How the bankers got away with it

Bank bonuses fell in the wake of the financial crash but have risen since.

In my column in this week's magazine (go on, get a subscription), I look at the level of bank bonuses before and after the financial crisis.

Since the crash, mindful of what the Harvard philosopher Michael Sandel described as "bailout outrage", politicians of all three parties have indulged in banker-bashing. But as the graph below shows, there is a significant gap between rhetoric and reality.

Bonus payouts peaked at £11.5bn in 2007 – the year before the crash – and fell to £5.3bn in 2008 following the bailout. Yet since then, as general living standards have continued to fall, the bonus pool has exceeded £7bn for two years running.

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With investment bank revenues falling, bonus levels are likely to be lower this year than in 2010. The 83 per cent state-owned RBS, which is expected to report a loss of roughly £613m, may pay nearer £1bn in bonuses than last year's £1.3bn. Such payments are at odds with the Tories' tough rhetoric in opposition, however. In 2009, George Osborne called for a ban on bonuses at banks that had received any sort of government guarantee. He later promised to block all cash bonuses over £2,000.

Osborne wasn't the only one. In his 2008 conference speech, David Cameron memorably spoke of a "day of reckoning" for the banks and, in his preface to the Liberal Democrats' manifesto, Nick Clegg declared that the banks should not be allowed to "ride roughshod" over the economy while handing out bonuses "by the bucketload".

The coalition's bank levy, which excludes the first £20bn of liabilities, is expected to raise just £1.25bn this year. By contrast, Alistair Darling's 50 per cent tax on bonuses over £25,000 raised £3.5bn last year.

Ministers rightly point out that the levy will raise more in subsequent years (£2.3bn in 2012 and £2.6bn in 2013) but they have yet to explain the shortfall in revenue this year. For reasons unknown, the government has set the levy at just 0.045 per cent this year but at 0.075 per cent next year and in following years.

The Financial Services Authority has ruled that at least half of all bonuses must be paid in shares rather than cash. But to voters facing the biggest squeeze in living standards since the 1920s, this is likely to be a distinction without a difference.

George Eaton is political editor of the New Statesman.

Photo: Getty
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The Liverpool protest was about finding a place for local support in a global game

Fans of other clubs should learn from Anfield's collective action.

One of the oldest songs associated with Liverpool Football Club is Poor Scouser Tommy, a characteristically emotional tale about a Liverpool fan whose last words as he lies dying on a WWII battlefield are an exhalation of pride in his football team.

In November 2014, at the start of a game against Stoke City, Liverpool fans unfurled a banner across the front of the Kop stand, daubed with the first line of that song: “Let me tell you a story of a poor boy”. But the poor boy wasn’t Tommy this time; it was any one of the fans holding the banner – a reference to escalating ticket prices at Anfield. The average matchday ticket in 1990 cost £4. Now a general admission ticket can cost as much as £59.

Last Saturday’s protest was more forthright. Liverpool had announced a new pricing structure from next season, which was to raise the price of the most expensive ticket to £77. Furious Liverpool fans said this represented a tipping point. So, in the 77th minute of Saturday’s match with Sunderland, an estimated 15,000 of the 44,000 fans present walked out. As they walked out, they chanted at the club’s owners: “You greedy bastards, enough is enough”.

The protest was triggered by the proposed price increase for next season, but the context stretches back over 20 years. In 1992, the top 22 clubs from the 92-club Football League broke away, establishing commercial independence. This enabled English football’s elite clubs to sign their own lucrative deal licensing television rights to Rupert Murdoch’s struggling satellite broadcaster, Sky.

The original TV deal gave the Premier League £191 million over five years. Last year, Sky and BT agreed to pay a combined total of £5.14 billion for just three more years of domestic coverage. The league is also televised in 212 territories worldwide, with a total audience of 4.7 billion. English football, not so long ago a pariah sport in polite society, is now a globalised mega-industry. Fanbases are enormous: Liverpool may only crowd 45,000 fans into its stadium on matchday, but it boasts nearly 600 million fans across the globe.

The matchgoing football fan has benefited from much of this boom. Higher revenues have meant that English teams have played host to many of the best players from all over the world. But the transformation of local institutions with geographic support into global commercial powerhouses with dizzying arrays of sponsorship partners (Manchester United has an ‘Official Global Noodle Partner’) has encouraged clubs to hike up prices for stadium admission as revenues have increased.

Many hoped that the scale of the most recent television deal would offer propitious circumstances for clubs to reduce prices for general admission to the stadium while only sacrificing a negligible portion of their overall revenues. Over a 13-month consultation period on the new ticket prices, supporter representatives put this case to Liverpool’s executives. They were ignored.

Ignored until Saturday, that is. Liverpool’s owners, a Boston-based consortium who have generally been popular on Merseyside after they won a legal battle to prize the club from its previous American owners, backed down last night in supplicatory language: they apologised for the “distress” caused by the new pricing plan, and extolled the “unique and sacred relationship between Liverpool Football Club and its supporters”.

The conflict in Liverpool between fans and club administrators has ended, at least for now, but the wail of discontent at Anfield last week was not just about prices. It was another symptom of the broader struggle to find a place for the local fan base in a globalised mega-industry.The lazy canard that football has become a business is only half-true. For the oligarchs and financiers who buy and sell top clubs, football is clearly business. But an ordinary business has free and rational consumers. Football fans are anything but rational. Once the romantic bond between fan and team has been forged, it does not vanish. If the prices rise too high, a Liverpool fan does not decide to support Everton instead.

Yet the success of the protest shows that fans retain some power. Football’s metamorphosis from a game to be played into a product to be sold is irreversible, but the fans are part of that product. When English football enthusiasts wake in the small hours in Melbourne to watch a match, part of the package on their screen is a stadium full of raucous supporters. And anyone who has ever met someone on another continent who has never travelled to the UK but is a diehard supporter of their team knows that fans in other countries see themselves as an extension of the local support, not its replacement.

English football fans should harness what power they have remaining and unite to secure a better deal for match goers. When Liverpool fans walked out on Saturday, too many supporters of other teams took it as an opportunity for partisan mockery. In football, collective action works not just on the pitch but off it too. Liverpool fans have realised that. Football fandom as a whole should take a leaf out of their book.