Bonuses: time for a windfall tax

Aren't you sick and tired of bankers ripping you off?

Can there be a more shameless, selfish, self-centred, navel-gazing bunch of bankers than the RBS board? How on earth can a failed bank, bailed out to the tune of billions of pounds by taxpayers, now try to blackmail those same taxpayers, ie, their new shareholders? Vince Cable is right -- call the bankers' bluff!

But not only has the government been outflanked by the Tories in recent months, in populist anti-bonus rhetoric, if not in concrete or workable proposals, but it still can't get its line straight. Harriet Harman says bonuses are "reckless" and "irresponsible" and Paul Myners says bankers need to "come back into the real world", but Peter Mandelson says that he understands "the point of view that RBS directors are expressing". He adds:

They say they have to remain competitive in the market in recruiting senior executives and that's why it's important that all the banks are equally restrained and that RBS is not singled out.

Meanwhile, the Prime Minister has belatedly "waded in", saying:

Nobody is being discriminated against because every bank is having to follow these procedures.

Every country in the world is legislating to create new bonus policies where we restrict bonuses both in terms of the eligibility and also in terms of the conditions attached to bonuses.

But why has Brown only now spoken up about this? Back in September, when James and I interviewed him for the New Statesman, he said so little about bank bonuses that we didn't even bother to include this passing line from the PM in the final piece:

I think what we're all talking about is how you can reduce the proportion of bonuses in revenues and profits and how you can limit them in that way -- what you've got to do is find the international rules that everybody can implement. You don't want to go down to the last person in the last board in the last company . . . and I think that's why the agreement in Pittsburgh will be one that can be applied across every nation.

The tone has changed -- thankfully, if belatedly. It's time for Brown and Darling and Mandelson and Harman to crack down on excessive bonuses. And if RBS, as Mandelson says, feels it is being "singled out", then the simplest solution is a windfall tax on all bonuses, so that the boys at Barclays pay as much as the boys at RBS. In fact, back in August, I wrote that Brown should "impose a retrospective 90 per cent tax on all 2008/2009 UK bank bonuses". I'm pleased that others are catching up. Here is the FT's Martin Wolf this week:

Yet, regardless of the success of reforms of incentives in -- and regulation of -- the financial sector, it is reasonable to recoup not only the direct fiscal costs of saving banks but even some of the wider fiscal costs of the crisis. The time has come for some carefully judged populism. A one-off windfall tax on bonuses would make the pain ahead for society so very much more bearable. Try it: millions will love it.

Oh, and never forget the key statistic, revealed by the the National Audit Office this week: our glorious banks have received £850bn of taxpayer support to see them through the financial crisis. As the Metro points out:

The figure is more than the entire NHS budget, almost three times [in fact, it's almost 23 times] the annual defence budget and more than five times what Britain spends every year on transport.

Shame on them.

 

 

 

 

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

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You may call me a monster – but I'm glad that girl's lemonade stall got shut down

What's wrong with hard-working public servants enforcing perfectly sensible regulations?

Who could fail to be moved by the widely shared tears of a five year old whose innocent lemonade stall was brutally shut down by evil bureaucrats? What sort of monster would not have their heartstrings tugged by the plaintive “I've done a bad thing” from a girl whose father tells us she “just wanted to put a smile on people's faces”?

Well me, actually.

There are half a million cases of food poisoning each year in the UK, and one of the reasons we have stringent controls on who can sell food and drink, especially in unsealed containers, is to try to cut those figures down. And street stalls in general are regulated because we have a system of taxation, rights and responsibilities in this country which underpins our functioning society. Regulation is a social and economic good.

It’s also pretty unfair to criticise the hard-working public servants who acted in this case for doing the job they are no doubt underpaid to do. For the council to say “we expect our enforcement officers to show common sense” as they cancelled the fine is all very well, but I’m willing to bet they are given precious little leeway in their training when it comes to who gets fined and who doesn’t. If the council is handing out apologies, it likely should be issuing one to its officers as well.

“But these are decent folk being persecuted by a nanny state,” I hear you cry. And I stand impervious, I’m afraid. Because I’ve heard that line a lot recently and it’s beginning to grate.

It’s the same argument used against speed cameras and parking fines. How often have you heard those caught out proclaim themselves as “law-abiding citizens” and bemoan the infringement of their freedom? I have news for you: if you break the speed limit, or park illegally, or indeed break health and safety or trading regulations, you are not a law-abiding citizen. You’re actually the one who’s in the wrong.

And rarely is ignorance an excuse. Speed limits and parking regulations are posted clearly. In the case of the now famous lemonade stand, the father in question is even quoted as saying “I thought that they would just tell us to pack up and go home.” So he knew he was breaking the rules. He just didn’t think the consequences should apply to him.

A culture of entitlement, and a belief that rules are for other people but not us, is a disease gripping middle Britain. It is demonstrated in many different ways, from the driver telling the cyclist that she has no right to be on the road because she doesn’t pay road tax (I know), to the father holding up his daughter’s tears to get out of a fine.

I know, I’m a monster. But hooray for the enforcers, I say.

Duncan Hothersall is the editor of Labour Hame