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20 July 2011

Bank bonuses make a mockery of the Tories’ rhetoric

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

By George Eaton

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.

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We’re not all in this together

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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.