Is this the end of bonus culture?

The punishment, finally, has come.

Finally the punishment has come. After years of banker bashing, public rage and political incredulity, bankers, it seems, are ultimately being hit where it hurts – their bonuses.

The bonus cap, announced on Wednesday, comes not from the UK Government, but the EU, who seemed very pleased with the result: Othmar Karas, the European Parliament’s negotiator said: “For the first time in the history of EU financial market regulation, we will cap bankers’ bonuses”.

But banking is only one half of the story. The excessive bonus culture, inherited from the 80s, has permeated just about every financial trading institution. Hedge funds, those opaque offices of Mayfair that have given us vocabulary like “futures” and “swaps”, are also likely to have their bonuses capped. Other traders could also see regulation: asset managers, investment managers, fund managers; the list goes on. So is this the end of bonus culture?   

Probably not, no. Although financial institutions threaten to go abroad, the list of regulatory-friendly destinations is getting smaller by the day. No, it is much easier just to bypass the rules. The obvious solution is simply to raise salaries – the norm method of gaining more pay before bonuses. An increased salary will also see bigger bonuses as the EU proposed cap is fixed to salaries at a ratio of 1:1 (or 2:1 with shareholder approval).

Long term bonuses-type rewards will also be exempt from the cap. Rather than receiving the usual Christmas bonus, bankers can earn a quarter of their salary through instruments deferred for five years. Other complex structures and financial vehicles will be set up to fall outside EU powers and confound Brussels policy makers. 

Like smoking, financial institutions seem unable to quite their bonuses. Discouraged by Government, banned from public places and shamed by society, bonus baiting goes on.

Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.