Banks given go-ahead to pay unlimited bonuses

Ministers cave in to City and reject calls to tackle highest earners as No 10 seeks face-saving deal

Source - Guardian 11/1/11

 

Britain's banks have been given the go-ahead to pay unlimited bonuses, drawing to a close a two-year political battle to rein in the City.

 

After months in which a series of government ministers of all parties have threatened a toughening in the stance over City bonuses, Downing Street said the government did not intend to intervene in the pay of the UK's top bankers.

 

Ministers are instead hoping for a face-saving deal in which the banks agree to lending targets and improve the way they disclose their pay deals. One of the options being discussed is releasing information on the five highest paid individuals at each bank.

 

"We've made a broad statement which is about the need to see some restraint and some responsibility from the banks, but we are not going to set bonus pools for individual banks," the prime minister's spokesman said.

 

Labour accused the government of capitulation and letting the bankers off the hook, urging the government to extend the bonus tax, which raised £3.5bn after it was introduced by Alistair Darling as a one-off measure in December 2009.

 

The coalition government replaced that bonus tax with an annual levy on balance sheets which is estimated to yield about £2.5bn a year. Ed Miliband, the Labour leader, said this was, in effect, a tax cut for bankers.

 

Ministers rejected Labour's proposal, preferring to work a compromise deal that would placate Vince Cable, the Liberal Democrat business secretary who has been pressing for tougher measures.

 

The government said an extension of the bonus tax would be self-defeating because bankers would become more skilled at avoiding the tax.

 

The levy, the Conservatives said, would raise more money in the medium term.

 

City sources were reassured by the government's milder stance ahead of the appearance of Bob Diamond, Barclays' new chief executive, before a potentially hostile Treasury select committee today.

 

The government's stance will be seen as a retreat from some of the aggressive rhetoric from the Liberal Democrats, but the government believes a hard-headed approach requires the government to focus on disclosure and measures that will improve lending, seen as the single most effective way of helping the British economy recover for recession.

 

Government sources said even if the government managed to get the size of bonus pools reduced by half from the expected total £7bn projected this year, there would be political flak, and it is better to focus government leverage on increasing net lending to business.

 

Government officials also pointed out the Financial Services Authority has already adopted European Union rules curbing bonuses. Measures include the mandatory deferral of parts of a bonus, retention of portions paid in shares and strict conditions on guaranteed bonuses. The overall aim, the government said, was to curb risky banking practices in the pursuit of higher bonuses.

 

Nevertheless, Nick Clegg, the deputy prime minister, again urged the bankers to be sensitive. "I totally accept that the kind of sky-high numbers that are bandied about in the City of London seem to come from a parallel universe to many people who are struggling to deal with increased costs and so on.

 

"But I think the key issue of principle is this: those people who are running the state-owned banks, who have benefited from immense generosity from British taxpayers, they have to be sensitive to what British taxpayers want."

 

The chancellor, George Osborne, will continue to seek an EU-wide deal on disclosure of pay bands above £1m, along the lines proposed by the City grandee Sir David Walker. He had initially proposed a UK-only deal before arguing international competition in banking required an EU-wide deal. It is possible Cable will get a more limited UK deal in the next fortnight, but there are concerns in parts of government that full-pay disclosure requirements will lead to inflationary pay pressures in banking as bankers realise how much their colleagues are being paid.

 

The banks may be forced to agree to publish deals of their highest five paid staff without identifying them – only HSBC does this at the moment, under the Hong Kong listing rules. Even so, this does not go as far as the proposals outlined by Walker, which Labour was planning to implement.

 

Arguing his bonus tax would raise more than the bank levy Miliband said today: "It cannot be right that, when workers face below-inflation pay increases, if they get any rise at all, and families see prices on the high street rising, senior bankers keep raking in bonuses that are more in one year than most people can earn in a lifetime."

 

He urged ministers to "take action", adding: "They should not get the scale of bonuses that is being talked about."

 

Miliband also came under pressure to say the Labour government had allowed public spending to get out of control, contributing to the country's record peace-time deficit. The Labour leader is expected to argue in coming weeks that the Labour government had been wrong not to state earlier in public that the banking crash required spending cuts to adjust to sudden and permanent loss in tax receipts. A Comres poll today showed Labour had opened up an an eight point lead over the Conservatives with Labour on 42 and the Conservatives on 34.

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No, really, what a fukkin' shock...... <_<

 

So, for the rest of us, it's pay-freezes or below inflation "rises" (which are by default pay cuts), cuts in public services, cuts to welfare, increases in VAT, increases in Fuel prices, increases in unemployment, and the people who caused all this mess in the first place just waltz off into the sun with a nice, big bonus and get to insulate themselves from the hardships facing the country... Marvellous...

 

But it's really just typical from The Tories who have proved themselves to be enemies of the workers time and time again, going all the way back to the HISTORICAL Tories who wielded power back in the 18th and 19th Centuries..... It's all so easy for Cameron and Co to tell US we have to tolerate pay-freezes, etc, because "we're in a mess", or we have to "tighten our belts" because "we're all in this together".... Like fukk "we" are... There is "us", who make up the vast majority, who are the workers, the back-bone of this country, who pay our taxes fair and square, and there is "them", the corrupt, the powerful rich b'astards who time and time again screw the system to their advantage, avoid paying taxes in deals and scams that the rest of us certainly have no access to, and those dirty swines in the City and Wall Street and bankers who play fast an loose with other people's money, have little or no idea of risk management and when it all goes tits up, they expect the "us" to bail the "them" out......

 

Minimum Wage is another absolute crock.. It was supposed to get people out of the poverty trap, but has only succeeded in creating an underclass known as "The Working Poor", I sincerely doubt Cameron and Co will be raising the level of Minimum Wage to levels which see off inflation, VAT increases, etc, etc.... And for all their talk of "representing hard working families", these self-same "Hard-working families" are incresingly finding themselves a lot worse off as Danny helpfully pointed out by inclusion of a graph on another topic...

 

The evidence is absolutely PILING up here that the "Coalishun" are nothing more than one party dominating the other, ie, the Tories dominating, looking after their fat-cat chums as they always have done, and the Fib-Dems being the enablers and the whipping-boys to this grossly indecent and unjust set of Tory measures....

 

But getting back to the bankers for a moment... I'll just leave you with the words of Tony Benn and what he experienced in government....

 

"As a minister, I experienced the power of industrialists and bankers to get their way by use of the crudest form of economic pressure, even blackmail, against a Labour Government. Compared to this, the pressure brought to bear in industrial disputes is minuscule. This power was revealed even more clearly in 1976 when the IMF secured cuts in our public expenditure. These lessons led me to the conclusion that the UK is only superficially governed by MPs and the voters who elect them. Parliamentary democracy is, in truth, little more than a means of securing a periodical change in the management team, which is then allowed to preside over a system that remains in essence intact. If the British people were ever to ask themselves what power they truly enjoyed under our political system they would be amazed to discover how little it is, and some new Chartist agitation might be born and might quickly gather momentum"

 

I agree with every word....

 

It really has been a pathetic display from the government over bonuses over the past few days, from Robert Peston saying that George Osborne's aides saying bankers had been "punished enough", David Cameron saying on TV that bankers shouldn't be a "scapegoat" for the recession, and Nick Clegg having the audacity to claim while all this pandering to the fat cats is going on that the government is standing up for people who get up early for work everyday. It's just totally unacceptable for bankers to be claiming these obscene amounts when it's only because of US bailing them out that they're not all unemployed right now. As a bare minimum, they should keep the 50% tax on bonuses that Labour brought in last year - like Alan Johnson said, it's a two-way bet, as the tax would either get the bankers not to pay bonuses, or if not, it would atleast mean we'd get a huge chunk of money into the Treasury (more than £3bn last year) which can be spared in cuts. But, unsurprisingly, the Tories don't want to upset their mates in the City, and the Lib Dems are apparently happy to stand idly by and watch.

 

Osborne has been ordered to the House of Commons to get raped grilled by Labour MPs at 3:30 this afternoon. Even though I have a 3000 word essay to finish by the end of the day, I probably won't resist watching it just to see the pathetic crap he comes out with :lol:

I also think the government have COMPLETELY underestimated the scale of public anger there'll be over this. Bankers' bonuses is the one subject that unites both the Guardian and the Daily Mail in outrage!

If anything the Tory rhetoric on bankers' bonuses before the election was even tougher than the Lib Dems'. Osborne called for a limit of £2000 but no doubt now someone has reminded him how much money the Tory party gets from the City. As for saying there is not much the government can do, that may be true with Barclay's but the state owns 83% of RBS so the government ought to able to exercise some influence there.

 

Obviously, if the tax on bonuses was made permanent, accountants would soon find ways round it but that's no reason to give up on it completely.

http://www.independent.co.uk/multimedia/dynamic/00533/cartoon120111_533401d.jpg

Great pic Danny, you should use it as a sig..... :lol:

 

Anyway, back to the topic..

 

Didn't you just "love" what that prick Bob Diamond said yesterday about how the period of "mourning" for the banks should be over and it should, presumably, just be all "business as usual" again...? What a load of crap... Anyone would actually be under the impression that the financial mess is actually over, he seems to have forgotten the fact that the Taxpayer had to shell out again a few months ago to prop up Irish Banks... <_< , so, if he honestly thinks things are back to normal in the Banking Industry he frankly needs a boot up the arse or a damn good slapping....

 

Of course, one thing he did say was very telling, however - the fact that NO ONE, not Cameron, not Osbourne, not Cable had actually looked him square in the eye and said to him he should perhaps show restraint in his compensation package.... Yeah, I could actually believe that tbh, the "Coalishun" are just caving in totally....

To me, it was pretty obvious Cameron is getting edgy about this whole topic at Prime Minister's Questions earlier today. To each and every one of Miliband's questions, all Cameron could do was sneer, attempt pathetic putdowns and keep slamming Labour's record on banks (apparently unaware that he's the PM now and no-one cares about what happened a year or so ago). "Alarm Clock Britain" (lol) isn't going to be impressed by that type of attitude when they're already getting more and more angry about bonuses by the day. It's obvious Cameron is weak-willed, as shown by the huge number of U-turns he's made on policies after just the slightest bit of media criticism - but the question is, this time, whether he's going to be more scared by the media backlash, or more scared by the backlash from his City paymasters if he attempts to rein them in.

If Cameron had any sense of concern for his hopes of winning the nest election and not tainting the reputation of his party even further, he'd show some balls and stand up to the banls over this issue. Barclays may be able to say what they want but the majority of RBS is owned by the taxpayer, and I don't think many of them would be too happy to be paying for these guy's Christmas bonuses.

If Cameron had any sense of concern for his hopes of winning the nest election and not tainting the reputation of his party even further, he'd show some balls and stand up to the banls over this issue. Barclays may be able to say what they want but the majority of RBS is owned by the taxpayer, and I don't think many of them would be too happy to be paying for these guy's Christmas bonuses.

 

Hmmm, I'm not sure that they can tbh... I mean, okay, Barclays weren't directly bailed out, but put it this way, if the bail-out hadn't happened at all, would Barclays still exist today...? I rather doubt that... So, Barclays indirectly benefited from the bail-out in my opinion, as did all the other banks... The US and UK taxpayer basically saved the entire industry from going to the wall, it had far more repercussions than just the few that needed a direct bail-out... So, I'm sorry, but because we saved the whole industry, we should be able to say to the whole lot of them "fukk your bonuses until all the money is paid back"..... -_-

 

Hmmm, I'm not sure that they can tbh... I mean, okay, Barclays weren't directly bailed out, but put it this way, if the bail-out hadn't happened at all, would Barclays still exist today...? I rather doubt that... So, Barclays indirectly benefited from the bail-out in my opinion, as did all the other banks... The US and UK taxpayer basically saved the entire industry from going to the wall, it had far more repercussions than just the few that needed a direct bail-out... So, I'm sorry, but because we saved the whole industry, we should be able to say to the whole lot of them "fukk your bonuses until all the money is paid back"..... -_-

I think they would still exist but that's partly down to a stroke of luck. One of the major reasons for the collapse of RBS was the inflated price they paid for ABN Amro. Why did they pay such a high price? Because there was another bidder. Who was that bidder? Barclays. If Barclays had bought ABN Amro they would have found themselves in deep doo-doo.

 

The full deal of the hilariously lame Project Merlin was revealed today, which, according to Osborne, will mean banks will now be forced to lend money to struggling businesses....

 

...until you read the small print, that is. Clause 3.5 of Project Merlin:

 

"nothing in this statement derogates from the obligation of the banks, and their boards and remuneration committees, to manage pay policy in a way which protects and enhances the interests of their shareholders"

 

...which basically means the Tories' City paymasters can carry on lending as much or as little money as they want.

 

Meanwhile, Osborne is also letting bankers claim their bonuses in full, refusing even to reinstate Labour's 50% bonuses tax. And, as usual, the Lib Dem ministers are gormlessly sitting there letting the Tories walk all over them, with Coalition whipping boy Danny Alexander sent out to news studios to defend it. The one Lib Dem who dared to speak the truth - Lord Oakeshott, who rightly called Project Merlin "pitiful" - was fired by the end of the day. The more things change, the more they seem to stay the same...

I have been a big admirer of Matthew Oakeshott for a long time. He clearly knows his stuff and as a result he has been a very effective spokesman. He wasn't sacked, he resigned as he felt unable to support government policy. That just makes me admire him even more.

Danny Alexander implied in an interview on the BBC that he'd actually been sacked - although, looking at the obvious (and understandable) contempt Oakeshott obviously had developed for Osborne and the Treasury, it probably would've been a matter of time before he resigned anyway.

Mighty Ming is on Question time tonight. That should be a good watch.