This opinion may differ from the vast majority of taxpayers in this country, according to national news.
I look at events regarding economics avidly, and so I’m posting my opinion based on common sense and general observations.
Over the last few weeks, the issue of Bankers’ bonuses has hit the headlines yet again. Headline figures were banded about “£5bn Barclay’s bonuses”, “£1bn RBS bonus bonanza”, “£2bn bonus for Lloyds chief”. These headlines put words into the mouths of the greater public, generating anger and frustration and causing general upset.
It is understandable that the public is upset by these bonuses, after HM Treasury (i.e. UK Taxpayers) ‘bailed out’ both RBS and Lloyds Banking. The Government purchased shares in both companies as a way of cash injection (‘bail out’), which amounted to billions of pounds.
I feel that it is rather unfair to bring Barclay’s into this argument, although they are in the banking sector, as they did not require a government bailout. I felt rather embarrassed when Bob Diamond, Chief Executive of Barclays was brought in front of a House of Commons select committee, to be asked, “Will you accept your bonus” by a Labour MP. Frankly, Barclays is a private institution – so what they pay their employees is irrelevant (as long as above minimum-wage). Mr Diamond answered pragmatically “I’ll take this decision with my family”. He turned down bonuses in the two years previous to this, so it is only right that he accepts this, as he is legally entitled.
There has been a lot said about bankers’ bonuses by this government, but little done. Vince Cable called for “restraint” (bearing in mind that during his campaign he said he would “limit cash bonuses to £2,500) with regard to bonuses, whilst also calling on banks to lend to small businesses. I do agree with Cable when he calls for lending to increase to small businesses, but I feel that it hypocrisy on behalf of the government – given the stick that banks’ got for irresponsible lending. I hear you say that lending to small businesses is not irresponsible – but in the eyes of the banks, it is: there is often very little collateral that these businesses can offer against such loans.
David Cameron also let off a bit of steam regarding bankers’ bonuses, but nowhere near as heavy-handed as what he suggested in previous speeches before taking office. David Cameron and co. have most probably seen a bit sense.
It would be naive (I believe) to suggest that bankers’ bonuses should be limited to (as the Liberals suggest) £2,500.
Limiting bonuses to this level would completely disinterest bankers. I hear you shout at me “GOOD”! However, it really isn’t.
- Bankers will flee to countries not suppressing bankers’ bonuses – the UK relies on the Financial Services sector far too much to allow this to happen. There is no real obligation for the major banks to have their head office in London/Edinburgh.
- The government collects tax on such bonuses. You could say to stop/limit a bonus so much is robbing Peter to pay Paul – many of these bankers’ bonuses will be filtered down into the local economy.
- HM Treasury own very large stakes in two of the world’s biggest banks – Royal Bank of Scotland (~80%) and Lloyds Banking Group (~40%). To impose such rules on the banks could see the share prices drop in fear of the best bankers leaving. This would cost the Government big time.
It was interesting the other day to hear the Chairman of RBS publicly state, “star bonuses were filtering down to non-star employees”. This just added more ammo to the public to be angry about and also politicians too. I guess it’s his job to make sure this doesn’t happen. Lets face it, I’m sure there are a lot of applicants up for such a job (and pay packet)!
I’m of the firm belief that if a banker (or a salesman for that matter) performs well in his job they should get a bonus – in proportion to their performance.
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