enriches them.

        As they say in the contemporary vernacular, duh!

      • lifelogic
        Posted May 14, 2012 at 10:00 pm | Permalink

        I agree this silly and trivial ISAs are more trouble than they are worth for most people and pensions make people vulnerable to being ripped off and restrict investments. Often they end up borrowing at 10% and earning next to nothing on their pension fund. They would be better off with no borrowing and no pension.

    • waramess
      Posted May 14, 2012 at 10:39 am | Permalink

      Nice one Nick, May 15 5.58am

    • norman
      Posted May 14, 2012 at 11:10 am | Permalink

      Why on earth would politicians report on debts that fall due long after they’ve left office? Who cares, just let someone else sort it out, I’m all right Jack.

      The only date that matters is the next election, that’s what we must keep our eye on, can’t let the other lot in, that’s more important than the state of the nation.

      • lifelogic
        Posted May 14, 2012 at 10:01 pm | Permalink

        But Cameron seem determined to let Labour back in.

    • lifelogic
      Posted May 15, 2012 at 5:52 am | Permalink

      Since when was the aim of government taxation?

      Since we got career politicians with degrees in Law, PPE and similar (and with no real interest in governing in the interests for the public) just personal career advancement and self publicity.

  4. Steve Cox
    Posted May 14, 2012 at 6:07 am | Permalink

    “Shareholders have been without dividends now for a long time, and should have priority.”

    Actually, depositors have been without interest now for a long time, and should have priority.

    • lifelogic
      Posted May 14, 2012 at 9:47 am | Permalink

      Depositors perhaps need to cut out the useless banks as middle men and lend directly taking suitable security. Interest rates for actual end borrowers are quite high. The banks are paying 1% for money and charging 10%+ to even very low risk borrowers.

    • Ted Greenhalgh
      Posted May 14, 2012 at 12:26 pm | Permalink

      Yes, it would be nice to get a modest return

  5. Mike Stallard
    Posted May 14, 2012 at 6:22 am | Permalink

    It honestly is of no concern to me what other people are getting paid.

    • backofanenvelope
      Posted May 14, 2012 at 9:51 am | Permalink

      I’m with you! If HMRC is on the ball, half of these bonuses will be taken in tax and re-distributed to the poor and needy (me). What is there not to like?

  6. colliemum
    Posted May 14, 2012 at 6:22 am | Permalink

    1. I think the public is not aware about the bonus ‘cuts’ for bankers, as you describe above. The BBC and the MSM prefer to follow Labour’s ‘narrative’ about greedy bankers. A bit more clarity and less obfuscation from all sides is certainly welcome.

    2. There is another point in regard to bonuses which are of farmore interest to the tax paying public, and that is bonuses for civil servants – because unlike bankers’ bonuses, these come out of our pockets. The question I hear is why are civil servants being paid bonuses for something they are obliged to do anyway?
    The pay structure of bankers and civil servants is very different. I think the practice of paying people some sort of bonus for doing what they ought to do needs a long hard look, because surely savings can be made here.

    • norman
      Posted May 14, 2012 at 11:14 am | Permalink

      Civil servants need a bonus because they are treated a lot worse than private sector workers and have a lot lower pay. Also they retire many years earlier than in the private sector which limits their earning potential. That’s why they also need such wonderful pensions so that they can enjoy the same level of retirement as a private sector worker.

      • lifelogic
        Posted May 14, 2012 at 10:03 pm | Permalink

        The earn more, work less, take more sick pay and have pensions circa ten time the size of the private sector.

    • nicol sinclair
      Posted May 14, 2012 at 12:30 pm | Permalink

      Can someone please tell this dinosaur what MSM stands for? To me it perhaps is an abbreviation for something a bit seedy!

      • forthurst
        Posted May 14, 2012 at 7:58 pm | Permalink

        “To me it perhaps is an abbreviation for something a bit seedy!”

        That’s all you need to know unless you are an historian.

    • uanime5
      Posted May 14, 2012 at 4:15 pm | Permalink

      I doubt many civil servants get million pound bonuses despite causing a major financial loss, unlike many bankers.

      • JT
        Posted May 14, 2012 at 7:05 pm | Permalink

        collectively they do … add up all those on the public payroll and add up all the bad decisions … and remember it’s all paid for by money earned somewhere else …

        and how about 2000 civil servants paid through consultancies / companies .. what’s all that about ?

    • Mike Stallard
      Posted May 14, 2012 at 4:47 pm | Permalink

      One thing that I should very much like reporting very thoroughly is what is going on in the Civil Service. I suspect complete collapse.
      The fact is that down here we only get the odd snippet, or are presented with what seems an utterly unjust and unexpected decision.
      The dear old Socialist Beeb has absolutely no idea about this.

      • zorro
        Posted May 14, 2012 at 9:54 pm | Permalink

        main stream media

        zorro

  7. Antisthenes
    Posted May 14, 2012 at 6:40 am | Permalink

    Despite opinion to the contrary it was not bad banks and bankers who caused the banking crisis and the bloated bonus culture but bad governments. Governments put in not too little regulation but bad regulation that was impossible to police competently, they insisted on lenders giving mortgages to those who did not have the ability to repay them when times got tough and other counter productive social engineering practices. They took upon themselves responsibility that hitherto had been the preserve of individuals and businesses so creating an environment that encouraged irresponsibility. No lessons have been learnt and the faceless bureaucrats who are not been reined in by politicians are continuing the same failed policies. Until it is recognised that the state cannot plan and control from the centre and a return to free market capitalism is established then many more illiberal laws and regulations will be foisted upon us and economic decline will surely continue.

    • Martyn
      Posted May 14, 2012 at 7:44 am | Permalink

      “Despite opinion to the contrary it was not bad banks and bankers who caused the banking crisis and the bloated bonus culture but bad governments”.

      My thoughts exactly! No matter where one looks, either to the past or the present governance of this unfortunate nation, the overwhelming impression gained is that of incompetence. Coupled, of course, with sustained attempts to shift the blame onto others.

    • lifelogic
      Posted May 14, 2012 at 9:51 am | Permalink

      Indeed there was lots of pointless bank regulation (recent utility bills of customers and the like) and no sensible regulation of the real banking risks, gearing or lending criteria.

      A sledge hammer to miss a nut as usual.

    • uanime5
      Posted May 14, 2012 at 4:17 pm | Permalink

      Given that the Government didn’t tell banks to turn these bad mortgages into great mortgages using financial alchemy and convince people to invest in these bad investments it seems that the banks aren’t completely blameless.

      • libertarian
        Posted May 14, 2012 at 9:25 pm | Permalink

        Er wrong again, in fact thats exactly what the US government did Clinton enacted the CPA programme compelling banks to make mortgages available to the poorest in society ( sub prime mortgages) The 2 US government agencies Fannie Mae and Freddie Mac where then charged with overseeing this.

        The Federal National Mortgage Association , commonly known as Fannie Mae, was founded in 1938 during the Great Depression as part of the New Deal. It is a government-sponsored enterprise , though it has been a publicly traded company since 1968. The corporation’s purpose is to expand the secondary mortgage market by securitizing mortgages in the form of mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on thrifts.

        • uanime5
          Posted May 15, 2012 at 5:44 pm | Permalink

          Unless the Government told Fannie Mae to turn risky mortgages into great mortgages to encourage more investments this wasn’t the fault of the Government.

      • lifelogic
        Posted May 14, 2012 at 10:06 pm | Permalink

        No one says the banks are “completely blameless” just that poor government regulation was the mainly to blame.

        • uanime5
          Posted May 15, 2012 at 5:45 pm | Permalink

          Just because all you can eat restaurants allow their customers to eat as much as they want doesn’t make them responsible for their customers becoming sick from overeating. Similarly poor regulation doesn’t excuse poor decisions by the banks.

    • sjb
      Posted May 14, 2012 at 5:21 pm | Permalink

      Antisthenes wrote: [Governments] insisted on lenders giving mortgages to those who did not have the ability to repay them […]”

      How did they do that, then?

      • libertarian
        Posted May 15, 2012 at 8:06 pm | Permalink

        Try reading my post above

  8. Rebecca Hanson
    Posted May 14, 2012 at 6:42 am | Permalink

    Yes, I’m happier.

    I worked in the city for a while and was horrified by the reckless elements of city culture which focused entirely on personal gain here and now, cared not a jot for the consequences of their behaviour for the rest of society, celebrated themselves for doing do and derided those who were not comfortable with this approach.

    Although the reduction in bonuses will hit other things as well as this culture I think it’s necessary.

    I’ve no interest in ‘revenge or punishment’ by the way. I just thing extreme bonuses fuel the culture I’ve described above and that it’s a dangerous culture for our economy.

    • Alte Fritz
      Posted May 14, 2012 at 6:50 am | Permalink

      Agree wholeheartedly. If lower bonus expectations make banking less a casino activity, so much the better.

    • Timaction
      Posted May 14, 2012 at 10:37 am | Permalink

      I agree. I also think the time to seperate the reckless element from the day to day banking activities is well overdue. So if they wish to be reckless then they should be allowed to go broke! Their over reward for their feckless behaviour has gone….good. The shortfall in tax revenue should come from real cuts in services and cuts in foreign and EU aid (£21 billion) and abolishing some of the promised quangos (Equalities Commission) etc. Where are the 80% cuts to the 20% rises in taxes?

      • Susan
        Posted May 14, 2012 at 10:50 pm | Permalink

        Timaction

        Which reckless part of banking would you like to separate. Banking is a risky business even, to use your words, day to day banking. Northern Rock did not have an investment arm and Lehmans did not have a retail arm, so which part of banking would you have ring-fenced to prevent either of these collapsing.

        All ring-fencing will do is make UK banking less competitive, have less funds to lend and make banking more costly to the customer. It will not prevent another crash. Would the Government really allow a large investment bank to just go broke, after all Lehman Brothers was allowed to fail and caused chaos all over the World as I remember.

        • David Price
          Posted May 15, 2012 at 3:39 pm | Permalink

          Quite.

          For those who think even simple retail banking is risk free perhaps they should try it themselves by lending through Zopa or other credit union. The first bad debt involving a supposedly low risk A* borrower quickly teaches you some realities.

          The issue was the less than optimal way the Labour government rescued the bust banks and then whipped up an anti-banker frenzy when it all got out of hand.

          • lifelogic
            Posted May 16, 2012 at 4:59 am | Permalink

            Lend taking good security then as the bank generally do it is fairly low risk then.

          • APL
            Posted May 16, 2012 at 7:31 am | Permalink

            David Price: “For those who think even simple retail banking is risk free perhaps they should try it themselves by lending through Zopa or other credit union.. ”

            Once upon a time in a banking industry far away, a bank might ensure that it has sufficient collateral pledged against its loan book.

            In those far off days, the local bank manager might know the business he was loaning to, he may have helped finance the business over a period of years, formed an opinion about the ability and credit worthiness of the business manager before he made the loan.

            The old type bank manager would have been unlikely to lend unsecured 100% or 120%, nor would he have made his lending decision based entirely on a computer model that took as its input data, assumptions of an ever expanding economy.

            But I guess they don’t make bankers like they used to.

    • libertarian
      Posted May 14, 2012 at 2:21 pm | Permalink

      So Rebecca you think our economy would be far far better by having a lot less money in it….hmmm

      And you’re a teacher…hmmm I think that may explain one or two things about the state we are in.

      • Rebecca Hanson
        Posted May 14, 2012 at 7:53 pm | Permalink

        I think it’s unrealistic to see the tax from city bonuses at their height as being sustainable libertarian.

        I think it’s important banks reinvest their profits in restructuring, refocusing and ensuring the quality and risk proofing of all the products they offer is robust rather than that they pay massive bonuses to staff who’ll be gone soon. I see this as being coherent economics in the medium and long term.

        • libertarian
          Posted May 14, 2012 at 9:31 pm | Permalink

          The tax from City income has been a large proportion of the tax take in this country for many many years. In this country unlike a lot of others we aren’t in a position to reinvest profits back into a business as the high rate of corporation tax is levied prior to the reinvestment and 3 why shouldn’t the owners of a business take a dividend, and also reward their top performers with bonuses. I’m sorry I have no idea what you are talking about “risk proofing all their products” Such as? Give me an example of an investment banking product that can be risk proofed.

          • Rebecca Hanson
            Posted May 15, 2012 at 10:35 am | Permalink

            When you explore the details of the arguments put forward by Hancock and Zahawi you begin to understand the need for the nurturing of a culture of corporate responsibility which nurtures personal responsibility and promotes those with long rather than short sight.

            I don’t think it’s the case that there being less money available for bonuses will, on it’s own, generate this change.

          • uanime5
            Posted May 15, 2012 at 5:53 pm | Permalink

            Tax from City income may be a large part of income tax revenues but I wouldn’t say it was a large part of the total taxes collected.

            If this money isn’t paid as a bonus it will remain part of the company’s profits and be subject to corporation tax so it shouldn’t be considered a complete loss of tax revenue.

            Business owners and top performers should be content with their salaries and not demand a bonus for doing their job. Especially when they do their job badly.

          • libertarian
            Posted May 15, 2012 at 8:07 pm | Permalink

            Sorry Rebecca that’s gobbledygook straight from the management by cliche handbook. It doesn’t mean anything

    • JT
      Posted May 14, 2012 at 7:06 pm | Permalink

      and that doesnt happen in the public sector ?
      it does

      and all the caring and long term thinking in the public sector makes good decisions … no chance

    • Susan
      Posted May 15, 2012 at 12:38 am | Permalink

      Rebecca,

      Are you sure that this view of the City is not your own personal thoughts on people who make a lot of money?

      Banks cannot be totally risk averse if they want to make money. Every time a bank lends money they are taking a risk.

      It could be said that members of the public who borrowed more than they knew they would be able to pay back were focused on personal gain, so this attitude was not just confined to a reckless element in the City.

      I also do not understand what you mean by paying large bonuses to staff who will soon be gone. Where are they going?

  9. Shinsei67
    Posted May 14, 2012 at 6:51 am | Permalink

    Does rather scupper Labour’s oft repeated calls for a new bankers’ bonus tax. If there are practically no bonuses then there isn’t anything to tax.

  10. frank salmon
    Posted May 14, 2012 at 7:05 am | Permalink

    If the bankers are overpaid, then there can’t be a ‘loss of revenue’. We just need markets to operate properly – then we’ll get the correct levels of pay. If governments tax us fairly, we won’t need to demand higher pay to make up for exorbitant tax. Nor should that be happening.

  11. ianwragg
    Posted May 14, 2012 at 7:11 am | Permalink

    Thanks John, I’m glad the bonus culture has been cured. The lost tax is being recovered from my increase in utility bills from £100 to £125 per month to buy the windmills. The increase in VAT will help as will the non return on our substantial savings.
    I’m truly sorry for the bankers and their plunge into austerity so I will have 1 minutes silence on their behalf as they keep the Porsche for another year.
    BTW I’ve had a 1.7% salary increase, well below the inflation which you keep saying will drop dramatically this year but has failed to materialise.

  12. Faustiesblog
    Posted May 14, 2012 at 7:16 am | Permalink

    “So I would like to know, are people today much happier because City bonuses are likely to be down by 80% on peak levels?”

    It’s a start. These bonuses represent a reward for reckless gambling. But by curtailing bonuses, the government is only tackling the symptoms. The cause is the moral hazard of having the taxpayer pay for the losses of these banks while in boom years, they kept all the profits.

    I’d be happy were the government to remove the moral hazard entirely.

    “What benefits should we now expect from this development?”

    Perhaps bankers will find that other vehicles for stuffing their wallets are likely to yield more tax for the Treasury. It seems likely that the government’s intention was to shunt them along that path. But then, given the disastrous decisions it’s made of late, I am not at all sure that the government has a coherent strategy – even behind closed doors.

    How should we replace the lost tax revenue?”

    It should stop spending. Stop paying fake charities (little more than the taxpayer paying to lobby the government, against the former’s best interests), reduce International ‘Aid’, for starters.

    As I mentioned above, it’s likely that What The Bankers Do Next will net the Treasury more revenue.

    “Should the government now claim victory and move on, or should we expect them to remove more of these bonuses?”

    Or, why don’t we make bankers personally liable for losses, as in the old days when banking crises were virtually unheard of? That would surely sharpen their minds.

  13. Alte Fritz
    Posted May 14, 2012 at 7:23 am | Permalink

    An afterthought. Yesterday, Manchester City won the Premiership and are damned with feint praise whenever the £1bn investment in the club is mentioned. Also, Rangers are to be bought out of administration by Singapore based buyers.

    The (not) beautiful game is characterised by pay (and tax avoidance) which would make a banker blush, yet there is none of the public opprobrium. Players’ keen appreciation of their value has bankrupted clubs and made it something in which Middle and Far Eastern money has the biggest say.

    I think that the public treatment of football and banking say much more about the state of the nation than is commonly accepted.

  14. JimF
    Posted May 14, 2012 at 7:29 am | Permalink

    So I would like to know, are people today much happier because City bonuses are likely to be down by 80% on peak levels?
    HAPPIER in that the situation appears to be becoming more balanced; SCEPTICAL in that this might only be because higher tax rates mean bonuses are being channelled elsewhere, and ANGRY that government bailout money ever went in this direction in the first place.

    What benefits should we now expect from this development?
    A fundamental shift in wealth from “skimmers” and toward “producers”, albeit these are broad-brush terms.

    How should we replace the lost tax revenue?
    We shouldn’t. We should cut spending to meet the new reality.

    Should the government now claim victory and move on, or should we expect them to remove more of these bonuses?
    That is an emotive statement. Government isn’t removing bonuses, the market is. The optimist in me says that bonuses would now go to “entrepreneurs” and “producers”, rather than Mr Fatcat, CEO of YYYbank, or Ms Wildcat Trader of XXXbank.

  15. Martin
    Posted May 14, 2012 at 7:31 am | Permalink

    You assume that city bonuses are the only way that money from the city can be taxed. Shareholders dividends are also taxed. If these dividends were larger then there would also be potentially more tax take. Overall I’m happier as dividend payments benefit more people.

  16. Denis Cooper
    Posted May 14, 2012 at 7:36 am | Permalink

    I’ve always thought that the problem is not so much the magnitude of bonuses, which in principle is really a matter for the shareholders, as the way that the structure of the bonuses encourages senior managers to pursue short term performance even if that may put the business at longer term risk. When this problem was addressed previously the solution was said to be L-Tips, Long Term Incentive Plans, but typically they run for only three years which is barely even medium term in my book. What is needed is a scheme which spreads the rewards over a much longer period, longer than both the electoral and business cycles, so that the focus of senior managers is shifted away from milking the business for what it’s worth while the going’s good towards its longer term future.

  17. alan jutson
    Posted May 14, 2012 at 7:41 am | Permalink

    When you have managed to increase your margins by 300%, as most Banks have over the past 5 years, you would think that huge profits would be made by all.

    The fact that many of them are now making lower profits, is probably because the real cost of all of the casino loans and trades have been added up, and are only now coming home to roost on the balance sheets.

    Meanwhile the average investor is still being screwed with low interest rates and high administrative charges, whilst the borrowers are getting loan recalls and paying heavily for any new loans required not only in interest, but in arrangement fees as well.

    What they do not make in bonuses, they may well get by another means (higher salaries etc)

    I do not have a lot of sympathy for the very high earners in the Banking industry, and by their recent actions, many of their shareholders agree.

    • alan jutson
      Posted May 14, 2012 at 5:56 pm | Permalink

      still in moderation?

      Have I said something that would have upset anyone ?

  18. Pete
    Posted May 14, 2012 at 7:56 am | Permalink

    Soon the Euro musical chair game will end and everybody will find that not only is there no music but also no chairs. Bonuses will be a worry of the past.

  19. Mike Fowle
    Posted May 14, 2012 at 7:56 am | Permalink

    I hold the contentious view that MPs are not paid nearly enough. The basic pay I believe is £65,000 a year, but they then might receive two or three times as much in expenses. A system that invites fiddling. This makes it difficult for them to comment on pay realistically. I think they should be paid a much higher rate, but out of which they had to meet all their expenses, and to provide for their pensions (which might be an eye opener for some of them). I agree that civil servants should not be paid bonuses. It distorts performance as well as not being justified.

  20. Alex
    Posted May 14, 2012 at 7:57 am | Permalink

    “Should the government now claim victory and move on, or should we expect them to remove more of these bonuses?”
    Where a bank has effectively been nationalised (RBS, for example) then of course the government should be forcing the setting of sensible bonuses; it’s taxpayer money.
    However, this doesn’t apply for most of the City. The sentence above appears to include the government ‘removing’ bonuses from the employees of private firms that, in many cases, have been profitable and well run, done nothing but contribute to the UK economy, and needed no taxpayer assistance. Or, in other words, government ministers determining the pay of the employees of private companies. Please tell us that this is not what you mean, John.

  21. Lindsay McDougall
    Posted May 14, 2012 at 8:04 am | Permalink

    It’s never good when top people in a large corpoation determine their own remuneration and bonuses. Board room pay review processes should involve shareholders, with small shareholders represented. The key point is that bonuses should be awarded for difficult targets, not easy ones. I was amused when the new American CEO of BP said that henceforth improved company environmental performance would be a major factor in determining bonuses. A year after the major oil spillage off the American south coast that won’t be difficult.

  22. Brian Tomkinson
    Posted May 14, 2012 at 8:14 am | Permalink

    How much tax has been lost by keeping interest rates for savers so low for so long? How much has interest on government debt increased over the last two years and what will it have risen to in 2015 because government won’t reduce its own spending?
    How can anyone be happier when we have a government which is planning to almost double our debt in just 5 years?

  23. lojolondon
    Posted May 14, 2012 at 8:36 am | Permalink

    The government has no truck meddling in private companies dealings and salaries, except of course, in Cuba and North Korea.

    What the government CAN and SHOULD do is cut salaries of all taxpayer-funded public sector workers, including but not limited to :

    Local authorities
    School Heads
    NHS trust
    All Quangos
    BBC
    Environment Agency, etc.

    No taxpayer-funded salary, no matter what they do, should be paid more than an MP. No bonuses, no golden handshakes.

    Of course, because this actually fits into the government’s remit and is something they should be doing as a matter of course, they never will.

    • Bazman
      Posted May 14, 2012 at 7:50 pm | Permalink

      What makes you think banks are privately owned companies? What we are dealing with here is communism for the rich and you propose to cut the already often minimal salaries of school cleaners, porters and dinner ladies?

      • APL
        Posted May 15, 2012 at 9:41 pm | Permalink

        Bazman: “What we are dealing with here is communism for the rich .. ”

        If by ‘rich’ you mean the so called CEOs of Local Authorities, NHS Trusts the BBC, QUANGO or Central government civil Service then; Yes they engage the state to confiscate the earnings of the productive sector of the economy and distribute it among themselves, to that extent that is crony communism AKA fascism.

        Bazman: “and you propose to cut the already often minimal salaries of school cleaners, porters and dinner ladies?”

        No.

  24. Robert K
    Posted May 14, 2012 at 8:53 am | Permalink

    Low bonuses mean low profits in what is the most important part of the UK economy.
    How can that be good news?

  25. English Pensioner
    Posted May 14, 2012 at 9:15 am | Permalink

    I’m more concerned about the pay and bonuses of the public sector than of bankers, there are, after all, far more of the former and I have to help pay for them!
    The salaries paid to the Heads of Quangos (six more are proposed in the Queen’s Speech according to Douglas Carswell), the salaries paid to Local Council employees and the salaries paid to staff in Government Agencies all need to be subjected to the same level of scrutiny by the media and politicians as that applied to the bank bonuses.

  26. Michael Read
    Posted May 14, 2012 at 9:16 am | Permalink

    Headline bonuses might have gone down but base salaries went up to compensate, not forgetting no doubt some other artful ways of bonus substitution.

    What are they doing getting paid anyway?

    Shouldn’t they be paying us back the 300bns worth of QE needed to keep them in business, and give the bonus junkies a job.

  27. sym
    Posted May 14, 2012 at 9:56 am | Permalink

    How should we replace the lost tax revenue?

    Ahem, nothing. Reduce public spending. Here’s a good start:

    http://www.telegraph.co.uk/technology/news/9260179/NHS-pays-extortionate-328-per-cent-mark-up-on-printer-parts.html

    If you can’t reduce public sector spending – perhaps since public sector employees are inoxerably cavalier with tax payer’s (read: nobody’s) money – then break up, privatise, reduce the size and scope of the state. Big state is big waste.

    Also, a “more equal society”?

    Since when should we aim to have such a beast that destroyed millions of lives in every attempt of creation by state imposition? We should perhaps aim for a society that rewards those who work, innovate, are compassionate, brave. Be instrumental in the well-being of themselves, their families, and perhaps indirectly the rest. Why should they be “equal” to those who don’t?

  28. Roy Grainger
    Posted May 14, 2012 at 9:57 am | Permalink

    Your analysis is somewhat simplified. The money not paid out in bonuses does not just disappear, it ends up somewhere else (because banks are not “producers”, they just move money around) – if it instead ends up with shareholders (as dividends), or depositors (as interest), or businesses (as loand to faciluitate) growth then it still (eventually) will generate tax income.

  29. Ashley Mooney
    Posted May 14, 2012 at 10:06 am | Permalink

    John – Surely the reduction in tax paid on bonuses results in a rise in other taxes (corporation tax on retaine profits? Income tax on divdens paid out?) The maths would be complex but we all know that governments have a way of grabbing our money one way or another!

  30. Neil Craig
    Posted May 14, 2012 at 10:09 am | Permalink

    I belioeve the anti-bonus programme pushed by Labour, the BBC & now the Tories is simply an extension of the anti-banker programme they pushed.

    The anti-banker programme – that it was the bankers & thus not the politicians who were responsible for getting Britain into recession – is clearly wholly false. The people running the economy, if that word does not imply too much ability, were the politicians. Banking is an international business and thus cannot be responsible for purely local recessions.

    (A parallel example left out-ed)
    I would not necessarily defend all bonuses but “the workman is worthy of his hire” ; the value of binuses is relativelyb small compared to the turnover of the businesses in question; & either the wealth created is lost by not rewarding the workers or it is passed on to the allegedly wicked capotalists & don’t se that rewarding capitalists is inherently more “socialist” than rewarding workers (that nobody in the “socialist” movement is even thinking about that shows how intellectually bankrupt it is).

    On a previous occasion I suggested that MPs and ministers should receive substantial bonuses – kicking in at achieving 1/2 the world average growth rate and rising directly. Unfortunately there seems little reason to expect that they would be earned.

  31. eddyh
    Posted May 14, 2012 at 10:16 am | Permalink

    I do think the government should offer a lead on linking pay for top executives clearly to performance.
    Surely, above all, this should apply to those in government. Mind you that would mean most top politicians queueing at soup kitchens.

  32. a-tracy
    Posted May 14, 2012 at 10:33 am | Permalink

    These City whiz kids and older bonus receivers like Fred Goodwin got bonus for what exactly, ruining our pensions, savings and investments. The people who don’t have safe public sector pensions, guaranteed by future taxpayers (they expect), have to trust savings and pension vehicles provided by many of these experts, yet when they screw up like Goodwin and Applegarth they get paid off and moved out with their savings and pensions enhanced!

    We no longer trust our institutions, I no longer have respect for these educated sorts that gamble with my hard earnings and I feel bitter that many of them were unjustly rewarded for bad decisions, had we made them in the business world would have lost us our homes and earnings.

  33. forthurst
    Posted May 14, 2012 at 10:38 am | Permalink

    “So I would like to know, are people today much happier because City bonuses are likely to be down by 80% on peak levels?”

    How is our ‘Schadenfeude index’ performing? Well, only for those who believe that engaging in ‘socially useless’ activities should not be copiously rewarded even if it involves taxpayers mortgaging their childrens’ futures to pay for them.

    As to where the tax is to come from in future: if banksters can continue to sell off successful British enterprises to foreigners, it will continue to become less and less possible to pay for universal (the whole planet’s) benefits, this especially when enterprises are being deliberately hamstrung by EU regulations. (Martin Coles’ revelation re the EU Commission’s secret deliberations is intriguing: who else and what other institutions’ submissions are fed into these?)

    How does ‘ringfencing’ prevent the ‘socially useless’ arm of a bank calling on the proper bank to increase its profits in the short term (by stinging depositors and borrowers) in order to cover the losses of bonus earners (rogue traders)? What advice have you given to Cameron on this?

    • forthurst
      Posted May 14, 2012 at 10:57 am | Permalink

      … in other words behaving like RBS?

  34. waramess
    Posted May 14, 2012 at 10:53 am | Permalink

    The problem has really never been about City bonuses but about envy fuelled by politicians. Only shareholders should care about bonuses whether they be City or footballers.

    More importantly is the fact that bonuses continue to be paid notwithstanding the opaque financials of the banks and the inability to see whether they are paid from profits or from capital.

    Cameron would do well to take a lesson from what Rajoy is proposing .

    A massive process of liquidating assets in some of the state owned banks in order to create some real liquidity in the system will be a start.

  35. Paul Danon
    Posted May 14, 2012 at 10:54 am | Permalink

    I disagree and think government should leave firms alone; they’re already taxed. This news may well drive companies overseas, making Britain seem closed for business, and more interested in long parental leave and gay marriage than in growth.

  36. norman
    Posted May 14, 2012 at 11:00 am | Permalink

    Switzerland and Hong Kong are welcome to them. Not all good news though, now we’ve got rid of those capitalist running dogs we need a new target for the next election. Sure Dave will think of something useful, everyone has to at some point in life so odds are shortening every day.

    As for the cash who cares about a piffling £4bn. Just give old Bill in the borrowing department to ask for some, or Eddy is always ready with the printing machine. You need to stop looking at these little details and instead concentrate on the bigger picture.

    We need to thank this government for wrecking the banking sector. Osborne often gets blamed for not accomplishing anything he sets out to do so it would be churlish not to give him the credit when he succeeds.

    Well done George, you’re not as completely useless as the whole country thinks you are after all. Looks like your bailout policy is going to help bring down the Eurozone too so on quite a run.

    Lot more success before 2015 too I’ll wager. Best get your name down for a 15 year stint in the Lords just in case though.

  37. Gary
    Posted May 14, 2012 at 11:13 am | Permalink

    (Some? ed) banks are insolvent. Without the central bank(aka taxpayers) keeping them on life support , they would die.

    Bonuses are a reward for success. The current level of bonuses would be equitable at £0. Or better still, make them pay back some of the earlier bonuses that were based on prior illusory profits and real failures.

    Reply: No bank should be insolvent – the regulators are meant to check their solvency. The Central Bank may have to make them liquid sometimes, as all banks borrow short and lend long to some extent.

  38. Gary
    Posted May 14, 2012 at 11:15 am | Permalink

    “Antisthenes
    Posted May 14, 2012 at 6:40 am | Permalink

    Despite opinion to the contrary it was not bad banks and bankers who caused the banking crisis and the bloated bonus culture but bad governments. Governments put in not too little regulation but bad regulation that was impossible to police competently”

    Yes Guv, not our fault, we committed the crimes because there were not enough police. Put the police in the pen.

  39. oap
    Posted May 14, 2012 at 11:16 am | Permalink

    The lost tax revenue should not be replaced. The lost £4 billion should be added to the spending cuts the government talks about (a lot) but has yet to start to make. As you pointed out recently, the UK is now an over-taxed country.

    Mr Hague`s remonstration that everyone should work harder will not persuade those already on 50%+ tax rates that they owe him anything extra. I doubt that those in the 40% bracket will feel much better disposed once they have factored in all the consumption taxes they pay in the form of VAT, excise duty, council taxes and so forth.

    And there is a reason many well-run, often large, businesses are sitting on cash – the profitable opportunities are not there and there is a real possibility of sharp economic decline in the EZ which will demand substantial financial reserves to secure their survival. It is indeed unfortunate that, by comparison, our national financial affairs are in such a sorry state. If the UK were a commercial business it would have long since been declared insolvent.

  40. rose
    Posted May 14, 2012 at 11:16 am | Permalink

    I don’t want HMG to interfere with what people are paid in the private sector. I want them to flatten and simplify the tax system so there is not this absurd and unhealthy arms race between them and high earners.

  41. Mactheknife
    Posted May 14, 2012 at 11:59 am | Permalink

    @JR

    ” Rewards should go for returning a bank in receipt of state shareholdings and subsidy in whole or parts to the private sector, getting taxpayers money back and generating susbstial cash profits to reward shareholders. Shareholders have been without dividends now for a long time, and should have priority.”

    Hester at RBS is on the way to doing this substatially improving the banks position. But when the media created a storm over his bonus the government failed to back him. Instead they flip-flopped and muttered and murmured to jurno’s without providing any support or explaining the banks improving financial position.

    We now have government ministers telling business to stop whinging about government policies and get on investing. I’m afraid the government needs to learn some humility. If business leaders do not see any improvement and lots of talk and very little action by Pickles, Hague, Hammond etc. they will not invest.

    Where is the deregulation, cheaper energy etc ? The answer is nowhere as we are being good little Europeans implementing every half baked piece fo legislation this socialist undemocratic collective cares to issue.

  42. Bert Young
    Posted May 14, 2012 at 12:57 pm | Permalink

    The bonus culture presently is , unfortunately , linked to short-term related results and , as such , of little value to shareholders , or , to employees with interest in building a meaningful future career . A different formula should be used relating experience and results over a much longer period of time . The presence of a successful individual in any organisation acts as a stimulus and should be featured in its promotion and recruitment systems . Attractive gradual salary enhancement is a much better approach .

  43. Patrick Loaring
    Posted May 14, 2012 at 1:02 pm | Permalink

    How does the Goverment get the tax money back that is being lost due to bankers getting lower bonuses? Get rid of the Quangos. Much promise has been made about a bonfire of the Quangos but this Goverment has done practically nothing. As a country we managed once without Quangos but currently Governments of all shades seem addicted to these non accountable bodies.

    I find the subject of bonuses for civil servants the one that I can’t understand. We have been told over many years that public servants get lower pay than the private sector and so they get in return job security and a better pension than the private sector. Now we are told that the public sector pay is higher on average than the private sector and the public sector still have job security and a better pension and now a bonus for doing their job. We are told that the public sector have to be paid the rate for the job otherwise they will go and work for the private sector. The public sector head count went up by half a million under labour and has been increasing anyway for the last 60+ years. A lot of the increase occurred in the years of low pay and no bonuses, so who is kidding who?

    I’ve just started reading your book “Singing the Blues”.

  44. Bill
    Posted May 14, 2012 at 1:47 pm | Permalink

    Perhaps if MPs started cutting back on their expenses this would be a start .

  45. Alex Sabine
    Posted May 14, 2012 at 2:10 pm | Permalink

    The tax revenue that was generated by massive City bonuses was part of the unsustainable Brown economic model; some commentators aptly characterised this as his Faustian pact with the City. Like other aspects of that discredited model, it cannot provide a sound foundation for the future.

    You are right to point out that this presents a problem for the Exchequer, and more particularly for those politicians whose taste for high public spending necessitate ever more tax revenue.

    To some extent alternative, more sustainable, sources of revenue are being sought to bridge the gap. This has been successful so far inasmuch as tax revenue has been rising despite the painfully slow recovery from the financial crisis, more than reversing the steep fall in revenue that occurred in 2009. (This is a striking contrast to the US, where tax revenue is still lower in nominal terms than before the crisis.)

    But the reality is that the British state will have to operate on a lower level of revenue than was previously assumed by all parties, and cut its coat accordingly.

    To be fair, the coalition’s plans reflect this, by planning for a reduction in total expenditure in real terms over this Parliament. This compares to the usual practice of spending growth broadly matching the trend growth rate of the economy (thus remaining stable as a share of GDP) or the Brownian practice of outstripping it year after year.

    (I do think real-terms figures matter incidentally, unless we are going to start ignoring them for other economic indicators like GDP growth. We do not say that the economy has grown if nominal GDP increases by 1% but inflation increases by 3% in the same period. We call that a recession. Likewise the big squeeze on household income in the past few years has been a case of very low growth in nominal wages outstripped by the rise in prices. When looking at public spending we should measure it in cash terms, real terms and as a proportion of the economy rather than selecting the particular figure that suits our argument.)

  46. Barbara Stevens
    Posted May 14, 2012 at 2:14 pm | Permalink

    I’m glad some companies are seeing the folly of large bonuses when compaines are losing money, they have gone into excess. No one is worth millions in bonuses while shareholders take less. Shareholders need to exercise better action against such things in the future to stop this greed getting a hold again; and it is greed for in most cases failure. I’ve no problem with generating extra income if they do well but the scale which they have awarded themselves is pure greed on their part. Others often work in the same companies with much less reward but work just as hard. I hope its not just a popular move to aid the government and they mean to curb things permanantly.

  47. Conrad Jones (Cheam)
    Posted May 14, 2012 at 2:49 pm | Permalink

    In a free market economy there would not be a problem of City Bonuses.

    If City Firms are doing so badly, what do you think is funding these Bonuses ?

    Are Banks part of the Government or are they Private?
    Why do Politicians rush to the aid of Banks and let manufacturing firms go bust?

  48. startledcod
    Posted May 14, 2012 at 3:30 pm | Permalink

    Have the leopards changed their spots? I fear not and suspect that the large reduction in reported bonuses has probably been matched by huge increases in salary and export of whole pay packets.

    @lifelogic, unfortunately corporation tax is paid at a significantly lower rate than PAYE and NI; your rejoicing should therefore be curtailed.

    • lifelogic
      Posted May 14, 2012 at 10:13 pm | Permalink

      Yes but where it is distributed to UK residents further taxes are paid even pension funds when the fund is taken as as pension.

  49. Electro-Kevin
    Posted May 14, 2012 at 3:56 pm | Permalink

    I have no problem with people making lots of money if their talents and skills are rare and they help to generate profit.

    The issues that do concern me, however, are the distortions caused by the City which draw those with scientific minds away from industry and that Britain is now far too London-centric and skewed towards banking.

    • Electro-Kevin
      Posted May 14, 2012 at 4:11 pm | Permalink

      PS – We don’t want an ‘equal’ society but a fair one.

      • Electro-Kevin
        Posted May 14, 2012 at 5:33 pm | Permalink

        Further to that notion of this country being a more ‘equal’ one:

        The City has proven to be one of the most egalitarian features of our country. Many an ordinary kid has made a fortune there and elevated themselves into a higher class.

        Britain needs fairness, not equality. The quest for equality is, in fact, at the root of this nation’s decline and has caused ever greater disparity between those who can afford to pay for education and those who can’t.

        If the Tories want equality then bring back grammar schools.

        “But grammar schools exclude on the basis of ability”

        And private schools exclude on the basis of money which is far worse but you won’t find the Tory Party standing against that.

  50. uanime5
    Posted May 14, 2012 at 3:58 pm | Permalink

    I’ve noticed a correlation between falling bonuses and failing share prices. It seems shareholders won’t accept huge bonuses for executives while they suffer huge losses.

    Did the wealthy pay any taxes on these bonuses or did they avoid this tax? If the latter occurred then the state has lost nothing.

    If bonuses haven’t been paid to executives then this money probably makes up the profits of the company. Perhaps a tax on profits would be an effective way to recover some of this money.

  51. Christopher Ekstrom
    Posted May 14, 2012 at 4:17 pm | Permalink

    Another post by the equitable Miss Hansen; now let’s hear which services she would cut? None? Like SamCam she wants to continue to grow services? Well then which new taxes are you supporting?

  52. Susan
    Posted May 14, 2012 at 4:38 pm | Permalink

    Well it certainly fits in with the Governments fairness agenda. My problem is that I do not see what is to be gained by cutting down City bonuses. If the idea is to make these people in receipt of bonuses feel like lepers, it probably is working but I cannot see any other benefit. The tax which would normally be collected will simply be lost to the treasury meaning that less money is collected to fund the public sector. Gordon Brown certainly found this useful money to spend when Labour were in Government. I would have thought the Coalition needed it even more.

    Ed Milibands position on this issue is even more ludicrous, on the one hand he calls for high rewards to be stopped but at the same time wants a special levy on the bonus payments to fund many of their spending projects. Everything is going to be funded by this levy according to Labour.

    I would imagine the Coalition will replace the lost revenue with tax rises or spending cuts as this appears to be the only options available. The public will not care if the bonus culture in the City has been brought under control, they will continue to blame these people for the financial crisis and see them as overpaid parasites. I wonder how long it will be before Global banks such as HSBC decide that London is not a good place for them to be based anymore.

  53. david englehart
    Posted May 14, 2012 at 5:25 pm | Permalink

    the politics of envy rarely takes into account how one will make up the tax shortfall once you have got rid of the people earning too much.
    the french are about to get a reality check on that.
    it was i suspect always thus.
    and it will be for the foreseable future.
    yet !!
    the swiss prosper.
    how?
    they are climatically and geographically an inhospitable country.
    but they work hard and do not envy those who succeed.
    in 1963 i got 12 swiss francs to the pound.
    look it up today.
    then ask what have we done to ourselves to allow this to happen.
    it is called democracy and allows those who would destroy our way of life to do their best so to do.
    my 3 children have swiss passports from their mothers’ sides.
    yet they live here and have no desire to live there neither do the mothers..
    we have so much to live for here and if only we could encourage wealth creation and sustainable private sector growth we could be the strongest economic and social model in europe.
    if i knew what the answer was i would be a very rich man instead of struggling along past retirement age frightened to give up work for fear of what the future holds.
    i suspect there is no easy solution albeit i see boris today has some interesting suggestions to make about the BBC.
    that would be a start.

  54. outsider
    Posted May 14, 2012 at 5:34 pm | Permalink

    Dear Mr Redwood, a couple of thoughts.
    1) The bonus money does not disappear. If profit was earned, it goes to other taxable parties such as bank holding companies and their shareholders, including the state, or to other bank staff or even (though probably not) depositors. Any tax loss is confined to the difference in marginal tax rates of the parties.

    2) I wish there were many more British billionaires who had built up businesses and could make personal decisions to invest in new ventures and ideas. We are short of home-grown billionaires. Bank traders getting annual cash bonuses of £300,000 to £1 million does not deliver the same economic benefit. It is more likely just to distort central London property prices and boost demand for Cristal champagne.

    So no sadness, or triumph for that matter, assuming the projections are correct.

  55. simon
    Posted May 14, 2012 at 6:47 pm | Permalink

    Part of the bonus cash has been shunted to ordinary pay.

    Part of the bonus cash is missing because GDP is down.

    Part of it is being withheld until the 50p tax rate is gone.

    If there’s any left, I hope companies are using it to invest and grow the economy.

  56. David Langley
    Posted May 15, 2012 at 8:20 am | Permalink

    Banking bonuses are a mystery to me, what exactly do bankers do to get it? do they take risks successfully? Is there a formula which says do your job you get basic salary (A) Be smart, work longer and earn more than (A) to a certain fixed number of levels you get (B).
    If banker gets the sack if they only earn (A) then risks etc have to be taken which = stress and casino practices.
    The thing is money does not disappear it goes somewhere else, more Corp Tax, more shareholder profits, more repayments to long suffering plebs holding the crap shares. etc.

  57. David Langley
    Posted May 15, 2012 at 10:04 am | Permalink

    By the way what does Osborne think he is doing today supporting the EU banking system?
    This guy is the one to watch he is more dangerous to us all than all of our other “Japes in the Dorm” boys.
    I think when he means support the Eurozone he means dish out dough. I cant wait to get rid of Mr Omnishambles man.

  58. APL
    Posted May 17, 2012 at 7:33 am | Permalink

    David Langley: “By the way what does Osborne think he is doing today supporting the EU banking system?”

    Our political elite, the lot of ’em have signed up to ever closer political union. Even our host talks about wanting a different set of shackles!

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page