Bad politics, baffling diplomacy - Osborne's stance on bank bonuses

The government's posturing is about little more than saying enough to keep the eurosceptics quiet.

Of all the unpopular causes to take up, defending bank bonuses must rank pretty high up the list. That still applies even if it is the EU, rather than the House of Commons, doing the legislating.

But that doesn't seem to have deterred David Cameron. Yesterday George Osborne stood alone in opposition to a deal that could make the European banking sector safer and more transparent and which contains a number of major reforms actively pushed by the UK.
 
First, a disclaimer. The Capital Requirements legislation is not really about bonuses or bankers' pay. Instead, it focuses on increasing the amount of core capital banks must hold on their balance sheet. A lack of sufficient good quality capital combined with a liquidity crisis when the money markets seized up, were the two main causes of the 2007-9 banking crisis. More than five years on, the European and US economies are still yet to recover.
 
Increasing the minimum levels of capital to be held on their balance sheets and establishing rules to control leverage ratios will bring more safety to the banking sector. Moreover, the introduction of country-by-country reporting, which will require European banks to disclose how much tax they pay is another welcome breakthrough that will increase transparency and rebuild public trust in the banking sector. Like the country-by-country reporting, new rules on bank pay were among the baubles added to the tree.
 
The provisions on bonus payments are among the most complicated parts of an already highly technical piece of law. This strict 1:1 cap will be the norm but banks will be able to pay bonuses worth double salary on a majority vote among shareholders. Meanwhile, with up to 25 per cent of the bonus able to be made in deferred bonds or securities there is scope to spread out payments or make them dependent on long-term performance.
 
What I suspect is that the government's posturing is about little more than saying enough to keep the eurosceptics quiet. Boris Johnson, who has been consistent and vocal in his opposition to the regulation, quickly denounced the agreement as "self-defeating" and "deluded". The Prime Minister, correctly guessing that Thursday's by-election might lead to more questions about his leadership and the threat from UKIP, chose to add his two penn'orth.
 
But it is difficult to take the government's opposition at face value. First of all, this is not a case of Britain vs Europe. There have been a glut of EU laws regulating different parts of the financial sector since the financial crisis - short selling, the derivatives market, hedge funds and insurance just to name a few. Guess how many times Britain has been outvoted in the Council of Ministers by those perfidious foreigners? Zero, nada, zilch - it hasn't happened since the last European elections in 2009.
 
For all the hyperbole likely to dominate the pages of Conservative Home and the right-wing press, the British government has not been marginalised in the negotiations on CRD IV. On the contrary, it has led them and, indeed, wanted to go further than the European Commission on the level of core capital that banks should be required to hold. While it is true that the British government had expressed reservations about the bonus cap, a government official I spoke with described CRD IV as "a crucially important piece of legislation".
 
The same is true in the European Parliament. Liberal Democrat MEP Sharon Bowles and Conservative Vicky Ford, who were part of the Parliament's six-member negotiating team, both spoke favourably of the agreement at a press conference on Thursday last week. One of the Parliament's most vocal critics of the City, Green MEP Philippe Lamberts, another member of the Parliament's negotiating team, said that he had "felt like a Briton" on "most topics" covered by the legislation.
 
Ford went further, saying that the public "need to know how much banks are paying in tax". Referring to the exemption allowing bonuses to be paid in long-dated bonds or securities, she added that "the long-dated pay element should be examined before they (bankers) start screaming".
 
Besides, rules on bank pay should hardly be controversial at a time when pay levels in both the public and private sector are being tightly controlled. The Independent was among those arguing last week that politicians should not legislate on private sector pay. This might hold water if the banking sector had shown an iota of willingness to self-regulate to curb excessive pay. They have not, and too many top banking executives are still receiving multi-million pound rewards for presiding over multi-million or billion pound losses.
 
There is precious little the government can do to block a cap and they know it. The Irish government, which currently holds the six month rotating presidency of the Council of Ministers, would not have offered the compromise unless it was confident that all governments would sign up to it. For its part, the Parliament, which has given up tighter rules on bank leverage ratios in exchange for the bonus cap, will not want to unpick a painstakingly reached agreement and wants the symbolic victory of the bonus cap. Although other countries are anxious for Britain to vote in favour, the bill will be adopted by a qualified majority by ministers and the European Parliament, so there is no scope for a veto.
 
By promising to hold an 'in/out' referendum early in the next Parliament, Cameron is already running a high risk strategy on Europe. If he wants other countries to look kindly on the prospect of giving more opt-outs and exemptions to Britain then he needs allies and he needs to pick his battles wisely. Holding up vitally important legislation on bank capital for the sake of a losing battle on behalf of a few thousand multi-millionaires in the Square Mile is not just bad politics, but bad economics too.
 
Ben Fox is a reporter for EU Observer. He writes in a personal capacity
Chancellor George Osborne is pictured prior to an Economic and Financial Affairs Council on March 5, 2013 at the EU headquarters in Brussels. Photograph: Getty Images.
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Meet Anne Marie Waters - the Ukip politician too extreme for Nigel Farage

In January 2016, Waters launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). 

There are few people in British political life who can be attacked from the left by Nigel Farage. Yet that is where Anne Marie Waters has found herself. And by the end of September she could well be the new leader of Ukip, a party almost synonymous with its beer-swilling, chain-smoking former leader.

Waters’s political journey is a curious one. She started out on the political left, but like Oswald Mosley before her, has since veered dramatically to the right. That, however, is where the similarities end. Waters is Irish, agnostic, a lesbian and a self-proclaimed feminist.

But it is her politics – rather than who she is – that have caused a stir among Ukip’s old guard. Former leader Paul Nuttall has said that her views make him “uncomfortable” while Farage has claimed Ukip is “finished” if, under her leadership, it becomes an anti-Islam party.

In her rhetoric, Waters echoes groups such as the English Defence League (EDL) and Britain First. She has called Islam “evil” and her leadership manifesto claims that the religion has turned Britain into a “fearful and censorious society”. Waters wants the banning of the burqa, the closure of all sharia councils and a temporary freeze on all immigration.

She started life in Dublin before moving to Germany in her teens to work as an au pair. Waters also lived in the Netherlands before returning to Britain to study journalism at Nottingham Trent University, graduating in 2003. She subsequently gained a second degree in law. It was then, she says, that she first learnt about Islam, which she claims treats women “like absolute dirt”. Now 39, Waters is a full-time campaigner who lives in Essex with her two dogs and her partner who is an accountant.

Waters’s first spell of serious activism was with the campaign group One Law for All, a secularist organisation fronted by the Iranian feminist and human rights activist Maryam Namazie. Waters resigned in November 2013 after four years with the organisation. According to Namazie, Waters left due to political disagreements over whether the group should collaborate with members of far-right groups.

In April 2014, Waters founded Sharia Watch UK and, in January 2016, she launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). The group was established as a British chapter of the German-based organisation and was set up to counter what it called the “Islamisation of our countries”. By the summer of 2016, it had petered out.

Waters twice stood unsuccessfully to become a Labour parliamentary candidate. Today, she says she could not back Labour due to its “betrayal of women” and “betrayal of the country” over Islam. After joining Ukip in 2014, she first ran for political office in the Lambeth council election, where she finished in ninth place. At the 2015 general election, Waters stood as the party’s candidate in Lewisham East, finishing third with 9.1 per cent of the vote. She was chosen to stand again in the 2016 London Assembly elections but was deselected after her role in Pegida UK became public. Waters was also prevented from standing in Lewisham East at the 2017 general election after Ukip’s then-leader Nuttall publicly intervened.

The current favourite of the 11 candidates standing to succeed Nuttall is deputy leader Peter Whittle, with Waters in second. Some had hoped the party’s top brass would ban her from standing but last week its national executive approved her campaign.

Due to an expected low turnout, the leadership contest is unpredictable. Last November, Nuttall was elected with just 9,622 votes. More than 1,000 new members reportedly joined Ukip in a two-week period earlier this year, prompting fears of far-right entryism.

Mike Hookem MEP has resigned as Ukip’s deputy whip over Waters’ candidacy, saying he would not “turn a blind eye” to extremism. By contrast, chief whip, MEP Stuart Agnew, is a supporter and has likened her to Joan of Arc. Waters is also working closely on her campaign with Jack Buckby, a former BNP activist and one of the few candidates to run against Labour in the by-election for Jo Cox’s former seat of Batley and Spen. Robinson is another backer.

Peculiarly for someone running to be the leader of a party, Waters does not appear to relish public attention. “I’m not a limelight person,” she recently told the Times. “I don’t like being phoned all the time.”

The journalist Jamie Bartlett, who was invited to the initial launch of Pegida UK in Luton in 2015, said of Waters: “She failed to remember the date of the demo. Her head lolled, her words were slurred, and she appeared to almost fall asleep while Tommy [Robinson] was speaking. After 10 minutes it all ground to an uneasy halt.”

In an age when authenticity is everything, it would be a mistake to underestimate yet another unconventional politician. But perhaps British Muslims shouldn’t panic about Anne Marie Waters just yet.

James Bloodworth is editor of Left Foot Forward

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear