The Staggers

The New Statesman’s rolling politics blog

Bank bonuses make a mockery of the Tories' rhetoric

Payments hit £14bn despite the coalition's pledge to block "unacceptable bonuses".

By George Eaton Published 20 July 2011 18:57

We've already highlighted five stories that slipped under the radar this week as the phone hacking scandal gathered pace. Here's another one: figures from the ONS show that bank bonuses totalled £14bn this year, unchanged from the previous year and higher than the 2008-09 figure of £12 billion. Significantly, the bonus pool is now 58 per cent higher than in 2000-01. Banks and insurance companies paid 40 per cent of all bonuses despite employing only 4 per cent of the workforce.

It's further evidence of the gap between the Tories' tough rhetoric in opposition and their inaction in power. In 2009, George Osborne called for a ban on bonuses at banks that had received any sort of government guarantee. He told the Guardian:

It is totally unacceptable for bank bonuses to be paid on the back of taxpayer guarantees ... It must stop.

He later promised to block all cash bonuses over £2,000. Even the coalition agreement pledged to tackle "unacceptable bonuses in the financial services sector". But the government allowed Barclays chief executive Bob Diamond to receive a bonus of £6.5m and Stephen Hester, head of the 83 per cent state-owned RBS, to receive a bonus of £2m.

We're not all in this together

Bank bonuses are 58 per cent higher than in 2000-1. Source:ONS

Remarkably, as Will Straw points out at Left Foot Forward, the bonuses paid out by nationalised banks exceeded those paid out to every public sector worker in the country. The public sector, which employs 22 per cent of the workforce, accounted for 1.5 per cent of all bonus payments. But the publicly owned banks, which employ just 1 per cent of the workforce, accounted for 1.6 per cent. It's yet more evidence that, contrary to George Osborne, we are not all in this together.

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28 comments

Thu, 2011-07-21 00:06 — Fergus Pickering (not verified)

Remind me what rhe proper Government of the Progressive Left did about this. Oh, but we've never had a proper Government of the progressive Left, have we? Why is that? Doesn't get any votes? And why would that be?

Thu, 2011-07-21 01:10 — CliveWolfe (not verified)

Hum... not the only ones to get big payouts eh?... Former Unite boss Derek Simpson for example.

Fri, 2011-07-22 07:38 — Luddite (not verified)

The left has taken to attacking the banks for their greed and reckless lending, but it was Gordon Brown himself that set-up the disastrous system by which the banks regulated themselves which in turn left the country with a gigantic financial headache.

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Thu, 2011-07-21 07:29 — Luddite (not verified)

Please remind me actually what did Mr Brown do to curtail obscene bankers bonuses?

Thu, 2011-07-21 08:30 — Craig (not verified)

He said something like 'I'm going to curtail banker's bonuses.' Looked a bit angry, dropped his jaw and that was about it.

Thu, 2011-07-21 09:04 — matthew fox (not verified)

It looks like Luddite and Craig forget Labour levied a bonus tax on bankers bonuses.

The tax raised billions of pounds in revenue, but for some reason, Osborne preferred to go easy on them.

Luddite being Luddite fails on grand scale when it comes to detail.

Sat, 2011-07-23 11:45 — Ivan White

During Gordon Brown's time in government, three million more jobs were created for "hard working people". Under this evil government, with its ideological hatred of the public sector, millions will no doubt lose their jobs. What will that do for anyone's "hopes and aspirations"?

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Sat, 2011-07-23 11:56 — Indu Pendent (not verified)

@foxy
Interesting point of view. I think the tax on bankers should not be a tax for the sake of it - what does the tax seek to achieve?

Do you think it will be enough to clear the massive increase in national debt acruing under the last government?

Do you think the £350Bn borrowed before 2008 qualifies as a 'massive' debt or is that just a small trifle UK working families can easily afford?

Sat, 2011-07-23 12:10 — Indu Pendent (not verified)

@Ivan
The jobs were absolutley not created by UK Industry which shrank under Gordon Brown.

The public sector grew by 1 million jobs which the country does not generate enough money to pay for.

I guess the remaining 2 million jobs were created in shops selling chinese imports.

Fri, 2011-07-22 11:38 — matthew fox (not verified)

@ Luddite

You asked for clarification and you got it Luddite, if you don't like the answer, tough.

@ Mr Danger

It was a one-off, because Labour thought the Bankers would have the brains not to go there, but they did.

Labour recently proposed another Bonus tax, which was totally ignored by Clegg and Cameron.

Sat, 2011-07-23 12:58 — Luddite (not verified)

Ivan White those 3 million new jobs you talk about, created very little wealth most where nothing more than government financed job creation schemes. All well and good when the country could afford them. Labour proved disastrous for manufacturing. Labour's appalling open door immigration policy drove down wages and kept millions on state benefits. You talk about evil, this 'EVIL' coalition government has done more for the hard working poor than 'wonderful' Labour ever did. MATE!!

Thu, 2011-07-21 13:13 — Pat (not verified)

@Fergus
1945, 1964, 1966, 1974 (twice) - all left of centre progressive governments (at least by today's standards), two of which elected by landslide.
@Luddite et al
Is this the line from CCO this morning? Pity it doesn't reflect reality (bonus tax etc).

Thu, 2011-07-21 16:08 — p j wall (not verified)

@Clive wolfe Grow up!! how is a 500 grand one of payment to an ex union rep comparable to billions paid to these useless parasites every year!!, and simpson was silly to take it, but to compare the two is so typical of a right wing tory tool!!!, go and have a good tug over a picture of thatcher!!!!.

Sat, 2011-07-23 17:15 — matthew fox (not verified)

Gideon Osborne borrowed £14 Billion for Jun 2011, and in the first two years of this Government, it will have borrowed £300 Billion.

Strange how these facts miss Indu Pendent.

It seems Mr Danger is outraged that people earning over £150,000 are taxed at the 50p rate.

Sat, 2011-07-23 19:10 — Indu Pendent (not verified)

@matt
Foxy, head stuck?

Its terrible the amount of borrowing the coalition is making. They need to tighten public spending a lot more. Labour's deficit reduction plan is to borrow £250Bn more than the coalition. Do you condone that?

The state is our servant and taxes should serve a purpose. The 50% tax is supported if it contributes to the economy more than it burdens it.

When Thatcher cut the 85% tax rate, the result was that tax revenues increased substantially.

The divide between rich and poor grew at its fastest rate in a generation over the term of the last government. e.g. cutting the Tories the 10 pence tax was one of the least progressive acts ever done by any UK government in modern times.

Thu, 2011-07-21 20:02 — Maria111

The root of the evil:
"Give me control of a nation's money and I care not who makes it's laws"

Sat, 2011-07-23 20:28 — matthew fox (not verified)

@ Indu Pendent

My head isn't big enough to get stuck, then again, your head is bigger then Birkenhead.

If it so terrible, why have you failed to mention so, when the figures where released on Thursday, do you work 48 hours behind everyone else.

I notice you haven't mentioned the government have borrowed more this June when compared to June 10, why is that ?

Indu Pendent again fails to mention Mrs T raised VAT and National Insurance contributions, blew hundreds of billions of North Sea Oil Revenue and borrowed like there was no tomorrow, I wonder why he runs away from these facts.

Between 1980 and 1985, North Sea Oil Revenues accounted for 15% of total government revenues. Just think Indu Pendent, all that free money and nothing to show for it.

The most regressive act ever done by any UK Government, was the 17.5% Vat levied on electricity and gas under John Major.

History shows us that Gordon Brown cut that rate to 5%.

Fri, 2011-07-22 17:39 — Mr Danger

You can propose any kind of silliness in opposition. Do you really think that corporations can pay 50% taxes on bonuses and then pay another 25% on whatever income is left over (and then what income is dividended out is again taxed)? And meanwhile the employee whose bonus was already taxed 50% pays another 50% tax on the half that he received?

You think this is a sensible, sustainable tax policy?

Now tell me again - what is the point of the tax?

1. To increase the budget deficit
2. To drive high earners out of the UK
3. To damage state owned banks
4. To make class hatred a cornerstone of financial sector regulation

Which is it?

Mon, 2011-07-25 07:53 — Luddite (not verified)

Indu Pendent, the appalling truth is you are right... working people do better under a right of centre government than a left of centre government. Why is that? It's also true to say Thatcher started welfare dependency with a disastrous assault on manufacturing and the Unions, but Labour had 13 prosperous years to change that, but failed to do so..

Thu, 2011-07-21 22:31 — basher (not verified)

p j wall said - "go and have a good tug over a picture of thatcher!!!!."

Not often I 'lol', but I actually did for real when I read that!:)

Thu, 2011-07-21 23:41 — Mr Danger

"The tax raised billions of pounds in revenue, but for some reason, Osborne preferred to go easy on them.

Luddite being Luddite fails on grand scale when it comes to detail."

Yet it was a one-off tax that Labour had no intention of continuing. You fail on a grand scale when it comes to honesty.

But really, what is the point of any of this?

RBS workers get bigger bonuses than other public sector employees. Yes, banking pays better than other public sector industries. Try paying RBS workers £15,000 a year and see what happens to the billions we have invested in RBS when all senior staff leave for other companies. Why the left is so determined to ruin a state owned asset out of sheer spite is a mystery to me.

And lets look at the rest of the bonuses. OK, a private company pays its employees well. Taxman collects more than 50% of the proceeds, straight back into government spending. What's the alternative - lower salaries = higher bank profits = lower tax revenues (corporate tax rate half the personal tax rate). Result? Lower tax revenue, higher deficit, more workers leaving UK. Is that a success somehow?

Finally, there is this continuing obsession with bonuses. Fine, how about all bonuses are converted to salary. Bonuses are zero. Yay! But why? How is this an improvement?

Wed, 2011-07-20 19:41 — Olu Ojedokun (not verified)

Same old Tories, same old......But people are so gullible, they will probably get a bump in the polls now!

Wed, 2011-07-20 20:16 — Jack (not verified)

What's the point eh? I mean really, what's the point. Doesn't matter what the public thinks, the powers that be will do exactly what they want regardless.

Not just banks, governments and police as well. All of them.

They're blatently taking the p*** knowing that when it comes down to it, the public are powerless and they'll get away with whatever they decide.

My God how I wish I had enough money to just get me and my family out of this country, but no, they have me financially shackled to this damn place and I'll probably die here having led an unfulfilled life because of them.

Wed, 2011-07-20 21:17 — Scotty

At least this government is trying to do some regulation of the finanical sector - not like the Great Balloon's act of throwing money at them with no control or wisdom -

Wed, 2011-07-20 21:21 — mediumal57

Fortunately for thos eof us who wisely didn't give much credence to Tory rhetoric, this come as no surprise. When it comes to putting money or people first the Tories will nearly always opt for the former. They will also, unlike the Labour Party since about 1967, always try to look after their own as well.

But we live in hope that one day we might actually get a proper Government of the Progressive Left again.

Fri, 2011-07-22 22:44 — Luddite (not verified)

Gordon Brown destroyed the hopes and aspirations of millions of hard working people.