It’s bonus time in the City again this year, the Champagne bars will be pleased. But what about the rest of us?
LLoyds TSB, 41% owned by the taxpayer, are paying their CEO Eric Daniels £2million this year. Needless to say the ethics of this are highly dubious, and we are in fact advocating that this be stopped.
Robert Peston reported that when asked his opinion on whether Daniels should forgo the bonus, he replied “Why on earth should he? He has returned Lloyds to profit. And also, he is leaving Lloyds in March, so why should Eric care if the bonus makes him unpopular?”. Obviously for this banker the forgoing of bonuses in the past was only worth it to avoid criticism, ethics doesn’t even come into it.
Bob Diamond, the head of Barclays Capital, is set to receive around £8.5m in bonuses, although he did state at the Treasury Select Committee that –
“No bank should be a burden on the taxpayer – we have to make the system safer,”
Later in the session Diamond declined to thank the taxpayer for the implicit support it provided the banking sector, to the tune of around £150bn from 2008 until the end of 2009. I wonder whether he would be singing the same tune if the EU forced bondholders to take losses on Irish bonds?
The government seems to have changed it’s tone just slightly on bonuses.
In autumn of 2009 George Osborne stated – “I am today calling on the Treasury and the FSA [Financial Services Authority] to combine forces and stop retail banks – in other words the banks that lend directly to businesses and families – paying out profits in significant cash bonuses. Full stop.”
Osborne today turned to passing the buck, accusing Labour of signing a “thoroughly inadequate” contract with RBS and blaming them for what is likely to be a return to business as usual for bonuses in the 84% state owned bank.
Still, Osborne felt it necessary to absolve himself of any guilt of failing to do anything substantial on the bonus issue by making an emergency statement in which he praised the new governments measures to force the banks to pay tax, of all things, along with their levy which is set to raise £2.5bn annually from the banks.
No, I didn’t miss out a zero or two, £2.5bn.
To put this in perspective, The banks fell short of their contribution to deposit insurance by seven years worth of the banking levy in 2009, and the implicit taxpayer support in 2009 as worked out by the Bank of England is calculated at 40 years worth. The total value of the bailout package is 340 years worth of this levy.
So on the presumption that this is the last financial crisis the taxpayer will ever be involved in, The banking sector might be able to pay us all back in extra taxes some time around 2400. I won’t hold my breath.
To add another layer of perspective to just how insignificant this effort is, the Labour Government imposed a 50% tax on bankers bonuses in the previous year raising an extra billion over the banking levy so lauded by government.
The Lib Dem election manifesto contained a statement that banks should not be allowed to pay more than £2,500 in bonuses. Well only wrong by a factor of 1,000 in our 41% state owned bank.
Bob Diamond claims that the time for “remorse and apology” from bankers is over. Back to champagne lunches while the extra 35,000 people who could not find work from October – December struggle to makes ends meet in the new year, having to deal with higher food prices as the Investment Bankers rub their hands in anticipation of their next big growth area, food speculation.
Food prices are already 70% higher in some areas than they were 6 months ago, markets becoming increasingly volatile as the investment banks have poured over $200bn, largely comprised of taxpayer support and quantitative easing, into betting on rising food prices. Riots have already begun to break out in Algeria.
The government seems to be resigned to defeat in the battle over bonuses. Imagine how angry they’ll be when they realise that most of this money was initially created by others bankers out of nothing!