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Labour declares war on fat City bonuses
Last updated at 12:07pm on 25.09.06
MP Harriet Harman has called to stop "excessive, ridiculous bonuses".
A Government minister today called for huge City bonuses to be curbed.
Harriet Harman said the payouts, totalling £7billion already this year, were increasing the gulf between rich and poor.
Ms Harman won strong applause when she called for action "to stop these excessive, ridiculous bonuses".
The constitutional affairs minister, who is close to Gordon Brown, said: "Inequality matters. The big gap between those at the top and those at the bottom makes for a sick society. I do take the view that we are in the Labour Party because we don't like to see some people struggling while others are hugely rich."
Her remarks, to a fringe meeting at Labour's conference in Manchester, echoed a pledge from Denis Healey who said he wanted to tax the rich "until the pips squeak" in the Seventies. The TUC has condemned bonus levels as "obscene" and with unions making up a third of the electoral college for the deputy leadership, Ms Harman has an eye on their votes as she seeks to replace John Prescott.
One recent survey showed that 52 per cent of City staff expect a big bonus this Christmas. Most of the bonuses are used to pay off mortgages or buy second homes and are a powerful driver of the housing market.
Former home secretary Charles Clarke said that the bonuses were inevitable if the economy was doing well, but he expressed his distaste at the way in which the cash was spent. Expensive cars and plastic surgery are among the favoured items for bonus spending. "I share some of the concern at the conspicuous consumption of some of the people who get these bonuses. I think it is deplorable and dreadful," he told the meeting of the Fabian Society.
But a senior Cabinet minister was scathing about Ms Harman's remarks, dismissing them as old fashioned. One study by the Centre for Economics and Business Research found that bonuses are now at a level higher than just before the dot.com boom. Nearly 10,000 extra jobs have been created, taking the total employed in financial services to 325,000. The average salary in the City is £88,000.
Among the big winners this winter are expected to be investment bank Goldman Sachs bosses Michael Sherwood and Richard Gnodde, the firm's European investment heads. Both are set for bonuses of £10 million each.
Last year, Barclays plc president Bob Diamond won the highest bonus, worth £14.8 million. Speaking at the same meeting, City minister Ed Balls made a strong defence of the pay-outs, pointing out that they were good for tax revenues and for job creation.
He added: "If the City is doing well, the country is doing well. When it prospers, we all prosper."
Reader views (16)
Ed Balls seems to have the tail wagging the dog. Surely the principle should be...
"If the Country is doing well, the city is doing well. When it prospers, we all prosper."?
- Richard, Hatfield
If someone goes to work, works hard and puts in the hours, then why shouldn't they be rewarded for that? Why should I feel sorry for those who sit around claiming benefits because they're too lazy to get a job? I was brought up with the belief that you get out what you put in and I don't see why bonuses should be capped to narrow the cap between the "I want, and I get" type and the "I want, and I'm not prepared to do anything to get it" group.
- Ashley, London
Tell me, Harriet love, if you feel that applies to you and your comrades in the Labour party? Have you shunned grace and favour or declined the limo for a ride on the tube? Have a you ever given back any of the huge earnings you've made from your legal career?
Don't be a hypocrite, you're not fooling anybody with that out dated dogma. Get real.
- James, Essex
Get a bonus for doing a job well that you are getting paid for. Where have I been going wrong? Still, J. Prescott and friends get paid for not doing much at all. The Home Office get paid for running a lunatic asylum.
- Frederick Gann, Dubai
Harman is just playing to the voters. Labour would never really do this as it would upset their rich friends in the City, and they think they need the to keep winning elections. And yet if they did adopt these sorts of policies, it would win anyway.
- Tim H, London
But where oh where will the labour party get all it's funding from if it targets the city boys?
And how much money will Gordon lose in tax revenue if everyone in the city moves overseas?
- Jacqueline, London
I find the hypocrisy of ministers appalling. Their remuneration packages dwarf the majority of city workers. The difference is, ministers are so very efficient at spending taxpayers money if they were employed in the City where bonuses are directly linked to performance theirs would be very small.
This government continues to squeeze all the hard working taxpayers for the benefit of those who wish to sponge off the system.
- Paul William, Staines, UK
I'd feel a bit miffed if the boss was getting a fat bonus for cutting back and creating redundancies, in the guise of effeciency, particularly if your job was at risk.
- Dhanraj, Basildon
The comments miss the point. The bonus payments come out of the funds under management. If the money was applied instead to our pension funds etc the holes would not be so large.
- Tony, London
Ms Harman's proposal to curb city banker's bonuses are nothing more than a cynical ploy to curry favour with the `brothers' whom she hopes will vote for her in the forthcoming election for Deputy Leader of New, Real or Exquisite Labour.
She would be far more believable if she utilised similar enery in condemning the method by which public sector pensions are subsidised by the rest of us.
- Ted Knight, Shetland
What the article fails to recognise is that it's only around 2% of the employees on an investment bank that get 50% of the bonus pool! The big bonues are a great way of motivating the miniuns at the bottom.
- Anon, London
The Poll showing over 44% of people supporting a cap on bonus' shows incredible naievity. All this will do is drive talent out of London and remuneration offshore. Everyone loses, especially the Inland Revenue...
- James Ritchie, London, UK.
The dangerous politics of envy from a bunch of dinosaurs. It would be interesting to know how Ms. Harman would define "too much" - and why focus on city bonuses only? What about sportsmen, lottery winners, or even politicians getting large advances for writing books or their spouses for speaking engagements; and as for Charles Clarke, I suppose it is OK for footballers or TV presenters to be paid in the millions and buy fast cars but not OK for hard working city bankers? These labour politicians live in a fantasy universe not the real world.
- Richard, London UK
It's refreshing to see a return of the good old Labour 'us and them' class warfare attitude.
- Richard, London
I notice Harman doesn't extend this notion to footballers. Maybe that would prove unpopluar with the voters as players would move abroad if their pay was capped. It's just another soundbite, and another ill-conceived idea (no surprise there then)
- Dan, Manchester
Envy politics rears it head again. If these guys get big bonuses they will have big tax bills. Perhaps we should ban ex-ministers from taking up directorships when they leave office.
- Amanda, St. Albans, UK
