Conference platforms and Parliament have been alive with attacks on bankers. Treated as a caste apart, they have been the butt end of jokes, the subject of barbed comments, and the object of policies designed to tax them and curb them. I would like to be a brave politician, and to speak up for many bankers.
Most bankers are people doing decent jobs for reasonable salaries. I do not think the ladies that help me pay my bills in the local branch of the bank I use earn large salaries and mega bonuses. Nor do I think they were in an any way to blame for the credit crunch. Critics should at the very least exempt to the vast majority of bank employees from their strictures.
Many of us are angry about the extent and the depth of the credit catastrophe that was unleashed. First we had the unacceptable boom up to 2007. Then we had the even worse bust, up to the autumn of 2008. Some Directors and senior executives of some banks were responsible for big mistakes in the business they took and in the way they ran and financed their banks. So too were the senior regulators to blame, for their failure to demand enough prudence on the way up, and for then demanding too much prudence in a hurry on the way down. The Bank of England was far from guiltless either. It set interest rates that were too low for years, then set higher rates and starved the markets of money just when the crisis began, which made it worse.
We need to be careful what reparation or punishment we seek to impose as a society on the guilty people. In the case of individual banks that went down or lost large sums of money, shareholders should take the necessary action to ensure those responsible lose their jobs. The government has decided to wind up the FSA, the banking regulator, and to create a new one in the Bank of England. The Bank has had a lucky course through the crisis, in view of its mistakes.
It is now fashionable for governments to impose extra taxes on banks. It is also popular. There are, however, limits to how much any government should do this. In the end higher bank taxes will be paid by all of us, bank customers. Taxes on banking balance sheets will persuade banks to have smaller balance sheets. That means they will lend less money to first time buyers seeking homes, to small and medium sized businesses wanting loans to expand, to anyone who might like to borrow money.
So why not then tax the bonuses and activities of the Investment banks more? Surely we can all agree about that? It is there that we see the concentrations of highly paid people earning mega bonuses for playing with money. Even here we need to think before we act. The large amount of this business transacted in London has brought in large sums in tax revenue for our government, and the spending power of these highly paid people has helped the shops and service businesses of London. Do we want that to go elsewhere? How do we strike the right balance between fair tax, and maintaining our tax competitiveness as a business location?
There are no easy answers to these issues. I want to see the UK get all its money back from the banks in trouble. I want to see well paid people stay here and pay a decent whack of tax. If we allow our feelings to become too heated we risk maligning the many innocent and lower paid bankers, and risk losing the high earners who do have their uses.