The unsqueezed top: how bankers' pay has already returned to its peak

The new report from the Parliamentary Commission on Banking Standards busts the myth that pay has fallen since the crash.

One of the many myths busted by today's report from the Parliamentary Commission on Banking Standards is that bankers' pay has fallen significantly since the crash. In his testimony to the inquiry, George Osborne noted estimates that the total City bonus pool fell from from £11.5bn in 2006 to £1.5bn in 2013, while Anthony Browne, the head of the British Bankers Association, pointed out that since 2007, cash bonuses are down 77 per cent and the total bonus pool has more than halved.

But what neither mentioned is that bankers have compensated themselves by simply claiming higher basic salaries. As the report notes, total remuneration across RBS, Lloyds, HSBC and Barclays has remained relatively stable. Indeed, since staff numbers have fallen significantly, per-capita remuneration has actually increased. As the graph below shows, pay at most banks has already returned to or exceeded its pre-crisis level. 

The report rightly goes on to argue: 

Public anger about high pay in banking should not be dismissed as petty jealousy or ignorance of the operation of the free market. Rewards have been paid for failure. They are unjustified. Although the banks and those who speak for them are keen to present evidence that bonuses have fallen, fixed pay has risen, offsetting some of the effect of this fall. The result is that overall levels of remuneration in banking have largely been maintained. Aggregate pay levels of senior bankers have also been unjustified. Given the performance of the banks, these levels of pay have produced excessive costs. Indeed, at a time of pay restraint in the public and private sectors, they will raise significant anger amongst taxpayers who have been required to subsidise these banks. These elevated levels of remuneration are particularly unacceptable when banks are complaining of an inability to lend owing to the need to preserve capital and are also attempting to justify rises in charges for consumers.
But while the bankers have already recovered all the losses from the crisis, average household incomes are not expected to return to their pre-recession level until 2023 (£22,000 in real terms). Another timely reminder, then, that we're not "all in this together". 
Total pay at RBS and the other three main banks has already returned to its pre-recession peak. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Show Hide image

Leader: Mourning in Manchester

Yet another attack shows we are going to have to get to used to the idea that our liberalism and our freedoms can only be preserved by a strong state.

Children are murdered and maimed by a suicide bomber as they are leaving a pop concert in Manchester. As a consequence, the government raises the terror threat to “critical”, which implies that another attack is imminent, and the army is sent out on to the streets of our cities in an attempt to reassure and encourage all good citizens to carry on as normal. The general election campaign is suspended. Islamic State gleefully denounces the murdered and wounded as “crusaders” and “polytheists”.

Meanwhile, the usual questions are asked, as they are after each new Islamist terrorist atrocity. Why do they hate us so much? Have they no conscience or pity or sense of fellow feeling? We hear, too, the same platitudes: there is more that unites us than divides us, and so on. And so we wait for the next attack on innocent civilians, the next assault on the free and open society, the next demonstration that Islamism is the world’s most malignant and dangerous ideology.

The truth of the matter is that the Manchester suicide bomber, Salman Ramadan Abedi, was born and educated in Britain. He was 22 when he chose to end his own life. He had grown up among us: indeed, like the London bombers of 7 July 2005, you could call him, however reluctantly, one of us. The son of Libyan refugees, he supported Manchester United, studied business management at Salford University and worshipped at Didsbury Mosque. Yet he hated this country and its people so viscerally that he was prepared to blow himself up in an attempt to murder and wound as many of his fellow citizens as possible.

The Manchester massacre was an act of nihilism by a wicked man. It was also sadly inevitable. “The bomb was,” writes the Mancunian cultural commentator Stuart Maconie on page 26, “as far as we can guess, an attack on the fans of a young American woman and entertainer, on the frivolousness and foolishness and fun of young girlhood, on lipstick and dressing up and dancing, on ‘boyfs’ and ‘bezzies’ and all the other freedoms that so enrage the fanatics and contradict their idiot dogmas. Hatred of women is a smouldering core of their wider, deeper loathing for us. But to single out children feels like a new low of wickedness.”

We understand the geopolitical context for the atrocity. IS is under assault and in retreat in its former strongholds of Mosul and Raqqa. Instead of urging recruits to migrate to the “caliphate”, IS has been urging its sympathisers and operatives in Europe to carry out attacks in their countries of residence. As our contributing writer and terrorism expert, Shiraz Maher, explains on page 22, these attacks are considered to be acts of revenge by the foot soldiers and fellow-travellers of the caliphate. There have been Western interventions in Muslim lands and so, in their view, all civilians in Western countries are legitimate targets for retaliatory violence.

An ever-present threat of terrorism is the new reality of our lives in Europe. If these zealots can murder children at an Ariana Grande concert in Manchester, there is no action that they would not consider unconscionable. And in this country there are many thousands – perhaps even tens of thousands – who are in thrall to Islamist ideology. “Terror makes the new future possible,” the American Don DeLillo wrote in his novel Mao II, long before the al-Qaeda attacks of 11 September 2001. The main work of terrorists “involves mid-air explosions and crumbled buildings. This is the new tragic narrative.”

Immediately after the Paris attacks in November 2015, John Gray reminded us in these pages of how “peaceful coexistence is not the default condition of modern humankind”. We are going to have to get used to the idea that our liberalism and our freedoms can only be preserved by a strong state. “The progressive narrative in which freedom is advancing throughout the world has left liberal societies unaware of their fragility,” John Gray wrote. Liberals may not like it, but a strong state is the precondition of any civilised social order. Certain cherished freedoms may have to be compromised. This is the new tragic narrative.

This article first appeared in the 25 May 2017 issue of the New Statesman, Why Islamic State targets Britain

0800 7318496