If there’s ever been any doubt about quite how big Britain’s banking sector is, the news this week that we have three times as many high earners as the rest of the EU put together should put that doubt to rest. According to the European Banking Association’s report on high earners (those earning more than €1 million a year), in 2011 Britain had 2,436, slightly down on 2010.
Comment has generally fallen into two loose camps: those bemoaning the wanton decadence of such levels of pay, a sore point given the origins of recent economic stagnation, and those who see the report as the cynical stockpiling of munitions for an assault on London’s financial fortress.
Aside from the justified but trite debate on bankers’ bonuses, those actually reading the report will notice how the number of high earners fell from 2010 to 2011 and how average total remuneration per person dropped by 40 per cent, from €2.3 million to €1.4 million. This may well be due to bankers frontloading compensation to avoid the 50p tax rate introduced in 2010/11, and also due to falling profits.
British bankers have learnt to seem humble about bonuses, even if it’s not always convincing. Stephen Hester’s claim that his parents think he earns too much shows distance, not humility, and Bob Diamond seems only partially right in saying: ‘This is going to sound arrogant as hell, but I never did anything for money.’
Even if you consider this outsize remuneration situation a disgrace, be wary before you join our European cousins in supporting a twice-salary bonus cap: bonuses can work. Their competitive element and reward for individual success can, in a properly regulated system, spur profit. The EU would stunt this system, rewarding mediocrity and failure through flat salaries. These endorse indolence not enterprise. The same green eyed emotion motivating High Earners is embittering their critics.
Politicians make headway through headlines; looking to bring the financial services down a peg or two in the envious eyes of those outside the gilded ivory tower will receive acclaim but won’t develop the debate.
This piece first appeared in Spear's Magazine.
Alex Matchett is a writer for Spear's.