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The latest outrageous splurge of bonuses for bankers shows that politics in this country has got to change.
The majority of people in Britain are being hit by the worst economic situation in our lifetimes, while those who caused the problem - the bankers - continue to rake in the rewards.
It is little over a year since the financial system descended into crisis. But now banking giant Goldman Sachs is set to pay a recordbreaking £14 billion in bonuses - the highest in its history.
The average bonus payment is estimated to be £500,000. Four-fifths of City workers expect their bonuses to be the same as last year or larger.
Yet the only reason any bank at all is making money is due to taxpayers' direct and indirect subsidies here and abroad. The financial sector was saved by money we stumped up.
Banks now benefit from a subsidy that the miners could only have dreamed of. The gluttony of the latest bonuses is not justified.
Goldman Sachs may not have been nationalised in the United States but that makes no difference to the fact that it and every other bank benefits from a virtuous circle that we pay for and have created.
The banks can make money only because of being able to borrow at ultra-low interest rates and then lend at higher ones.
Liquidity exists because of what the state has pumped into the economy. Yet still too little reaches those who need it most, such as the companies that need to borrow.
And many institutions that banks such as Goldman Sachs do business with are solvent in the first place only because of the taxpayer.
Without public support for the banking sector, Goldman would have gone bankrupt with all the others.
Unfortunately, political debate is focused not on how to revive the economy but instead on what should be cut from public spending.
The public finances have deteriorated because tax revenues have fallen with output, profits and employment, alongside those immense sums transferred from taxpayers to bank shareholders.
The Government must break out of this trap. Spending cuts would reduce demand in the economy and worsen the impact of the recession.
The political course that has been adopted in London since the recession began, where the Mayor has been a constant voice for the most privileged and a defender of the worst of "masters of the universe" bankers, banging the drum for hedge funds and insisting that the rich should pay no more tax, is exactly wrong.
When George Osborne, Boris Johnson and co insist that spending is slashed, that people work longer but their pay is frozen and their fares must rise, we ought to contrast it with the generous subsidy handed to the bankers that is turned into bonuses and payments to shareholders.
What the economy needs now is to raise investment and increase growth.
The banks we have bailed out must be instructed to lend to people and businesses. We must invest in those parts of the economy that have collapsed, like building new homes.
And instead of imploring bankers to throw a few crumbs from their table, we need fair taxation of the highest incomes so that low and middle-income earners do not shoulder the burden of paying for a situation they did not create.
Reader views (12)
Ken blames the bankers an envies their bonuses but they are the driving force behind the recovery he wants. It was the governments lax monetary policy that led to the financial meltdown as the banks could borrow at such cheap rates. ken's suggestion that we spend more money we don't have is typical bonehead economics from a bonehead.
- Rob Alkin, London
I see good old Red Kenny is on his champagne socialist soap box yet again, he mentions nothing of the fact he is a millionaire himself, or his high fee's charged for giving after dinner speches etc, etc.
Champagne socialist don't you just love em.
- P Staker, London.
One of the few things Ken is spot on. Some of this big money should go to Londoners. Banks could do more than just make huge profits for themselves.
- Edwin Underhill, beaconsfield bucks
The Government should withdraw the £180Bn long term subsidy that it paid to the Banks that had been close to receivership, and grant the same status to TFL. Bringing back vibrancy to industrial hegemony for getting London back to work. Though would sound the death knell to the poiticians that are looking to set up World Gov - World Bank and their employment rights after the next election.
- Bill, Hay~Heath UK
Red Ken talking rubbish again? He created the wasteful monster called City Hall. What exactly does this useless lot do? Collect tax and waste the money? London worked just fine before Livingstone started taxing Londoners to employ his apparatchik friends. The inefficient TFL and black hole Tube are classic examples of badly run monopoly businesses which just jack up prices with impunity. Goldman Sachs pays billions in tax to HM Government as do the employees, where exactly does Livingstone think the profits at GS should go? Levy 100% tax? Really ? Does he imagine that the people who used their skills to make this money will work for nothing? If it was so easy to make this money then everyone would be at it and profits would vanish, fast! One thing for sure is that the markets are brutally competitive and move with almost instant speed to close pricing anomalies, unlike City Hall!! The useless High Street banks are the problem, they got taxpayer money not GS, they are the ones sitting on their hands and taxpayer money failing to support businesses needing funding. The politics of envy will not improve matters or boost the economy.
- James Macleod Ritchie, Oyster Bay Cove
Richard,
See my post below. If you're on Ken with this one, please give me some idea as to how much more above the figures I have quoted should go into the Treasury coffers above the 60% HM Gov will get next year?
The banks, if the don't move abroad, could choose not to pay out these large sums to the employees and have them taxed at the Corporation Tax rate of 30%, which as you can see is substantially below the 48.552% HM Gov is already getting and half of what they will get next year. In addition to this the moneys retained by the companies will likely be paid out to their shareholders, many of which, probably the majority, are overseas.
You do the math!
- Mark, South-East London
Im with ken on this ..im not with him on much ,but this i am,
- Richard, LONDON
Yes, any bank that takes money from the tax-payer should have to justify to whom the bonuses go. Top management that caused losses should of course not participate. But not all bonuses are paid to a minority of 'fat cats' and should still be paid, as they were contracted to be paid and no government should interfere in previously contracted arrangements.
The same goes for politicians. We have far to many people who are doing jobs that are superfluous in today's constrained circumstances. Too many fact finding trips and jaunts for minorities, too many out reach officers, and too much wasted tax payer money.
The people who were at the forefront of this policy should also be held to account and never alloed back into high office.
Wasting tax payers' mony should not be limited to just the private sector.
- Stephen Rothbart, Prague Czech Republic
This is very interesting Ken, but what i'd really like to read from you is a proper analysis of the mess Boris has made of city hall's finances and his latest outrageous fare rises.
- Kev, Bromley
If £14B is available in this one bank for bonuses 48.552% of this will get into the HM Trasury coffers immediately; this figure will rise to about 60% next tax year.
Excepting than Oil what other UK industry pumps these kinds of sums into the treasury, year on year?
Personally I think they are paying enough and bankers are just easy targets for current and ex-politicians who have fritted away unimaginable sums on failed or failing policies and who afterall didn't care less what the banking sector were doing as long as the cash rolled in.
- Mark, South-East London
I am not nor ever have been a banker or worked in that industry but I have studied the industry and the past two years to know that Ken is talking a load of Twaddle re Goldman Sacks - I dont like them much either but get your facts right Ken before waffling on like you have done.
Other Banks deserve your critisism but not GS - Sadly for your opinion it is one of the two investment banks that did not and would not have gone broke and they have paid back the money they were compelled to take by the Fed.
The system is not very good but its the only one that works world wide.
Ken's views would carry more weight if he did better research and got his facts right ...
.... he sounds no better than many of the Bankers .... which is why he got thrown out of city hall
- Rodney Bentham-Wood, london
Well Ken for the first time in my life I agree with you
- T.Nicholson, Bedale, UK
