How to curb bonuses
The Bank of England has provided the Treasury and Business Department with both an argument and a tool for curbing bank bonuses.
It takes the form of Chart 5.9 on page 51 of the Bank of England's latest Financial Stability Review, which has the unprepossessing title "Estimated size of total implicit funding subsidy to UK banks and building societies split by size".
This shows the Bank of England's calculations of the monetary value to the big UK banks of the truth, which was revealed in the Great Crash of 2008, that the state won't allow them to fail - that taxpayers will always bail them out, for fear of the catastrophic impact on the economy that would be caused by a collapse in the payment and credit-creation systems.
What the Bank of England has done is to get from the credit rating agencies (who in this case are definitely providing a public service, in the view of the Bank) the ratings for our banks' debts on a "supported" basis and on a "standalone" basis. That is the difference between their perceived creditworthiness with and without the implicit taxpayer guarantee.
The Bank of England then looked at the interest rates that the relevant banks pay to borrow with their "supported" credit ratings, and compared this with the higher interest rate they would have to pay if there were no such taxpayer support.
The Bank then took the difference between those two interest rates and multiplied that difference by all the funds the big banks have raised on the back of their supported credit ratings.
The answer is the subsidy provided by taxpayers to the quartet of big banks, Royal Bank of Scotland, HSBC, Lloyds and Barclays, in the view of the Bank of England.
I hope you are still with me, because what comes next is pretty shocking. The Bank of England estimates that in 2009 alone, the big British banks collectively received a subsidy from taxpayers of around £100bn. And the subsidy in 2008 was around £50bn.
To put it another way, it is quite difficult to see how they could ever generate a profit without this subsidy.
And the Bank was also minded to demonstrate that the taxpayer subsidy for big banks is miles bigger than for smaller ones.
To be clear, the Bank of England acknowledges that there is an implicit taxpayer subsidy for smaller banks too. But it estimates that subsidy as equivalent to less than 1% of all the money borrowed by smaller banks, whereas it represents 2.5% of big banks' liabilities - which means that it is far more important to the big banks than to the smaller ones.
Here's what follows.
As currently constructed, our four big banks would not have much of a business without that taxpayer subsidy.
So in theory, if the chancellor and business secretary wished banks to pay zero bonuses, all they would have to say is that they are planning to legislate such that all lenders to British banks face the risk of losses ahead of any losses incurred by bank depositors.
If this sounds familiar, that's because it is similar to the formulation used by the German government a few weeks ago about a new potential risk of loss for lenders to eurozone governments such as Ireland - which immediately spooked investors and prompted a funding crisis for weaker eurozone states.
So if the chancellor and business secretary were to say, in this way, that taxpayers were no longer standing behind all the debts of banks, the price of borrowing for banks would rise very sharply, in the best case for banks. And in a worst case, the big banks would not be able to refinance all that debt maturing in the coming year (see my earlier note on this) and they would be kaput.
Of course, Mr Osborne and Mr Cable would not wish to bankrupt our banks.
But if they really want to squeeze banks' bonus payments, they might mention to the four big banks that they are keen to find a way to eliminate that £100bn subsidy - and Mr Osborne and Mr Cable might also point out that in the absence of that £100bn, the banks don't really have any spare resources with which to pay bonuses (or even, perhaps, to keep the lights on).