Miliband’s smart move on bank bonuses

The Labour leader’s call for an extended bonus tax is good politics and good economics.

Ed Miliband's decision to call for the extension of the tax on bankers' bonuses is good politics and good economics. At a time when ministers are backing away from a confrontation with the banks, Miliband has seized an opportunity to win favourable headlines. The coalition will struggle to oppose him without implying, as Peter Mandelson once put it, that the rich have "suffered enough" (not a popular political message in these straitened times).

So long as the banks refuse to show pay restraint, it makes sense for the government to raise some much-needed revenue. Alistair Darling's original 50 per cent tax on bonuses over £25,000 raised £3.5bn, four times more than the government originally forecast. By contrast, the coalition's bank levy is expected to raise just £1.25bn. Miliband's suggestion that now is the wrong time to be "cutting taxes for the banks" will resonate with voters suffering the biggest squeeze on living standards since the 1970s.

It's worth adding that Darling's tax did not lead to an "exodus" from the City of London. An analysis by PricewaterhouseCoopers found that the gap with other jurisdictions was not wide enough to justify a move out of London. As the FT's report noted:

[A] married banker with two children, one of them aged under six, with gross income of £250,000 and a mortgage of £750,000, would net £141,000 in the UK, after deductions for tax and social security, according to PwC's calculations. In Geneva, that same employee would take home about £156,000, 11 per cent more.

The gap with other European financial centres and the US is significantly smaller. The same worker would net £150,000 in Paris, £149,000 in Frankfurt and £145,000 in New York . . . While the tax hit becomes much more significant among top earners, such as those earning in excess of £1m, it is difficult for senior bankers and traders to relocate in isolation, without more junior employees on their team or support functions.

Miliband's announcement is tailor-made to appeal to two of the groups he is most concerned with: "the squeezed middle" and disaffected Liberal Democrats. Senior Lib Dems were exasperated by Cameron's suggestion that the banks are "an easy scapegoat" and few are more angered by the bankers' recklessness than the middle classes. It's hardly election-winning stuff but, in the current circumstances, a little bit of populism will do Miliband no harm.

George Eaton is political editor of the New Statesman.

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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke, but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reports in this morning’s Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.