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How the bonus tax will work

Robert Peston | 08:46 UK time, Wednesday, 9 December 2009

The chancellor will at lunchtime announce a super-tax on banks that pay big bonuses (no surprise there, given how much I have been banging on about it).

It will have an impact on hundreds of banks operating in the UK of all nationalities.

The special one-off levy will make it very expensive for those banks to pay big bonuses to thousands of bankers based in Britain.

Docklands

Later today, in the pre-Budget report, the chancellor will say that if banks pay bonuses to individual bankers over a specified fairly low level - perhaps £10,000 - that will trigger a special one-year-only tax for those banks.

The tax payable will be calculated by adding together all those big bonuses and then levying a charge on the aggregated sum of those big bonuses.

The tax rate for the bank on that pool of bonuses would be more than 50%.

Which will make it very expensive for the banks to pay the bonuses.

So although the Treasury expects to raise a few hundred million pounds from the levy, it would not be wholly surprised if the take were less substantial - in that the banks could decide this is not a great year to pay bonuses.

What is particularly striking is the sheer number of banks - hundreds - that will be affected: the tax will hit British banks as well as overseas banks with subsidiaries or branches in London.

It means that banks from Britain's Barclays, through France's BNP Paribas, to Goldman Sachs of the US will all be affected.

It will cause a furore in the City, because no other country has announced such a super tax on bonuses.

What's more, the chancellor is likely to say that if he sees banks systematically taking clever steps to avoid the tax - by temporarily pushing up the basic pay of employees, for example - he would expect the Inland Revenue to be aggressive in preventing that and would not hesitate to legislate to close down the avoidance schemes.

This is a big moment for the City of London.

Some will say that banks and bankers are rightly being punished for the economic and financial havoc they caused by their reckless lending and investing.

Others will warn that the competitiveness of a vital British industry, finance, may be harmed - and that we could all be the poorer.

UPDATE, 11:11: Perhaps the best way to see the proposed super-tax on bonus-paying banks is as a semi-voluntary windfall tax.

If banks choose to pay big bonuses, they will pay the tax. If they decide against paying big bonuses, they won't pay it.

The chancellor is in effect saying that much of banks' profits in 2009 have been a windfall, or a gift from the state generated by the exceptional financial and economic measures taken by the Bank of England and the Treasury to resuscitate the economy and financial system.

These profits should be deployed to strengthen the banks by being retained as capital, Mr Darling is insisting. But if the banks choose to reduce their profits - and tax - by paying out a proportion of the profits as fat bonuses, then he will get his mits on a fat slug of this putative windfall through his new one-off super-tax.

So there is a stark choice for banks' boards and their shareholders.

They can ask their top executives to make a financial sacrifice for a year for the financial health of the bank. Or the banks can suffer a big financial hit so that the members of the bond or forex desks can buy another Ferrari or several.

It's a tough one.

What fascinates me is how the tax will affect the behaviour of banks and bankers.

The Treasury clearly believes it has constructed the tax in a way which creates little incentive for individual bankers to move abroad or move firms - since the tax would be paid by the bank not the banker.

And since the tax will last no longer than a year, it should not be sufficient to persuade the banks themselves to re-locate to Paris, Frankfurt or Geneva - which are still at a disadvantage to London in respect of skills and tech infrastructure.

What's more Dubai isn't quite the competitive threat as a financial centre that it might have appeared to some a year or so ago.

So the City will doubtless scream blue murder about the tax, because banks and bankers are being hit where it hurts most - in the pocket.

But the bankers to whom I've spoken in the past few days about all this say that the City has survived much worse.

Comments

Page 1 of 3

  • Comment number 1.

    And just how much tax will it raise ?

  • Comment number 2.

    Sarkozy will be delighted - today will be known as the day Darling killed the City.

  • Comment number 3.

    Just for a change I think I'm with Darling on this. It is reasonably clever "I will not say "Don't" and I will not say "Do" just here are the consequences if you do!

    The bonus ball is now back with the banks especially RBS, resignation letters in this pile please.

  • Comment number 4.

    'Others will warn that the competitiveness of a vital British industry, finance, may be harmed - and that we could all be the poorer.'

    Only in the short term!

  • Comment number 5.

    This is a stupid idea from a stupid government.
    This is going to back fire big time!
    Like it or not we need the banks, they on the other hand do not need Britain.

  • Comment number 6.

    To the Bankers: hello! There would be no banks, let alone bonuses (or jobs) if it wasn't for taxpayers! Think of it as taxpayers awarding themselves a bonus. (I know that the tables aren't usually supposed to be turned in such a way, but you have been seriously incompetent so it would be incompetent to reward such incompetence.)

  • Comment number 7.

    This is all just puff and nonsense - tax a bonus and it will become a salary! It is just window dressing.

    If the Government (and indeed the Tories) had and real intention of doing anything about inequality they would introduce a national maximum wage - anything else is just rubbish.

    By the way we have too many too big banks for us as a Nation to support so we must as a matter of urgency drive many of them overseas!!!!!

  • Comment number 8.

    5,

    'Like it or not we need the banks, they on the other hand do not need Britain.'

    They do not need Britain? I'll have my bailout money back right now thank you very much then!

  • Comment number 9.

    Sadly the bankers have brought all this on themselves in the words of Lou Reed,

    "You have to reap just what you sow".

    The RBS core and non-core furore and Barclays lifting up bankers base pay by 50% are just a couple of many examples of means that banks have sought to continue to gorge at what they beleive to be a never ending trough of goodies whether they have earned it or not.

    Perhaps the answer is simple for any sensible bank.

    1) Keeps bonuses small this year and give the public the spiel re needing to retain resources to invest in a better Britain, to help get this great nation back on its feet again, support small businesses etc etc.
    2) Reinvest that money that would have gone out of the bank in bonuses to make more money.
    3) As 2) increases profits next year pay a fully justified bigger bonus next year when Alistair and Gordon are long gone and tax rates are more sensible.

    As everyones's favourite Russian meerkat would say "seemples".

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    As you said in the blog one of my concerns is that basic pay will just be increased - plus you'll probably soon employees becoming consultants and find the banks paying massive 'success fees' to them.

    Although a one off tax may be popular I'm not sure it really is compensating the taxpayer for the risk they are taking on - plus the UK taxpayer are not guaranteeing of all these banks (eg. if BNP Paribas went bust the UK gov wouldn't step in).

    Banks need to be taxed higher in general - no other industry in the country is underwritten by the taxpayer and gets to borrow at 0.5%.

    For me the sad thing is I still don't think the banks 'get it'. When they made losses in 2008 they didn't share the losses between themselves. If you set up a company and make money - good on you.

    Lets hope this crisis means less people go into 'finance' but instead do work which truly creates wealth and jobs and does benefit society rather than benefiting an elite few and bankrupting the country (HMT have borrowed £117bn so far for the banks - double the entire annual education budget for the UK)

  • Comment number 12.

    #5
    We need clearing banks. We need commercial lending banks.
    Do we really need Investment banks ?
    Are the profits generated this year anything other than profits booked as a result of the rising stock market with money given to the banks by the taxpayer to get through to business and households?

    Just 2 quotes from D Adams
    'Call that clever cause I don't' and
    '10 out of 10 for style but minus several million for good thinking'

    Let em Go

  • Comment number 13.

    So, does this mean that it is the banks as institutions will be taxed on what you refer to as the "pool of bonuses", but the bonuses will still be paid to individuals?

    It seems to me that this won't actually achieve very much as we taxpayers are propping up some of these institutions to a large degree with our money and if it's the banks being taxed and not the individual then we are effectively shooting ourselves in the foot in the cause of creative accounting.

    This appears to show that the chancellor will not call the bluff of the RBS board after all, who'll still be laughing at each and every one of us all the way to the bank!

  • Comment number 14.

    Will this actually result in an increase or decrease in overall tax revenue? By making bonuses prohibitive less may be paid out, leading to lower income tax receipts. Any additional levy raised may therefore not even offset the reduction in income tax receipts.

  • Comment number 15.

    2. At 09:13am on 09 Dec 2009, Mike D wrote:

    "Sarkozy will be delighted - today will be known as the day Darling killed the City."


    Yep, the day which came after the day that the City killed us. I'm so glad to see the bankers are out in force defending their bonuses - merely demonstrating their lack of understanding of Macro Economics and ultimately their inability to do their jobs properly (for which they expect giant rewards).

  • Comment number 16.

    Whilst I agree the super-tax is mainly political as it isn't about raising revenue,(notice the Tories are a bit quiet - trying to avoid a trap?) I have to disagree this tax will have any long term affect. It is simply trying to prevent bonuses whilst there is an election coming.

    As for us becoming poorer as a result of bankers leaving, I have to ask: Why is London a financial hub? Are we better at banking than everyone else in Europe? Is that how it grew? Or is it because the banks and bankers can do what the hell they like here? Similarly in Wall Street.

    If bankers leave as a result of this one-off tax, because all they care about is money, attracting them back won't be too difficult.

  • Comment number 17.

    If the banks/bankers have to be taxed because of taxpayer largesse then
    surely it should also apply to car manufacturers and car dealers who gained from the car scrappage scheme.
    But fairness has never been a political winner I suppose.

  • Comment number 18.

    It would be very interesting to see a well-researched article comparing this with the "circulation tax" on share profits ennacted by Sweden in 1987/88 - that tax was introduced as a populist measure, primarily so the Social Democrat government could be seen to punish the "young finance puppies" ("Finansvalp" in Swedish) who were making what was termed "excessive" profits on short-term stock trading.
    The result of the tax was a large net loss of tax revenue to the Swedish state when a large proportion of the Stockholm Stock Exchange trading volumes moving to London - outside the reach of the Swedish authorities - along with the finance departments and (in some cases) the office of the CEO of companies such as telecommunications company Ericsson.
    London today remains as "Sweden's 4th or 5th largest city" due to the large number of Swedish expats, many of whom remain as tax exiles and no longer pay a penny of tax to Sweden - I'm one of them!
    Ironic.

  • Comment number 19.

    John_from_Hendon - I agree absolutely!

    We need a much smaller banking system and need the banks to break up. The sooner they are taxed in a way that represents the true risk we are taking on the better - lets take away these guarantees from banks asap - they are distorting the market. The bankers who were so called free-market champions ironically are benefiting from the biggest state subsidy in history!!!!

    We should only be guaranteeing utility functions of banks - nothing else.

    If the banking industry had no guarantees from the UK gov't then this tax wouldn't be needed. There is no super tax for retailers or footballers is there!

    The fact is that no bank could survive at the moment without the guarantees - hopefully this tax will concentrate the minds of the bankers and they will split themselves up and create safer business models which do not need taxpayer guarantees.

  • Comment number 20.

    5. At 09:18am on 09 Dec 2009, telecasterdave wrote:

    "Like it or not we need the banks, they on the other hand do not need Britain."

    For what? To allocate resources as they have done so well for the last 10 years.
    Most people who are unable to fulfill their fundamental job requirements usually end up getting sacked - not rewarded.

    ....or maybe we should just make banks above the law - perhaps that would help them fail a little more spectacularly.

  • Comment number 21.

    I think that this is a good move. It will mean that bank management will spend even less time on performance management and appraisals. In most banks there is a bell curve that dictates that only a small minority receive meaningful bonuses and more often than not performance is subjectively rather than objectively managed. What is wrong with annual salary increases where someone does a good job? The bonus culture has had its day.

  • Comment number 22.

    At last! The Bankers have bitten the hand that feeds them. That is a simple principle of greed, not ethics, not morals and not economics. Their own greed has forced the hand of the ruling party to act in a manner more befitting their status ~ Politicians and to a degree, bankers are supposed to be our trusted servants. For far too long the relationship between those with political power and those in the Banking sector have creamed off huge profits in order to gain or preserve personal wealth and status.
    I have no doubt that the cleverest amongst the Banking community are, as we speak, drawing up new contracts and employing teams of Lawyers to find ways to keep the wealth rolling in. Will it mean the end of the line for London as a force on the international scene of Business and Banking? I doubt it. It may however, prove to be the end of a very chummy relationship between those that we vote for and those that are trusted to invest the country's wealth wisely. Publicly, the 'suited' protagonists will shift uneasily, behind the scenes the sparks will be flying and, not before time.

  • Comment number 23.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 24.

    Well done!

    when will there be a similar tax on footballers?

  • Comment number 25.

    Whether this sort of tax is right or wrong or good or bad makes absolutely no difference whatsoever.

    The behaviour of the banks and the presumed expectations of certain employees within the context of the bank bail-out by both the taxpayer and the saver makes this sort of measure politically necessary. Darling would be stupid not to implement such a measure.

    The City of London needs to be brought to heel not just by the government but by the entire country. If the City of London is not going to serve the interests of the people of Britain then the people of Britain would be better off doing without the City. If the banks do not serve the national interest then the bankers might just as well leave to go and wreck some other nation's economy.

  • Comment number 26.

    who are these banks run for anyway - their employees or shareholders?

    They should be being run for shareholders so payment of dividends should be made before any bonuses!

    The whole system has broken down - the shareholders don't call the banks to account as these fund managers expect to get the same obscence salaries too - they are also probably good mates.

    While everything was hunky-dory and profits were being generated it was almost bearable but it isn't any longer - the myth of this precious 'talent' in banking has been exposed. This 'talent' failed so spectacularly in it decision making, governance and risk management.

  • Comment number 27.

    this is completely insane. Regardless of whether bankers should or shouldn't get bonuses, this could have the effect of driving high tax revenue and domestic spending out of the uk. Let them go? Well not particularly bright, as they would do exactly the same business as before in the uk from somewhere like switzerland. many of the highly paid investment bankers are foreigners who come to london spend their earnings, pay taxes and then leave. They take nothing from the uk and give back substantial amounts. What about the bailout? The reality is, even if the uk didn't have a financial centre, there would have been a similar crisis - other european countries don't have a financial centre but they had to do the same.

  • Comment number 28.

    A retrospective super-tax on MP's and their past fiddles would be even better. Caledonian Comment

  • Comment number 29.

    #24 - presumably when we put the future of our country at risk to bail them out!

  • Comment number 30.

    The banks complaining about retaining talent and attracting the best is completely irrelevant. There are a large number of multinational companies based in Britain and a huge business market. Granted some of this will depart if conditions get too onerous, but not all of them, and other companies will grow to take their place. Therefore there will always be a level of business activity in Britain and there will always be a need for banking services.

    If the overpaid Wall Streeters return to the US or move to Switzerland in a huff, others will take their place who are prepared to work for more reasonable salaries. Other banks will grow into the gap. That's the nature of the free market.

  • Comment number 31.

    I doubt his anti avoidance strategy is enforceable - for example how can you stop people getting this paid as a monthly bonus of £9k each month over 12 months - total bonus over 100k - or raising salary levels is surely something any company should be able to do, likewise changing remuneration structure.

    I fear this is all political manouvering to make right noises for public without harming City.

    Votes won at no cost - those of you bloggers who think that Ciy should be allowed to continue to abuse the UK population sound like you have won - for now at least.

  • Comment number 32.

    In any case, the bankers will find a way to get around the bonus scenario either by way of increasing salary or by investing in other ways. Remember the gold bars and wine schemes a few years back? Tip for next year will be wristwatches and antique firearms. Both are considered mechanical items and therefore are exempt from IHT and CGT. Oh, and wristwatches are a lot more portable than gold bars or firearms.

  • Comment number 33.

    The goose is being cooked, let's hope it is not golden:( Separation is the only way, ( http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act ) for real stability. Don't punish the bankers (as tempting as it sounds) solve the problem.

  • Comment number 34.

    Yes - go after the toffs, not me. And if they want to leave, please don't let them back - they've caused us all enough trouble, thank you very much.

  • Comment number 35.

    This to me is very unfair on the banks that have NOT needed a government bailout - Barclays is mentioned, and I assume HSBC is also caught up this.

    By all means levy this on RBS et al - they are using OUR money at the moment. It would be nice to see it not blown away in bonuses that may, or may not, be warranted.

    I've already read about HSBC moving its HQ out of London - if they had any doubts before, this surely seals it all up.

    Utterly, utterly stupid from a Chancellor and PM who can't scrape a double digit IQ between them.

  • Comment number 36.

    > Well done! When will there be a similar tax on footballers?

    There's no need for that - footballing is skilled work, unlike shuffling money and gambling.

  • Comment number 37.

    #11. danj180 wrote:
    "As you said in the blog one of my concerns is that basic pay will just be increased - plus you'll probably soon employees becoming consultants and find the banks paying massive 'success fees' to them."
    = = = = =
    That's what comes of a bungling government interfering into the workings of a commercial organisation. All this because Gormless Gord, when he set up his new regulatory powers, the FSA, "forgot" to tell them their prime task was to regulate!

    They didn't, of course, so Brown syphoned off a huge tax take, KNOWING (for a change) the he could increase it with a credit expansion policy that, while it got individuals into unsustainable debt, made them feel good about it until the chains finally strangled them.
    = = = = =
    "Although a one off tax may be popular I'm not sure it really is compensating the taxpayer for the risk they are taking on - plus the UK taxpayer are not guaranteeing of all these banks"
    = = = = = =

    Exactly how much extra tax have you paid for which you want compensation? Only one bank is controlled by the taxpayer. That makes me a shareholder and, as such, I want it to get as profitable as possible, as quickly as possible. That means seasoned bankers running it, not civil servants. (But you bet that with his usual flair and panache, when it comes time to sell it, Gormless G will sell it at a rock bottom price.

    = = = = = = =
    "Banks need to be taxed higher in general - no other industry in the country is underwritten by the taxpayer and gets to borrow at 0.5%."
    = = = = = = =

    Get your facts straight! What balloney! What NAIVEty!!! Hahaha! The taxplayer has NOT underwritten the industry, just one and a half banks. And I can assure you that the cost to bailed banks is a tad more than 0.5%

    = = = = = = =

    "For me the sad thing is I still don't think the banks 'get it'. When they made losses in 2008 they didn't share the losses between themselves. If you set up a company and make money - good on you."
    = = = = = = =

    But again it's regulation, you see. Before Gormy Gord became Chancellor the amount of capital assets ratio (to lending) was controlled by the Bank of England. The "Wholesale Market", the Money Market, then, was about each bank balancing its books each night. They all have accounts at the B of E and the aim was to close with zero balance.

    Of coure, Gord stopped all that and was simply too stupid to work out the consequences would be: banks (and particularly mortgage lenders) borrowing from the Money Market SHORT TERM to provide LONG TERM funding. Crazy! So obviously, when the market "dried up" (in fact, banks refused to lend to each other), the reckless lenders were left with long term debt and no funds to support it. Simple, yes?

    It all comes back to Gormless Gord and his gall, hurling the blame at banks to distract people from his own crass regulatory failings. The banks were an easy target because they were visibly in the doldrums. This was "there'll be no more boom and bust" Brown.

  • Comment number 38.

    latest scores
    Switerland 10
    NY 3
    Paris 2
    London -10

    Well done Gordon! Good job. I really want to bid for your tie and signed book in the Evening Standard charity auction. Your place as the worst PM in living memory is secure. You have yuor place in history as the man who destroyed his own country!

  • Comment number 39.

    8.

    I am afraid the bail-out money has long gone, and probably a lot more than we will ever know.

  • Comment number 40.

    The thinking behind the proposal is not to raise revenue, but prevent the morally outrageous bonus's being paid to an industry that has bankrupted the country and relied totally on bailouts to keep it going.

    However, whilst better than nothing, this proposal is not great. It treats a totally failed bank like RBS and Lloyds the same as a steadier, more successful bank like HSBC and Co-Op.

    Employees at RBS do not deserve a single penny in bonus, no matter how clever (ha ha!) or hardworking they are. The bank simply has no money to pay bonuses with, even if one arm did make a profit this year (how hard is that when you can borrow at 0.5 per cent?).

    Employees at HSBC however, probably do deserve something. Sure, without the assurance, guarentees and QE measures they would not have made as much money as they have, and for that they deserve their bonuses to be reduced (or "super taxed"). But they do not owe me money (yet).

    And all the while, Fred Goodwin is getting hundreds of thousands a year. As the man (arguably) most responsible for this mess, how can he still be free? How about taxing his pension with a super duper tax? Or better still, sending him to Helmand to put his skills to use out there.

  • Comment number 41.

    I work in Banking, and like the massive massive majority I had nothing to do with irresponsible lending. And my bank took no public money. And through strong management remained profitable. And arguments saying that if the government hadn't propped up RBS / HBOS we would have been ruined are true, but not the point. If they had collapsed ALL of British industry would have suffered.

    If Robert is right, todays decision will mean I have to cancel some building work I had planned (and saved for). That means local builders, local decorators will lose out. B&Q may get a visit from me instead. I voted New Labour since 97 and never will again. Cameron needs to show some gumption otherwise he won't get my vote either.

    So Gordon will tax me, I will spend less locally and so the cycle will go on.

    He will blame anyone except his government and his economic mismanagement.

    Anyone ever heard of a government that scapegoats a section of society in order to divert attention from it's own failing?????

  • Comment number 42.

    This is a crazy step, perhaps the last of a dying government.

    The importance of the City to gov't tax revenue has been stated above and I firmly stand behind those comments.

    This is totally knee-jerk political meddling and if we have a hung parliament after the next election the damage will be difficult to undo.

    Has anyone considered how many industries/sectors in our economy pay a bonus of more than £10k? Lawyers, Consultancies, Insurers, even some/many Civil Servants receive more than that. Also (and someone mentioned this above and its a fair comment)- what about footballers?

    This is all, partly at least, the consequence of having the longest serving non elected Prime Minister in history.

    Incidentally- and significantly off topic...great news re Silverstone (assuming anyone can afford to go to watch).

  • Comment number 43.

    Much of this talk of bankers going elsewhere is just bullying bravado. There have been estimates that between 5000 and 10000 bankers will get over £1m this year in the city alone. Are there really that number of equivalent jobs abroad? Or might the glut of job applications drive down the cost of employing a banker? It's a market after all.

    And just exactly how sure are these superstars that their 'success' is really down to their individual talent? In 'Fooled by randomness' Nicholas Taleb puts a lot of it down to survivor bias.

  • Comment number 44.

    Given that this has been trailed for several weeks in advance, does anyone think that bankers have not been taking steps to avoid this? The tax take will not change one little bit. The Times lists about 6 different ways to get round this and rather easily at that.

    This is gesture politics from a government that has run out of steam and ideas and will say anything to grab a headline.

  • Comment number 45.

    What needed to happen was the introduction of a tax or some clever legislation that would ensure that any bank profits are retained to improve capital buffers and as a consequence improve lending conditions.
    This tax will not achieve this, for example the £1.5Bn bonus pool at RBS will still be paid out it is just that half of it will be paid into the wastefull hands of central government. Moreover more profits may end up being paid out if the banks decide to uplift the size of bonuses to compensate for the additional tax! The bank's capital buffers will still become diminished and no doubt in the near future will require further replenishment in the form of more government interjection, and I'll bet the amount required is significantly higher than the tax take from this one off super tax. It is very clearly a political initiative, don't be fooled by it, it's clumsy, stupid and doesn't help anyone.

  • Comment number 46.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 47.

    The less you reward and manage success, eventually the less output you get.

    When it doesn't matter if you make that extra 5% for your employer productivity falls.

    This sort of measure is just the way the Government have tinkered at the edges of so many things in the past, then have to tinker again because they don't understand the impact the first change makes. We have seen it time and time again, making populist moves in the hope of bribing the electorate and causing chaos.

    If they really want to be smart. It shouldn't be bonusses per se that they deal with, it should be the whole salary package. That would catch all including those in the public sector whose salaries have expanded as they built their "empires" on public money being thrown in the direction of their departments.

    Of course that would lay waste to the claim that this Government reduces taxes. Shame on you Brown, you are stealthily and crazily turning what was once an organised society into one that has no idea on what is around the corner and who or what the target will be next in order to satisfy your experiment on society. It is your doing, you have been at the helm for longer than anyone cares to remember.

    The masses who understand only the headlines will be rubbing their hands with glee at this announcement and not understand the real consequences for the future.

    PS And I'm no investment banker, nor do I even know one, if the society is to be built with jealousy and rage at the core, why not introduce a 50% tax for those earning above the average wage, that would satisfy everyone who does a standard job and just does their bit for the country.

  • Comment number 48.

    "How the bonus tax will work"

    This really does cross the line.

    Did you write the legislation? Has it been passed by Parliament? When did you get elected?

    Setting aside the fat that this is probably market sensitive and that you probably just broke the law, whatever happened to the pledge to announce things in Parliament? I assume that Mr Speaker Bercow will begin proceedings today with a stern rebuke for the Chancellor and the BBC for leaking the details?

  • Comment number 49.

    I'm surprised that you can tax just one industry - seems overly specific. £10k also seems a fairly low threshold for 50% tax. If the individual concerned earns £60k per year and the bank gives them a £10K bonus they should be paying 40% tax on this amount not 50%.
    I'm certainly in favour of the govt protecting our (the tax payers) investment but this seems a bit desperate. Personally, I'm much more concerned about regulation safeguards being introduced to prevent the banks from overextending themselves as they did earlier in the year.

  • Comment number 50.

    In which case everyone's a winner. Brown and the banks may be able to part salvage tarnished reputations and this will go some (albiet minor) way in addressing the national scandal of youth unemployment and training defecits. In their tenure the Baby Boomers ( the generation which benefited most from post-war socialism and hideous Thatcherism ) have let down the youth and subsequent generations in so many ways. No more lost generations please!

  • Comment number 51.

    I am normally opposed to anything that spews forth from this discredited government. However, the rewards enjoyed by bankers are totally disproportionate to their contribution to the good of society, and these rewards therefore distort the market.

    There is perhaps a parallel to be drawn from the concepts of Resource Curse, and instead we have Bankers Curse. They attract the best and the brightest because of the disproportionate rewards, which then robs other parts of the economy of these potential talents. These rewards need cutting down to size so that the profits stay within the banks. The banks need the profits in the short term to support their balance sheets, and in the long term to pay out as dividends to the banks owners. Lets not forget that the banks owners are US for Lloyds and RBS and the pension schemes, that's US again, for everyone else.

    The huge rewards also distort other markets – eg property, that is again against the common good.

    I would propose a simple solution – 110% tax on all earnings over £500K as measured by P60. It would be a very powerful incentive to be real.

  • Comment number 52.

    Comment #13

    THIS IS AN ESSENTIAL POINT. If this means that bonuses will still be paid it's just that more of what should be retained profit will go to additional taxes then this tax does far more damage than good. Equity buffers will be further eroded further weakening banks capital positions and making lending conditions even tighter. If this is the case this is absolute madness!!!!

  • Comment number 53.

    When considering a windfall tax on bankers' bonuses, it might be useful to consider just how much benefit could be drawn from spending these vast sums in socially useful ways. Please read my article on this - http://slingerblog.blogspot.com/2009/12/protect-arts-drama-music-and-culture.html.

  • Comment number 54.

    If I was chancellor and I REALLY wanted to place a tax on highly mobile bankers with great tax advisers, I would announce the measure at 23.59 one evening effective from 00.00 the next day. I certainly would not trail it in the media for weeks.

    So what we have here is a political gesture which is aimed at dumb labour voters. It will raise almost nothing with all the avoidance schemes put in place. Trouble is the message it sends out to international bankers is not good and those little cuckoo clocks are so enchanting.

  • Comment number 55.

    I'd like to ask Mr Peston if he could use his blog to educate people as to how finance actually works, the roles played by different banks and the variety of roles in a bank (IT, finance, operational, trading, advisory) so at least the opinions above would be educated and not advocate violence. How did an IT worker lose your tax money – money that co-incidentally is a GUARANTEE - very little was actually paid. Its time journalists realise they have a fiscal responsibility when reporting to stop headline grabbing when it can have such an enormous detriment to the country.
    Its nice for Joe public to hide behind bonuses when the average house is 5-7 times the average wage and the only way of funding that is to artificially lower interest rates to a point saving is redundant and a mortgage on a £400k house is £100 a month.
    Or one could ask - does this tax also apply to hedge funds? Law firms on banking deals? Retail banks? Building societies? Or is the 'evil' confined to investment banks in terms of greed ?
    There's no reason for any bank to stay in the UK, then take away the bars and restaurants, the taxis, the cleaning staff, the shops.. everything that supports the 300,000 people working in the city. Then house prices crash. Its called a double-dip for those who don't know.
    Paris will welcome Paribas with open arms, Frankfurt - Deutsche, Madrid - Santander. Everyone else will be very welcome in Switzerland or Dubai. 20% of Britains tax income is a big give away – not seeing how the nurses and teachers will be getting a pay-rise anytime soon with that cut.

  • Comment number 56.

    #41 - if RP is right then only any bonus you receive over £10k will be affected. Therefore you must be expecting a huge bonus at a time when the UK economy is in crisis.

    It is difficult to sympathise with your 'plight' of having to go to B&Q to get some building work done. I'm sure the local tradesmen will suffer but I bet you have access to spare funds if you really want them.

  • Comment number 57.

    Sounds easy enough to avoid - if it only runs for one year bankers can have the choice between a heavily taxed bonus this year or a deferred and less taxed bonus next year.

    It could help retain staff but the trouble with schemes like that is they tend to retain the staff who aren't good enough to get a better deal elsewhere.

  • Comment number 58.

    This is a waste-of-time, sounds-good-as-we're-coming-to-an-election deflection of blame onto the banks. Darling is desperate for revenue and knows it'll go down well with a naive public.

    If he's going to tax bonuses, [b]tax them all. Across all businesses.[/b] They were once the Christmas bonuses - ha! No need to tell me that Brown could play the role Scrooge easily now things have gone badly wrong.

    And this is another of his grand mistakes, like taxing private pension funds and the 10p tax rate and...(ad naus).

    I dare say the banks will spot the loophole, wait until April then defer bonuses until next April - if they've any sense - or incorporate the bonus into salary. Windfall taxes in the free market are dangerous indeed. They could cost him dear in the end

  • Comment number 59.

    Comment 4

    Yes but as Keynes said 'in the long term we're all dead.'

  • Comment number 60.

    I think we are missing the point here. Businesses provide bonuses for two reasons, as an incentive and as a way of rewarding performance. In the latter case it allows a business to keep its fixed cost structure low with further cost only being incurred when performance has been achieved.
    If we start to tax bonuses at a punitive rate it will result in higher levels of fixed cost as expected bonus becomes a salary - this in turn makes the business more vulnerable in a down-turn.
    Surely this is not what the government wants to achieve.
    Perhaps the government objective with this tax is nationalisation by the back door - obtain revenue from the bank and in the process reduce the bank's tier 1 capital ratio which in turn makes it more likely they will need to raise new capital and, surprise, surprise, the government pop up as the only organisation with the funds to provide that capital. Call me a cynic if you wish but i cannot see any better reason for a tax on bonuses when our banking system is as fragile as it is, and let's be honest, they did quite a good job of nationalising Northern Rock by apparently feeding information to the BBC that would have been better kept confidential (as it was with the Bank of England loans to RBS and Lloyds)

  • Comment number 61.

    I have a plan....

    First of all build lots of things but pay for them on the never never,
    Then increase all other forms of spending till my credit runs out
    Then fiddle around with tax rules whilst the country goes into melt down driving out the highearners and big corperations
    Finally rush home to scotland and and live the life of leasure after granting them inderpandance!

  • Comment number 62.

    #9

    This would seem to be the aim of the policy - the government is saying, please behave yourself this year, then we can all get back to normal next year and you can do what you want again.

    Cameron's silence is basically signalling agreement.

    But what choice have they got? This Government has already spent our future prosperity on saving the banks - so we have to make sure that that prosperity actualy materialises. And as for the last 30 years governments of both colours have basically bet on us becoming the worlds financial clearing house - we are in too deep to change direction.

    So Brown / Darling / Cameron are saying 'please let us look like we are acting tough and we promise to only make short term cosmetic changes'.

    Pathetic.

  • Comment number 63.

    "U13736045 wrote: And just how much tax will it raise ?"

    The answer is hopefully not a lot because this measure is designed to make it unattractive for the banks to pay bonuses in the first place. A point that seems to be being missed by many including Mr Preston who asks the same question.

    It's very clever in that if it works few bonuses will be paid, he has not prevented them from being paid (thus thwarted threats of resignations) but if the banks insist on paying them then he gets the tax.

    Come next year when everyone expects the Tories to be in power then if they allow huge bonuses that the banks will have clearly deferred for a year then they (the Tories) are unpopular. Yes that shows there is a political side to this but what is wrong with forcing the next potential government into a corner if you feel it is just?

    As to bonuses in general why are they there at all? These investment bankers basic salaries are already no doubt very high. If they do their job properly they have earned their wage. Why do they need a bonus as well?

    Come the annual review time if they have earned huge sums for their bank a pat on the pack and a couple of percentage points pay rise above inflation ought to be enough. That would hardly be chickenfeed would it? If they have failed, no pay rise. This is what most people who live in the real world would expect.

    If bonuses were not paid and they all left then I am sure other equally capable people would be glad of their basic salaries. Their job is not that of a nuclear physicist. Tey are not indispensable. So call their bluff and when they leave they can take that apologist spokesperson from APACS with them.

    I am fed up of whenever a tax on the super rich is mooted be it on bankers bonuses or foreign nationals who pay no tax we get apologists claiming they will all leave and we will be worse off. Rubbish. Let them go.



  • Comment number 64.

    Comment 48

    I agree, this really does stink all the insider trading that goes on between the BBC and the Treasury more specifically Peston and Darling.
    It's too late the whole barrel is wrotten isn't it!

  • Comment number 65.

    So next year instead of bonsuses a lot of bankers will have temporary pay rises which will not be covered by the complex bonus rules.

    Net extra TAX next year from this bonus grab will be nill, net effect will be another nail in the cities coffin.

    RIP City of London, and thank you for all the TAX you have paid during your long life supporting the UK, you and your taxes will be greatly missed.

  • Comment number 66.

    The big question will be, if it is levied on the banks rather than the bankers, whether it can be offset against tax losses of the banks. If it can, the banks will not worry too much about it. They are adept at creating tax losses which do not appear in their accounting profit and loss. (They have had to be - other companies can do lots of transfer pricing, but for banks this is very difficult.) Doing this will be quiet as HMRC have to treat the banks' tax returns as confidential. It will also have the perverse effect of increasing the bonuses of tax arbitrageurs. However, if it is a one-off charge in a new class such that other losses cannot be created and offset then it really will hammer the banks and trash the country.

    My advice to Darling. Levy the tax so it looks like you're being tough, but accept that you won't get any real money. In the government's figures you will show the gain from this tax and point out that the gains from other taxes on banks have reduced as they have made less profit (rather than because new losses have been created to offset this new tax). Suggest to RBS directors that the new tax might be a good excuse to reduce cash bonuses without resigning, but let them increase the amount of equity that they give out to try and retain some bankers - you can sell this as being what you wanted as it aligns the risks and rewards of bank and bankers (though there is a large body of research which shows it does no such thing).

  • Comment number 67.

    Post 28 I agree re the over claims on MP's expenses. Somehow I can't see the turkeys in Westminster voting for that particular christmas meal though.
    This is all a bit of showboating by a dieing government desperately seeking some cheap publicity.
    To be blunt I wouldn't trust my money to a bank or firm of accountants who couldn't find a legitimate way around Alistair's little charade. Don't expect it to raise even a tenth of what Alistaiir claims later today.
    Like the mortgage bailout schemes that were supposed to help tens of thousands and had only helped about 10 to 15 this is all spin and hubris.



  • Comment number 68.

    I've just been informed, this very minute, that the privately run dementia home in Bournemouth, where my 90 year old mother is currently housed suffering from severe dementia, is to close, in exactly one month's time. The proprietor told me that their bank has, as of this morning, pulled the plug on them.

    I have no idea whether this is related in any way to this bonus situation, and the government's increasing control over banks - control in all the wrong ways - but it is a bit of a coincidence nonetheless.

    But why cannot the bonuses be used, as post #53 says, in socially useful ways? The emotional turmoil that is going to go through my mother's mind doesn't bear thinking about - she has long not been allowed outside, even in the home's garden, as it takes three days to get her back on some sort of even keel. Now she has to be moved to a new home altogether. The government seems to have money (OUR money) to throw at anything it fancies if it buys votes, but there is not enough money to fund a sorely needed dementia home for people like my mother.

    This home has been operating for nearly 20 years. They have employees who have been there almost since it opened. What a Christmas gift for them.

    There is something seriously wrong in this country, and this inept sick government lies at the heart of it.

  • Comment number 69.

    I can already see the idea of a shell company charging the banks for "consultancy services" and then awarding a huge dividend to its banker owners. More tax-efficient than paying a bonus...

  • Comment number 70.

    I work for an Investment Bank in Canary Wharf, and am presently in credit of around 300 hours worked for this year, which is (was!) due to be reflected in my pretty modest bonus. We don't get paid overtime, weekend working allowances, etc, and I've worked just about every weekend of 2009. Time I'd much rather have spent with my children. Could someone please explain how a payment at the end of the year to compensate for all those extra hours is "excessive" and "unacceptable"? A lot of the critics posting here seem not to know what Banking industry bonuses actually are or what they're paid for. Maybe the Chancellor doesn't either!

  • Comment number 71.

    This tax is simply to please the people who believe that the UK's economy can survive without a competitive banking system and also the people who believe the media spin that tax payers have ownership of the banks.









  • Comment number 72.

    At long last, some action (hopefully, the beginning theme), bankers and their bonuses have for far too long been totally out of step with the "real" world.

    Oh they say (time and time, and time, again)..."but we're talented, we're indispensable, we provide a vital service to the nation, we're worth it"...etc etc.

    Well their unique "talents" could be replaced (and at a far lower cost) by many, many people. Their indispensability is in most cases very debatable, as the "service" they provide has become more and more opaque over the years (and in many cases is a "service" provided to fulfill a need of their own making). And if we were collectively able to look beyond, and through, the smoke and mirrors of their arts, then their "worth" to the nation would be revealed to be in actuality a fraction of the value they (and their media mouthpieces) place on it.

    As a group, there are some individuals amongst them who no doubt use their bounty to bring a little goodness into the lives of less fortunate individuals (through various charitable acts) but they are in the vast minority, and the "herd" rush on each year; either hoarding their wealth, or embarking on spending and binging sprees (which in actuality filters very little, if any, value down through to society as a whole).

    As a nation we should be hanging our heads in shame, at our inability (at best), or (worse) our indifference, in letting this particular orgy of excess run on for so long.

    And if bankers scream indignities, and outrage, now?...Well, let them.

    And if they should choose to cut off their noses, to spite their faces, and leave?...Well, actually, good riddance!! (for the rest of us, maybe? some short term pain, but very likely long term gain)

  • Comment number 73.

    Do you think that, as a last act of kindness to these poor city boys, the taxpayer could club together and charter a few jumbos to make sure they get to Switzerland ok ?
    They could wave their fivers through the windows at us.
    Nice one !

  • Comment number 74.

    Lets see:

    Employee No 1: gets paid £100K per year and a bonus of £1m because his part of the bank made an operating profit of £100m

    Employee No 2: gets paid £100K per year and a commission of 1% on the income generated by his part of the bank after operating costs are taken into account

    Employee No 3: is not an employee but a consultant provided by a company owned by the employee. He gets paid £100k per year plus success fees of £1m.

    Three scenarios and only one will qualify as a bonus.

    Not exactly difficult to avoid and I have only had one cup of coffe so far this morning !

  • Comment number 75.

    I as a shareholder in independant and a government majority owned banks do not agree with taxing bonuses either with the individual or on the Bank itself. The staff have by their endeavours have created the profits, the government gets the taxation, the rest is shared by staff and shareholders (including the government) who have put the funds up and profit retained to the benefit of the business.

    If profits and earned bonuses are considered windfalls, then surely Brown's and Darling's future pensions are windfalls, these have not beeen earned either in this term of government. They should be taxed also at the windfall rate set!

  • Comment number 76.

    Have you ever heard of contracts, Mr Peston? Most of these bonuses will be triggered by departments reaching their targets and the recipients will be contractually entitled to them. Not that that is likely to worry our present government who have only a nodding acquaintance with the rule of law.

    And how come you are announcing changes to tax legislation? I thought that that was Darling's job and that it took place in the House of Commons. Of course, you may well be an official spokesman for all I know...

  • Comment number 77.

    Whilst I fully agree that the banks got us into this mess and to reward senior directors for such failure would be wrong.

    £10,000 may seem high but to many managers and sales staff this is a large proportion of thier income. The bailed out banks own other businesses such as contract hire companies who all paid their sales staff commissions for acheivement of targets etc. These bonuses sometimes made up 40 -50% of their salaries. This is effectively capping and even reducing these pay plans.

    Imagine trying to bonus pay a teacher , nurse or even BBC presenter and then removing this bonus through no fault of their own. There would be civil unrest.

    And no I do not work for the banks but have experienced first hand the effect such draconian measures are having on these peoples lives.

  • Comment number 78.

    This will be popular with the readers of the popular press, but does not tackle the real problem which arises through allowing private banks to have a dominant position in determining the amount of spending power in the economy.

    Private banks are supposed to maximise share holder value, even when partly owned by the taxpayer. They cannot be expected to act in the public interest, as many naively assume. Their refusal to make credit readily to available business, taking advantage of the credit shortage to increase margins instead, illustrates this perfectly.

    The banks must be regulated, so that the level of their sterling lending can be controlled by the Bank of England on the Treasury's behalf. The bonus super tax will do nothing to help do this.

  • Comment number 79.

    #43. Wealthybutnomoney wrote:
    "Much of this talk of bankers going elsewhere is just bullying bravado. There have been estimates that between 5000 and 10000 bankers will get over £1m this year in the city alone. Are there really that number of equivalent jobs abroad?"

    = = = =

    Well whatever the number, if those posts existed in London you bet there'll be enough jobs in the thousands of financial centres around the world. A few investment bankers have already gone. You only need to lose half of the rest then London goes belly up as a financial centre of any importance.

    Besides, this tax afflicts banks based in other countries with "branches" here. D'you think they'll just sit buy and let that happen with NO change to their business policies regards the UK?

  • Comment number 80.

    # 37 - doctor bob

    hey there doctor bob - i agree with a lot you say but maybe I need to explain myself more clearly...

    doctor bob said: "Get your facts straight! What balloney! What NAIVEty!!! Hahaha! The taxplayer has NOT underwritten the industry, just one and a half banks. And I can assure you that the cost to bailed banks is a tad more than 0.5%"

    Of course I know that we only have a direct interest in NR, RBS and Lloyds/HBOS however a bank like Barclays can now borrow money at much cheaper rates as the market knows it is effectively backed by the taxpayer - none of the bond holders of RBS or HBOS lost out at all!

    So there is an implicit guarantee for all major UK clearing banks which means they can borrow more cheaply - and we will pick up the tab if/when things do wrong.

    This is why Mervyn King hesitated so much in bailing out NR as he was concerned about the moral hazard - ie banks and their bond holders won't care so much about risk anymore as they know UK taxpayer will bail them out.

    Have a look at the National Audit office report which came out on Friday - it estimates the total guarantee provided to banking system to £850bn - this is not just RBS, NR and HBOS!

    Re: 0.5% financing - I agree they can't finance all their borrowing at 0.5% but as clearing banks they can borrow some short term at this rate -other companies such as retailers wouldn't be able to access short term funding at this low rate.

    See FT article below which shows its not only the bailed out banks which are being helped by gov ....

    "UK bank borrowing costs to rise
    By David Oakley

    Published: December 2 2009 18:55 | Last updated: December 2 2009 19:33

    Barclays, Lloyds Banking Group and Royal Bank of Scotland, the UK banks, are facing £6bn ($10bn) in extra interest rate costs over the next four years as the Bank of England withdraws cheap emergency loans from the market.

    The cost of replacing this cheap funding combined with new liquidity rules, which will require banks to invest more of their reserves in risk-free government debt paying lower interest rates, will hit the UK institutions hard, according to research by Credit Suisse."

  • Comment number 81.

    Bonuses being paid in Britain are being taxed. That seems a bit harsh on employees of foreign banks which are being propped up by foreign governments. But what about the overseas employees of British banks? It was reported that the really big bonuses that RBS wanted to pay were to a few employees in Connecticut USA.

    Granted, something had to be done about rent-seeking bankers, and maybe this is the least worst option. But I strongly suspect that the banks will find away round this new tax.

  • Comment number 82.

    #69 - your suggested arbitrage wouldn't work. In principle it has long been a good idea to have your pay made to a company and then NOT pay the dividend and eventually get taxed to capital on your pay (and when there was taper relief this was even lower than it is now). However, because it is so obvious it was made very hard. The only people who managed it with good effect were hedgies, and that was done by pooling their monies with investors for long periods rather than paying to a separate consultancy company.

    But you are right in one respect - tax arbitargeurs are paid more than HMRC staff by a factor often in excess of 100. If you pick up tax code you can tell it was written by illiterate fools to tight time schedules. Smart, motivated people get around tax with great ease.

  • Comment number 83.

    I will never understand how people can ever advocate measures like this.

    It's all very well when it's happening to someone else isn't it?

    As other posters have said:

    1) The taxpayer is not involved with ALL banks
    2) Not ALL financial sector staff due a bonus had anything to do with the crises
    3) LOTS OF SECTORS PAY OUT HUGE BONUSES!!!

    How can anyone actually support this?

    How can anyone seriously think it is a good policy to penalise thousands of dedicated workers RATHER THAN THE PEOPLE WHO ARE SUPPOSED TO BE ENSURING THE INDUSTRY IS REGULATED???

    What's next?

    Punitive tax on ALL bonuses? The people who earn bonuses already pay more tax than the average person anyway.

    How is it fair to penalise people who made sensible career choices by perusing a career that offers bonuses?

    I'm in software development. I negotiated a bonus as part of my contract.

    If some other software development company wrecks havok in the world, through no fault of my own, how is it fair that my bonus be hit???

    I'd laugh if I didn't feel so sick.

  • Comment number 84.

    56 -you are right, I was. But not massively more. And that money wasn't going to be buried in the garden, it was going to be spent locally. I'll survive as you say (though wish I knew where these reserves are you seem to assume I have -bit of a chip eh?!?), but I think it will be sad for ALL when I phone the builder and tell him that the job is off.

    The B&Q point is exactly that -my family will be fine, we'll trim back plans and adjust. But the loser won't just be me.

  • Comment number 85.

    It seems a good idea to me if the intention is to force the banks to strengthen/recover their balance sheets.

    I also hear all this bleating about how important this sector is - 10% GDP - well by my reckoning that means that there is 90% elsewhere that also need help i.e the majority that we need to consider. So they'll all leave will they - switch off the lights - sounds to me very much like Arthur Scargill reborn.

    Maggie nor Brown could/can stand for these tantrums.





  • Comment number 86.

    So the bankers’ responses to the new tax are either we’ll find a way to evade it, or we’ll move abroad to avoid paying it.

    Imagine the furore if any other group of individuals immediately stood up and said they would evade a new tax, rather than pay it.

    And if some want to move abroad, thus putting their families through the upheaval of an overseas move, simply to avoid paying a one-off tax on their bonus, then let them. I think we’ll be far better of as a country in the long run without people with cynicism levels of this magnitude strolling around the Square Mile.

    After all, Migration Watch say there are too many people in this country – it’s good of the bankers to help solve the problem like this.

  • Comment number 87.

    Given that the banks have said they can't afford to pre-fund the FSCS because they need to build capital wouldn't a better idea to have been that for every pound of bonuses paid they have to pay a pound into the FSCS. That way we would a least be building in some protection for future.

  • Comment number 88.

    "The thinking behind the proposal is not to raise revenue, but prevent the morally outrageous bonus's being paid to an industry that has bankrupted the country and relied totally on bailouts to keep it going."

    -- I beg to differ. What has bankrupted the country is actually the governments inability to keep spending under control, mistaking the revenue from a bubble for his own "genius".

    Witness the truly massive growth in public sector non-jobs (plus their unfunded pension liabilities). The banking crisis is a godsend to Brown's spinners as he can blame the banks.

  • Comment number 89.

    This needs clarification. Is this bonus on the person or the bank? If on the bank this in effect becomes double taxation (person is taxed and then the bank is taxed separately). I would assume that most bonuses will be taxed at the higher rate in any case so this tax must be an additional tax applied to the banks themselves which will in effect reduce the amount of retained profits, reduce any dividend payments and most importantly reduce overall capital. This will not necessarily prevent bonus payments, the people this most punishes again is the shareholders. Perhaps this is Darling's intention, to get the shareholders to take more responsibility for curtailing their employees excesses, they should not be approving gross bonus payments(including super tax) which undermines the capital position of the bank. However, if there are legal obligations to pay the current bonuses the shareholders will have no choice and therefore yet again will have to take all of the pain. Just to remind everyone again most of us have a vested interest in these banks not just through direct taxpayer support but through our pensions and personal investments. So this may not turn out to be a personal tax on the bankers at all, but indirectly another tax on all of us!!! Nice one Darling.

  • Comment number 90.

    #28 Calendonian

    I totally agree...but it won't happen.

    Interesting to compare the approach here with Ireland;


    http://news.bbc.co.uk/1/hi/world/europe/8402551.stm

    I've heard our debt, if it rises as predicted, will also amount to 14% GDP next year.

    Is it not totally perverse that there's little political appetite to talk about serious cuts being required yet? What other possible option is there? We've got nothing to sell!

    You'll note (Mr Darling/Mr Brown, Cameron/Osbourne, Clegg/Cable) that your opposite number(s) have taken a pay cut circa 20%.

    Will you also be doing the same?

  • Comment number 91.

    We need to consider that the actual "bankers" who caused this mess will be in the minority in the entire banking industry.

    Are the "bankers" who actually making a profit for their employer and hitting their targets on the same pedestal as the "bankers" who are losing millions in another department in a completely different building, who probably are not getting bonuses anyway unless they are paid to lose money?

    Are the people who have worked hard all year to hit their targets, and are depending on their bonuses going to be hit by this just the apease the hourly paid masses who don't understand how this type of pay scheme can work?

  • Comment number 92.

    70. At 11:01am on 09 Dec 2009, Paul C wrote:
    I work for an Investment Bank in Canary Wharf, and am presently in credit of around 300 hours worked for this year, which is (was!) due to be reflected in my pretty modest bonus. We don't get paid overtime, weekend working allowances, etc, and I've worked just about every weekend of 2009. Time I'd much rather have spent with my children.
    -------------------------------

    You have worked illegal days as defined by the working time directive. You must have at least one day off a week and also must have at least two consecutive days off a fortnight.

    Unlike total hours worked, rules for days worked cannot be waived in your contract of employment. Take your employer to a tribunal and get your dosh that way. Then apply for a new job!!!

  • Comment number 93.

    #75 you got me thinking, I know im being trivial, but if the govt wants to make a point against people who have earned obscene amounts from the banks, how about a winfall tax on the £2m a year and £500k a year tony blair received from J P Morgan and Zurich respectfully. Also how about a windfall tax on the £4.6m he is to earn from his memoirs, after leading us into war against Iraq.

  • Comment number 94.

    #84 if you want decent materials and a reasonable price, then B&Q is definitely NOT the place to go. A few headline grabbing low prices, vast majority punitive (think their prices set by redundant investment bankers).

  • Comment number 95.

    I didn't take on a mortgage that I couldn't afford. I didn't buy a 42" widescreen TV at all, let alone on credit that I could not repay. But thanks for taking my kid's school fees.

  • Comment number 96.

    Post 70, bah humbug!
    I work for a multinational insurer in the City. Like you most of my colleagues and I work at least one or two hours extra a day and most do some work at weekends.
    We are also tied to the company in addition to this by means of laptops, broadband connections and blackberries. We all accept this as part and parcel of the job and just get on with it.
    After all no one in their right mind is going to pay anyone upwards of GBP 50,000 a year or in some case much more for 9 to 5 Monday to Friday. They want their pound of flesh for the big salary they pay you to do your job.
    To be absolutely blunt if you can't stand the heat get out of the kitchen!
    Its a work life balance. Do you work to live or live to work? If you want to see your family in the evenings and at weekends you might have to change your job.

  • Comment number 97.

    with reference to the banks and the governments relationship with them are you aware that HM revenue & customs are now banking with Citibank N. A. an American bank!!!!!!!!!!!!

  • Comment number 98.

    This will not achieve the main objective, which is to ensure banks retain most of their profits to improve their capital positions and hence improve lending conditions!!!
    RBS (et al) will still be paying out £1.5Bn from their profits it's just that half of it will now be going to the treasury, but it's still £1.5Bn off the core capital of the bank!!
    Mad, stupid, politics before rationale!

  • Comment number 99.

    #70 Paul C - your 'pretty modest bonus' as you describe it is obviously more than 10k otherwise it is unaffected by these rules.

    As £10k is 40% of an average wage in this country do you wonder why people think that people in the City are detached from reality?

    Do you think that only people in the city work long hours and don't see their families?

    Do you not think that many factory workers do double shifts many weeks just to earn about £20k?

    Do you not think that many families both parents have to work and neither see their children just to make ends meet?

    Do you not think that the miners thought that the Government was being a little harsh on them when they closed all the pits?

    Do you not think that if it is so hard to be an investment banker and you are so super talented perhaps yo should do something else where you don't have to work weekends and can see your children?

    Or perhaps your 'pretty modest bonus' is more important because perhaps you are obsessed with money rather than the important things in life?

    Yet you are happy to portray yourself as someone who is missing out on family life to justify an attack about tax legislation that affects you.

    Wake up, smell the roses, its not about money and yachts and fast cars and big houses. Life is a day to day adventure full of joy but that happiness is not found in material things it is found in the love and happiness of people around you and in doing things that help make other people's lives better.

    I dare you to try it - you will never forget the moment you read this if you just dare to act and change your life for the better - its not too late - the time you have wasted on investment banking will help to set you up in your new life as a financially secure person - move north - it may be grim (;-)>) but its also a lot cheaper and more beautiful than the City and it takes less time to get to work.

    Go on - make the leap of faith that will improve your life for ever - your family deserve it too.

  • Comment number 100.

    I'm not sure I agree with this move.

    I have no problem with doing something to prevent excessive bonuses to RBS who have had massive bailouts, or to reduce those at other banks using the guarantee schemes - obviously these banks have *failed* in some way, so they should not be getting bonuses. They wouldn't even be getting salaries if they hadn't been bailed out. I don't understand how they can be given bonuses for small profits 'this year' ignoring the massive losses the same people caused last year.

    However, some banks have managed fine without bailouts or using the guarantee scheme, why should people there not get their bonuses?

    If this means that some bankers move from RBS to HSBC, then so be it - however I do suspect that HSBC might be slightly reluctant to employ them.

 

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