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City fury at George Osborne’s bonus war on bankers
Joe Murphy and Simon English26.10.09
George Osborne faced attacks from all sides today after calling for a clampdown on big bonuses.
The shadow chancellor wants the regulators to take action to ban high street banks from giving big cash payments as rewards.
Mr Osborne said he was talking about "emergency measures this Christmas", adding: "Let's end the big cash bonuses. If there's spare cash at the bank it should be lent out to small businesses, medium businesses, to help people keep their jobs."
The Tories reckon that reining in bonuses would free about £10billion for loans. But Treasury Chief Secretary Liam Byrne mocked Mr Osborne for "wimping out", saying his proposals would "actually water down the rules we've put in place, which are now the tightest in the world".
British Bankers' Association chief executive Angela Knight, a former Tory Treasury minister, queried the omission of investment banks, adding: "The big bonus culture is not in retail banking but investment banks."
And Mr Osborne's stance infuriated bankers who warned that financiers would move abroad if they felt they were being unfairly targeted. David Buik of broking house BGC Partners said: "It is profoundly wrong. The idea is supposed to be a vote winner, but it lacks practicality. It is far too rigid if he wants London to maintain its presence at the top of the financial tree. We need a sensible bonus culture, but not this. He is completely and totally wrong."
Manoj Ladwa, senior trader at ETX Capital, said: "Mr Osborne's idea of robbing Peter to pay Paul sounds like a knee-jerk reaction to a deeper, underlying problem." A City banker who did not want to be named said: "It's all just a political game because the man on the street wants to bash bankers."
Mr Osborne was not giving a figure in a speech in Canary Wharf setting out the policy, but in the past the Conservatives have talked about a £2,000 cap with bigger bonuses being made in shares.
Labour asked why the Tory policy did not apply to investment banks, whose "casino banking" was at the heart of the credit crunch. "Is Osborne looking after his real friends in the City," asked one source.
The shadow chancellor's move pre-empts legislation expected to be unveiled by Labour next month.
Writing in today's Evening Standard, Mr Osborne says the Treasury and the Financial Services Authority already have the power to implement the ban on cash bonuses. Last week it was predicted that City bank bonuses would hit £6billion this year, up from £4billion last year, because of rising profits and less competition.
Mr Osborne told GMTV: "This is still a credit crunch, and it would be inexcusable for banks to pay out big bonuses to their staff, when there are so many businesses that need that cash." He stressed he was not talking about "people at the cash tills".
Reader views (33)
Why does apathy allow the Bankers to get large Bonuses ? Mr Brown said there was no reward for failure, now we know it was a lie.
- Stan White, leeds
It's more then McBroon and the the NoLab goons have been able to come up with.
At least it's heading in the right direction, what would you have, more of the same?
- Maxk, portsmouth, england
Mr Osborne will get my vote. I use to think that Shareholders were the owners of the Bank, or the Tax payers ? but no the Bankers are incharge and they pay themselves Millions in Bonuses. This is due to apathy with the large fund managers, I for one would like to see a dividend paid. There should be one rule No Dividend No Bonuses.
- Stan White, leeds
I think that it is inexcusable for the banks, of whatever persuasion, to continue to pay out these obscene bonuses. That money could be put to good use to furnish loans to businesses, large and small, to protect the workforce, and/or used to off-set the huge loans that we, as a country, have taken. I think President Obama's idea to tax these large bonuses at 95% is the course that we should be following. I won't be surprised to hear of banker's houses, or persons, being targeted by some of the newly unemployed from this recession.
- Chris Allen, London
George you sound like a Labour MP lets hop David Cameron can come up with someone who knows what they're talking about when the Torys win the election.....
- El Del, Valencia Spain
Simple. Nationalise the banks then the tax payer can control the wages.
- Mick, London, England
While I agree that bonuses should not be paid in cash, as there is no facility for clawback nor any shouldering of long-term responsibility, Osborne is not in a position to be doling out these declarations.
The man is a house price speculator, and his stance suggests that he is firmly in favour of inciting house price inflation. These fools seem to think that certain forms of inflation are awful, while another is delightful - and it all boils down to their making a quick buck.
- Roy, London, UK
What a fool Osborne is turning out to be. I'm no fan of Cameron either, but at least he looks up to the job he wants, Osborne plainly isn't and is only still in his Shadow Cabinet role because of his friendship with Cameron. That's no way to run a political party, let alone the country.
The choice at next year's election is looking increasingly like one bunch of lefty fools, unfit to run a whelk stall, or the other, differentiated only by the colour of their rosettes and nothing else.
- Matthew, London, UK
To Mr Opinion,
They do already have to maintain a cash reserve under MIFID and the Basel 2 accords, which is far more strigent than anything this government would impose on its own
- Steve, London
Spare Cash - Spare ??
There is no cash or any other negotiable instrument that cannot be accounted for. It belongs to those that own the business ie shareholders; and might comprise of pension and trust funds that look after four savings ( don't complain about the interest rates that’s the Governments doing).
If a bonus is given as a reward for binging a bigger profit for the banks owners and larger dividends for their funds then why complain, it’s an incentive.
But in the 'bash the bankers' ego warrior culture the general, misguided, opinion is to have a go at somebody that appears to be a totem for their troubles.
I suggest that If the Conservatives and the complainers on this thread want to make a difference they should resign where there job does not make a contribution to the economy of the nation and the remainder voluntarily take a 30% pay cut and rely on a bonus based on their contribution to make up the rest.
Oh no you wouldn’t do that because you are far to busy complaining from a position of relative financial safety !
- James, City of London
They don't get it do they? As George Soros said a few days ago, these huge profits are because the banks have been able to benefit from free money (0.5% etc)to invest/punt since the bubble popped and reduced competition. Certain sections of the Finance industry have brought about an horrific recession across the industrialised world which has left millions unemployed and struggling, people who didn't benefit from large bonuses.
- David Stephens, London
I've no problem 'in principal' with large bonuses, as I believe private companies should be able to pay their staff whatever the hell they want.
However, a great many of these banks are no longer truly private businesses now are they? Aside from the ones that were part nationalised, a great many more were propped up with very favourable loans from the taxpayers purse.
Until ALL taxpayers money has been paid back, with interest, no bank that took taxpayers money should be paying a single penny in 'bonuses' to any member of staff - all of whom would be out of work without the largess of the taxpayer.
Of course, that would never actually work without the full co-operation of both the US and the rest of Europe all agreeing to the same thing.
I'll start holding my breath for that now shall I...?
- John T, London
Simple, bring back hourly overtime at 1.5x salary, if I had fixed working hours then I'd be bringing in about double my salary at the moment as opposed to the 20% bonus I get.
- Bob, Cheam
Reading through the comments it looks like a lot of bankers took timeout of their 'busy' days to disapprove!
A politician actually talking sense for once.
I have no problem with bonuses being paid for high profits but let's face it - these profits are a drop in the ocean to what these banks have received in public funding.
Pay back what is owed to the public purse before having the cheek to ask for bonuses!
- Kong Loo, Manchester, UK
what about those banks that didnt take or have paid back all gov funding? who are these politicians to dictate how a business should reward its staff?
a to the comment from osborne that banks should lend to small businesses instead of paying bonuses...why...
why would you lend to a failing business when it can be put to good use within the bank?
have you read any of the banks recent results...trading makes money...why lend 1m to a business when a trader can run a 1m var book and produce multiples of that.
its common sense, think guys, think!!
get off your high horses...you were more than willing to take that over inflated mortgage and 0% finance furniture to put your small man syndrome at ease.
- Anon, london
If Goldman does eventually pay out in 2009 bonuses to its London-based employees what it indicated last week HM Revenue & Customs stands to pick up £2 billion of it. That is £2 billion that the goverment will not need to grab from the rest of us; and given this country’s shortfall between tax revenues and public expenditure as the recession continues, you might thinkthe general public would be grateful.
- Matt, London
oh dear Mr Osbourne. Is that the best you can come up with? How about passing a law that means banks have to have a percentage of their value held in cash reserves? This would mean they have to hold this money rather than pay it out in bonuses and it will prevent the taxpayer having to bail them out in 10 years time when they do it all again.
- Mr Opinion, London
withdraw all future funding to the banks ,that will solve the bonus problem .
- Rosalind Patrick, surrey
Hang on - any "surplus" money at the bank belongs to the savers and investors, and is not for the employees to take home for themselves. It's like me looking round my place of work for money, IT equipment and furniture and saying, thats spare I'll take it for myself. Employees have contracts and salaries. Obsorne is totally right.
- Roarke, Wembley, UK
Brown and Darling let the bankers get way with billions of bonuses and the bankers now even after the govt bail out anre atking tax papers as bonuses. The Labour supporters who comment do not want to highlight. The class warriors of Labour want the Labour govt bank with another leader. Osbourne is suggesting a way forward. We need free markets not just for Brown and Blair and for us. Labour is a deluded bunch.
- Gary S, London
Osborne always looks like a rabbit caught in the headlights. The Eton crew refer to him as an oik. He won't be chancellor. "Dave" will need someone like Letwin, where has he disappeared to btw?, if he ever fools enough voters to put the rich, public school, Bullingdon Club tossers in power over the rest of us "oiks".
- Derek Porter, United Kingdom
I just repeat the concerns of the other posters, this isn't real policy to real problems it's simply window dressing for one upmanship political reasons.
- Richard, UK
First the bankers rob us blind! Now they hold us to complete ransom! They know the Taxpayer must bail them out no matter how bad their betting games turn out.
- A Tax Slave, london
Let all these bankers depart, but Switzerland doesnt want them, they have enough bankers as it is. And I know of at least 3,000+ out of work potential bankers-in-waiting prepared to do their job at a fraction of their wage. The bonus, fat cat culture has grown out of all proportion. I'm just waiting for the second wave of this recession, when some of these banks will need a second helping of cash injection from the UKs taxpayers. Then there will be blood on the streets.
- John, london, uk
"trying to copy the Govts tough stance on Bankers bonuses" Dhan Raj, Basildon.
Tough stance ? They are just about to pay themselves 6bn of OUR MONEY in bonuses.
- Chris, Rochester
Mr Osborne said he was talking about "emergency measures this Christmas"...more like he was talking about how to gain banner headlines over Labour and incite the baying crowd. Yes, bashing the Bankers is a popular subject Mr Osborne, but will this truly help?
To make things worse he knows this...Sigh! I can hear the lemmings marching to support him…)
- Jacqui, London
Osborne is simply trying to copy the Govts tough stance on Bankers bonuses for fear of being left behind. Hope the Bankers wake up to the 2 faced Tories.
- Dhan Raj, Basildon
This is another example of opposition by Focus Group. Why not deduct ninety percent Tax at source on all bonuses, to avoid tax-dodging and let them have the money? Share deals though a good idea would lead to the use of Tax loopholes and more tax avoidance.
- D Dare, Kenton England
Are the Conservatives, becoming socialists to justify warped thinking of people’s freedoms and their lack of quality of life? Or is it that becoming the new socialist party they can justify that reasoning behind their belief that it is the EU in charge.
When are we going to get a political class that starts to trust the people, believe the people have responsibilities and recognise that personal achievement is part of a free society?
Maybe the conservatives are moving to the left, to attract the left leaning membership of the BNP. Like all of the political class they just don’t get it, people support the BNP because the other parties do not support the people, meaning they are all as bad as one and other and need a good kicking. Wake up, you are about to see a protest from the people of this country not only losing their freedoms, but the fact the political class doesn’t understand the meaning of democracy.
- Ian, Reading, England
If the bonuses were paid on profits there would be no problem - but they were paid on the illusion of profits. This nonsense has to be sorted out.
- W R Stevenson, London SE26
I think the Conservative Party are beginning to show cracks. Its leadership is beginning to think in a socialistic way. It is not up to Government to dictate how much individuals and companies may earn but to tax proceeds in order to run the country. I am afraid that Osborne should keep his mouth firmly shut if he is unable to understand the fundamentals of economics and the city culture of low salaries and high bonuses. The exchequer will suffer from his stupidity as the city will drift abroad. Why kill the goose that lays the golden egg in order to make political capital? All Osborne is doing is pandering to the mob. All the Gorvernment should be doing is making sure thet the regulator is regulating not curtailing the earning of the individuals and city firms.
- Alexis Dogilewski, london
Nothing George Osborne says about financial rules or morality has any credibility since, along with Gove and Lansley, he is one of Cameron's front bench house "flippers". When will he be forced to resign? It is incredible that this has been swept under the carpet. What short memories we seem to have. Not to mention the Tory party's reliance on finance from (overseas?) millionaires like Lord Ashcroft.
- Robert C, London, UK
He should pay the £55K capital gains tax he owes if he wants credibility and authority. Osborne is a tax-dodger.
- Neil, London, London UK
