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What is the government’s argument for its inaction on bank bonuses?

Cameron says he will not “take revenge” on bankers with a punitive tax, but fails to explain why.

David Cameron's retreat on bank bonuses has continued unabashed, with a guarantee that he will not "hammer" the banks.

Admitting that some people would be angry over this, he said:

It's about getting the balance right. It's not going to be easy and it won't satisfy everybody. But we've got to try to work for that balance rather than just think, "Let's take revenge on people because they've made us mad as hell."

In words that will sound hollow, Cameron said he understood public anger:

There is part of me, like probably everyone in this room, that thinks, "Right, let's just go after every penny we can get out of those banks, let's tax these bonuses to hell." That would look good for a few weeks.

We want a growing economy which is creating jobs, and that means banks that are lending to businesses. I don't want to just try to win good headlines by saying I'm going to hammer these guys.

It is a strange argument from a man who – as Ed Miliband pointed out at PMQs on Wednesday – was calling for a limit of £2,000 on cash bonuses in 2009. Indeed, his posturing over the banks while in opposition even caused some Tory donors to express their concern publicly.

Yet no one in government has made a clear argument for exactly why paying out large bonuses is so crucial to lending – in fact, as I pointed out earlier in the week, George Osborne argued precisely the opposite when in opposition. Numerous academic studies have shown that bonuses cause excessive risk-taking and reduce efficiency.

Could it have something to do with the party's friends in the City? Figures for April 2010 showed that prominent figures from the financial sector donated £500,000 to the party in the second week of the May election campaign – or a quarter of total donations.

It should come as no surprise that the Conservatives are on the side of the financial sector and big business; but Cameron and Osborne's opportunistic posturing over bonuses while in opposition makes it all the more galling. Let us not forget that the coalition agreement pledges "robust action to tackle unacceptable bonuses".

This presents a dream opportunity for Labour to strike the right note with popular support. For their own sake, someone in government needs to make a clear case for their current course of action – or total lack thereof.