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Time to hug a banker?

Robert Peston | 10:02 UK time, Thursday, 10 December 2009

If I were running a big international bank with substantial operations in London (no need to cheer that I'm not, thank you very much) I'd be a little bit depressed that the government's super-tax on bonuses has not been attacked on principle by either of the main opposition parties.

Canary Wharf

It's true that Vince Cable, the Lib Dem's economics force-of-nature, grumped yesterday about the levy, but only that he felt it had more holes for bankers to slip through than vintage Emmental.

Having read the HMRC's technical note [128KB PDF] on it this morning, I'm not sure he's quite right. That said, the low yield expected by the Treasury from the tax - some £550m - is something of a puzzle.

As I mentioned in a note last week (RBS board to quit if chancellor vetoes £1.5bn in bonuses), Royal Bank of Scotland was expecting to pay bonuses just to its investment bankers of £1.5bn for their performance in 2009.

On the reasonable assumption that the bulk of the £1.5bn would consist of bonuses greater than the tax threshold of £25,000, RBS's bonuses would deliver more than £550m in tax just on their own.

What's more, RBS was by no means planning to be a particularly generous bonus-payer.

Inevitably RBS will now suspend its bonus plans, till it can evaluate what its competitors will do.

But the Treasury's forecast of what it expects to receive from the tax implies either that it expects banks to massively reduce their bonus payments or to find ways of avoiding the new tax on them.

Actually there is a further possible explanation - which is that a truly astonishing number of those earning the big bucks in the City are not resident here for tax purposes.

Certainly many international banks have a policy of rotating their top staff around the world so that they are never in one place long enough to become liable for local taxes.

Even so, the point of greater interest for those who run big banks is surely that no politician with clout - except for the Mayor of London, Boris "the bank lover" Johnson - felt able to stand up yesterday to defend the banks and their bonuses. And even Johnson's defence was feeble by his standards.

So some bankers may rage at what they see as an infringement of their Magna Carta right to pay themselves what they like, but it should give them pause for thought that they have become so marginalised in our society that even the most ardent supporters of liberal capitalism will not rally to their cause.

To put it mildly, this is not healthy. It can't be a recipe for either economic success or social stability that the guardians of our savings and the providers of finance for households and businesses are untouchable outcasts.

We would all benefit from a rapprochement.

The question is how it can be achieved.

Banks and bankers could retaliate by taking themselves to financial centres where they'll be more welcome.

And, of course, there are such places.

But Britain is not the only country mulling a one-off tax on bonuses and may not be the last to impose one.

It is striking that the French President, Nicolas Sarkozy, today put his name alongside Gordon Brown's to an article in the Wall Street Journal which says "we agree that a one-off tax in relation to bonuses should be considered a priority, due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system".

What Gordon Brown and Alistair Darling would dearly love to see would be the American's imposing some kind of cap on 2009 bonuses.

Well the history of bitter rivalry between Wall Street and the City of London would suggest that's not very likely - especially with Congressional elections looming and candidates so dependent on contributions from the financial sector.

It would be wrong however to characterise the US as the home of anything-goes remuneration: the US Treasury's so-called "pay czar", Kenneth Feinberg, has imposed pretty swingeing restraints on the remuneration of employees in businesses that have received substantial amounts of government assistance.

What's to be done?

Well a number of bank chief executives and chairman have said to me in private that they accept the argument that their profits for 2009 contain a substantial windfall element, generated by the exceptional measures taken by central banks and finance ministries to limit the damage from a recession partly caused by reckless bankers.

Perhaps if a few of them said this more loudly in public, and created the conditions for a voluntary moratorium on big bonuses by the industry, they'd be allowed out of the gulag of their own construction.

What would be in it for the bankers? Well political leaders might I suppose adapt one of David Cameron's catchphrases and call on us all to hug a banker.

Just think of the catharsis, as we wept together over the economic vandalism of the past few years - for which we may all share some responsibility (although some are plainly more to blame than others).

Comments

Page 1 of 2

  • Comment number 1.

    If I were running a big international bank with substantial operations in London I would convene a meeting with all the other people running both UK and international banks and develop an industrial policy aimed at broadening and rebalancing the economy.

  • Comment number 2.

    If the levy is on the bank does it matter whether the recipient of the bonus is resident? Surely the yield would be the same regardless of the residence status of the recipient?

    In any event, a lot of these people would be resident but would not be ordinarily resident or domiciled but would still be liable to UK tax. I assume the low yield is because the tax is meant to be a deterrent to paying bonuses which means, that having spent it, there will be a bigger hole in the finances if the deterrent effect works.

  • Comment number 3.

    Bankers are a sideshow. Reading the papers this morning:

    1. The substantial tax rises on anyone earning over £20,000 a year are not going towards repaying the national debt or shrinking the deficit. No, they going to fund further increases in public spending, particularly rises in benefits for those not working. How can anyone who actually works think this is right or 'fair'?

    2. Employer national insurance has risen to 13.8% of every salary; so employers across the country now have a further incentive to cut hours and jobs to the bare minimum. Any marginal job has just become even more difficult for an employer to justify. Great news again for those in work and worried about their jobs.

    3. Labour have refused to say where the cuts will fall, despite hammering the Tories for not being specific and 'having any policies.' It's now clear that Labour have refused to spell out the real numbers because they are so appalling. So we will have to wait until after the election, making our debt problems even worse in the meantime, to find out.

    4. This is just the beginning: massive further tax rises will follow post the election assuming Labour are re-elected. (Suspect they will be albeit narrowly.)

    5. Growing risk that public finances continue to deteriorate, sparking a gilts' buyers strike / debt crisis and requiring an emergency IMF bailout. Labour are just hoping this happens after the election; decent odds on the bet. Still, not really the responsible way to run the country.

    Labour have totally lost control of the public finances. They always do. Sadly, we will end up paying for it. Partly my fault, I voted for Blair the first two times. Won't vote Labour again though!

  • Comment number 4.

    But does the tax stop RBS paying big bonuses at its overseas offices?

  • Comment number 5.

    Robert,

    'No it is not healthy'
    I know, having your appendix taken out is not pleasant, but when you are sick and need it out you have it done. The consequences of not doing so are worse than not healthy.

    They bankers were not taxed enough IMHO, despite the squeals - they'd squeal at giving the taxman an extra penny a year, you know the guy who pays for the police and all the other services we have in this country.

    I worry the infection of extreme greed has not been completely dealt with effectively, and it may flare back up again.

  • Comment number 6.

    The low tax take expected might also be because the majority of workers in banks receive nothing like £25k+ in bonus.

    A bonus will be paid to all staff in a bank from the clerk in your local branch through to chairman and board. so there may be many hundreds, if not thousands, of staff getting between £200 and £10,000.

    Also, the bonus pot and the remuneration pot are often the same ie the £1.5bn includes salaries as well as bonuses. But that wouldn't make great headlines would it.

    Perhaps more detail is needed before the lynching continues

  • Comment number 7.

    Robert, I think you miss the point. This is a fantasy budget along the lines of Germany's fantasy armies in 1945. Anyone clever enough to earn big bucks is clever enough to minimise tax liabilities. As labour found out in the 1970s, you can raise taxes to 98% but find that everyone that could be liable leave the country, or work around it.

    That most of our MPs and ministers and advisors are not in the same league as the 'clever' people is self evident. Take the temporary increases in allowances. Either it was a mistake by honest individuals running the accounts or a deliberate attempt to mislead (like the 10% tax rate). The voters will decide, unfortunately in 6 months time, by which time the mess will be worse.

  • Comment number 8.

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

  • Comment number 9.

    Robert,
    If I was running an international bank in the City of London I would be erecting a security fence around the area.
    That way the bankers could enjoy the millionaire life-style while keeping the poor and improvished outside. From this independent state within London they could send out memos to the Treasury about their demands and how the government should act. Ending each memo with:
    "....so let them eat cake!"
    OK...I'm being sarcastic....however I do have to ask the question:
    "Who runs the country?"

  • Comment number 10.

    I am surprised at the overall tone of this article which seems to imply some level of sympathy with the bankers who have wrought most of this on themselves through their own hubris and greed.

    A reminder of the basic point in this bonus furore, which is that if the taxpayer hadn't jumped in with billions of cash, loans and guarantees to save RBS, HBOS, and others, there would be no banks paying out any salaries, let alone bonuses.

    It was impossible for the man on the street to understand how the board of RBS (who are effectively public servants at present) could be paying out huge bonuses to the very people who created this turmoil, rather than paying down the huge debt owed to this country.

    Any rapprochment that Robert wants to see has to come from the actions (not words) of the banks themselves, not from us the taxpayers or the Government caving in to their demands.

    Too long the bankers have swaggered about as self appointed rulers of the world, whereas the true heroes in our society are the men and women quietly making a living, paying their taxes, helping their communities, and feeding their families.



  • Comment number 11.

    Just think of the catharsis, as we wept together over the economic vandalism of the past few years - for which we may all share some responsibility (although some are plainly more to blame than others).

    Interesting view Robert, do you feel that when apportioning blame that we should look a little closer to home than the bankers?

    Whilst I do not pretend to have your extensive insider knowledge of the movers and shakers of the city, I have met a number of people in the city in my fifteen years working there, and none of them, to my knowledge, ever abducted families or threatened the public into borrowing money that they knew they couldn't afford to pay back.

    Indeed could it not be argued that if we had taken the pain in 2001 when the economy was obviously in need of a re-balance, rather than reducing the tier-1 capital requirements for banks (thus setting the ground for the monster credit boom that followed) to prolong the boom, and make the bust even worse this situation would not have arisen to the extent we now see.

    If this is the case then the blame needs to be seen a little closer to home and certainly the very politicians that now lord over us, and the bankers, for being such fools, themselves hold the the responsibility for setting their self interest (getting re-elected) ahead of the greater good of the country, and this ignores the fact that some could be accused of theft, so the moral ground has never been more boggy.

    And indeed to take this a little further, should that much maligned character 'Fred', formerly of RBS, be required to re-pay his pension pot, should the ministers and MPs that allowed this situation to happen on their watch not be required to show a same level of self sacrifice that they expect of those that operated within the laws that they passed?

  • Comment number 12.

    The guardians of savings and providers of finance for homes are social outcast for precisely that reason - they weren't.
    A significant number of these 'guardians' played fast and loose with imaginary money and sold it to others who didn't understand what was happening.
    This is all fine until my money gets involved.
    Banking appears to be too important to be left in the hands of people who only think as far as the next bonus. Even politicians think further than that!

  • Comment number 13.

    The reticence of the banking sector to accept any culpability for our current plight, coupled with their insatiable greed to reward themselves at the expense of the shareholders and investors inevitably means that the only people willing to hug a banker are probably bankers themselves - no on else would stoop that low.

  • Comment number 14.

    #6 yam yzf has it right - a huge part of the bonus pot in investment banks is divided up into small chunks that go to normal operational staff - legal, finance, accounting, documentation, settlements, clerical, etc.

    It is only in part related to overall profit, but to a much larger extent determined by the individual's performance during the year against agreed targets, just like any other business.

    This is because - surprise surprise - the jobs that they do is not directly linked to profits, they need to be done (and done well), whether the bank makes a profit or loss, and usually under rather demanding conditions.

    The £25k threshold acknowledges this reality, but the tabloid "greedy banker" image is too convenient an untruth for politicians to come clean about. If they are not to blame, who then????

    I have given up hoping that supposedly informed journalists like Robert will try to dig just a little bit deeper for us.

  • Comment number 15.

    "Well a number of bank chief executives and chairman have said to me in private that they accept the argument that their profits for 2009 contain a substantial windfall element, generated by the exceptional measures taken by central banks and finance ministries to limit the damage from a recession partly caused by reckless bankers.

    Perhaps if a few of them said this more loudly in public, and created the conditions for a voluntary moratorium on big bonuses by the industry, they'd be allowed out of the gulag of their own construction."

    Perhaps if a few of them said this more loudly in public, there would be intant scrutiny over whether they themselves got a bonus. If the answer is yes, I would expect them to receive opprobium on a par with Fred 'the Shred'.

    Anonymity is the best defence.

  • Comment number 16.

    For all those who want to 'go back to business as usual' I have a question? Did you watch Sir David Attenborough last night on BBC2, and if so why do you want business as usual?

    For those who say we are looking for growth, how do you plan to achieve this and will you reassess your plan? What changes will you make given the considered words of Sir David Attenborough?

  • Comment number 17.

    Hug a banker? - Is this the only way to get some trickle down. The bonus issue has been dealt with can we move on to some bigger issues as suggested by number 1. Retaining a significant part of the banking industry in the public sector (preumably not to be subject to the 1% cap?)will go along way to facilitate the re-balancing of the economy and implementing an effective industrial policy.

  • Comment number 18.

    Bankers are on their way to join the ranks of other "key" people despised in this country;

    1. Estate agents
    2. Politicians
    3. Insurance companies

  • Comment number 19.

    WHAT A COMPLETE AND UTTER LOAD OF BULL!

    OTHER COUNTRIES SEEM TO GET BY WITHOUT HAVING A 'WORLDWIDE BANKING' CENTRE LOCATED IN THEIR COUNTRY!!!

    IN FACT, I WOULD VENTURE TO SAY THAT BANKING CENTRES SHOULD BE LOCATED IN COUNTRIES WITH EXTREMELY SMALL POPULATIONS...SO THAT THE BANKS CAN'T HOLD THE CITIZENS AND TAXPAYERS TO RANSOM WITH BY PLACING A GUN PLACE TO THEIR HEADS AND SAYING 'GIVE US ALL YOUR MONEY OR THE ECONOMY GETS IT!'....GEDDIT?

  • Comment number 20.

    My understanding is:

    1. The tax is only on discretionary bonuses.
    2. Guaranteed bonuses are unaffected
    3. The bank pays the extra tax
    4. So the 'ankers still get their money
    5. What are they complaining about?

  • Comment number 21.

    I didn't ask this man to nationalise my industry to bale out the Scottish banks. I'd be far better off with another two tough years in my industry but with these banks in their graves where they should be. We all would.

  • Comment number 22.

    "If i were running a big international bank i'd be a little bit depressed that the government's super-tax on bonuses has not been attacked on principle by either of the main opposition parties." - Come on RP, this is a great deal for the bankers, you'd also have no excuss to be a little depressed with the money you'd be on.

    Why are you only talking of Bankers though, to keep the football analogy going, its reported that there are over 300 non domiciled footballers / managers for tax purposes in the uk, this would equate to the team, bench and manager of every premiership team in the country.

    Many of footballers who do pay uk tax have set up ltd co for their image rights to reduce their tax to between 19 and 30%, in line, percentage wise, with the income tax and NI of somebody earning £20k per annum.

    Others are at least considering "cleaver" schemes where they are meerly loaned money from the club, thus in the short term only paying tax on the 5% interest they are deemed to have as a benefit, ie an immediate tax rate of less than 2.5%.

    Entertainers are probably no different.

    I have banged on that the top 10% earners in the country pay around 32% tax rate as compared to the lowest 10% earners paying 46% when all taxes are taken into account. The latest pre budget has done very little to redress this.

    Personally i'm not emotional enought to want to biff or hug a banker, but i do feel the "clever" ways of not paying tax is probably exploited by virtually all those who wages are say over £200k per annum

    IMO a very tax simple system where everyone is "made" to pay a sensible amount relating to their income is more desirable than complex systems which almost invite accountants to find a loop holes.

    Also In War time, trying not pay tax had a stigma to it, imo there should be more emphasis on avoiding paying tax being unfair rather than clever.

  • Comment number 23.

    Robert, I will take your challenge and offer support for the bankers against this tax on the following grounds:

    1. It has a whiff of retrospective-ness which offends a sense of justice.
    2. By their action of supporting the gilt markets, re-igniting the carry trade and re-inflating the stock market, their investment activities have created a mirage that all is getting back to normal.
    3. Bonus payments, as usual, support the London property market, which in turn acts as a beacon for the rest of the country.
    4. Money in HMG’s hands is less beneficial to the populace even than it is in the hands of the fat-cats.

    However, I take issue with your comment that these bankers are providers of finance for households and business, unless you mean in the sense that the milkman used to be the provider of milk, or more appositely that the rations officer was the provider of sustenance.

    The root problem is the debt reliant monetary system compounded by ever-expanding government (in all its senses). Acceptance of this is a society wide problem, albeit based on mass ignorance. For the time being that ignorance remains and is sought after in many quarters. It is evident that most people do in fact want to get back to summer 2007 and continue the bubble economy.

    Personally, I do not believe that that is a mathematical possibility to continue with debt based money but the alternative is truly revolutionary. For all those who wish to return to the world of ever increasing house prices, annual inflation linked pay rises and a slow but steady erosion of personal wealth and freedom, you really have no choice but to encourage your masters of the universe to enthusiastically pursue their ways.

  • Comment number 24.

    "To put it mildly, this is not healthy. It can't be a recipe for either economic success or social stability that the guardians of our savings and the providers of finance for households and businesses are untouchable outcasts."

    Robert, since when did this apply to Investment Bankers? Retail Bankers I don't think anyone's got an argument with. Investment Bankers basically gambling with customers' term deposits for personal gain? No thanks.

  • Comment number 25.

    This is not a tax on banker's bonuses this is another tax on shareholders. The majority of bankers will still get their bonuses by hook or by crook all this tax initiative achieves is a further erosion of the capital base of the banks and less distributable profits to shareholders. Before any banker recieves a bonus they need to get their company valuations back to where the levels they were at pre-crunch. Any distributable profits should go to shareholders to compensate for their loss of equity. Institutional shareholders should have the balls to veto all bonus payments until the bank achieves these objectives and the FSA should insist on this capital retention in the name of financial stability. We are no where near out of the woods in terms of financial stability in the banking system, why are the FSA not stepping in to insist on further capital retention until at least economic growth returns and there's a sustained rise in asset values reducing further writedowns.

  • Comment number 26.

    In response to #4.
    The HMRC's technical note contains the following definition
    "and either the individual is resident in the United Kingdom in the tax year 2009/10 or performs duties of the Banking Employment at any time in that year wholly or partly in the UK"
    So presumably the answer is No.

  • Comment number 27.

    We shouldn't be surprised if this tax doesn't raise much thats not the point - if any tax is raised from this it will just demonstrate that banks are run for their employee benefits not for their shareholders. Let me explain..

    A bank wants to pay an employee a bonus of £500k.

    They will have to set aside £1m which will then be taxed at 50% leaving. £500k for the employee (which will then be taxed at 41%). The bank will also have to pay employees National Insurance of approx 12% on the 500k so thats about 60k.

    So the employee has a bonus of 500k (before tax - after tax its 295k) whereas the bank had to pay out £1.06m!

    Alternatively the bank could lend out this £1.06m or use it to build up their capital base.

    If they waited just 4 months the same bonus could be paid for half the cost to them - which will benefit shareholders more?

  • Comment number 28.

    Why is the regulator(FSA) not insisting that all profits be retained to shore up the capital positions at all banks?!?
    If there are further significant writedowns next year due to a double dip recession and the banks then require even futher capital injections what is going to happen if the government simply cannot obtain further finances to provide that capital? Why don't we ensure that the banks are more than bullet proof in terms of capital positions in case things do not turn out as good as projected.
    The FSA should do what they said they would do if they felt banks were taking too much risk with insufficient capital protection and insist on higher capital ratios.
    The institutional investors should act in the best interests of their investors and ensure that the companies they provided investment to are also acting in the best interests of the owners.

  • Comment number 29.

    Maybe it won't raise very much money, but something really has to be done about the bankers. This isn't much but it is a start and Mr. Darling has at least fired a shot across their gilded boughs. The banks have behaved appallingly. They squander their money, encourage irresponsible borrowing, impose punitive charges on their customers and refuse to pay them back, and every year they seem to indulge in an orgy of greed and excess with their bonuses at a time when their customers and the public are suffering immensely. All this after the taxpayer stumped up the money to get them out of a hole. And we are supposed to sit back and let them ride roughshod over us, because if we don't, they'll throw a strop and leave? We can't let this happen. If some of them leave, they leave, and maybe it's good riddance. The problem is that 30 years of monetarist policies in this country have decimated all our other major industries, so that the bankers are all we've got left. They know this, and, like an abusive husband, continue to treat us appallingly because they know we haven't go the guts to stand up to them. We must stop acting so pathetically. It has to stop, if only for our own pride.

  • Comment number 30.

    The reason the bankers aren't more public about the fact that they don't deserve these bonuses is that they will rock the boat and start to admit the 'talent' argument is a myth!

    Only one my friend from Uni went into banking - he was not the most intelligent (he kept failing the maths tests so had to take the legal route in to M&A) however he was the richest and best connected - his dad bought him an MG for his 21st birthday.

    The only other people I know in banking are privately educated - they work hard but I don't think they are any more intelligent or creative than people working in medicine or education.

    I know what - why don't all the highly paid investment bankers all go on strike - then we'll be able to see the true value they bring to the country.

    In the world most of us live in a strike of bin collectors/postal workers/nurses would bring more disruption than an investment bankers strike.

    But if those that deal in CDSs and and CDOs want to strike and prove me wrong - go ahead!

    'Credit Default Swap traders of the world unite!'

  • Comment number 31.

    21,

    Sadly you are very much mistaken for these so called 'Scottish' Banks, ceased being Scottish some time ago.................

  • Comment number 32.

    "a recession partly caused by reckless bankers"

    So how about concentrating on the other causes. Some that spring to mind are:

    Reckless borrowers
    Reckless govt spending
    Reckless govt taxes (pensions tax, IR35 etc)
    Reckless PFI schemes
    Reckless introduction of non-jobs in the public sector

    I am sure others will think of more.

    Don't forget that your pension fund relied on the dividends in the boom years. Don't forget that you didn't need those exotic holidays and new cars. Don't forget that GB taxed dividend payments which directly reduced the amount of pension you will receive. Don't forget that labour mobility has been restricted through IR35 and section 660A.

    Simply, don't forget that the govt are employing all the resources of their spin machine to deflect the balme from themselves.

    And finally, don't forget that this conveniently removes focus from other areas such as the EU appointments etc.

  • Comment number 33.

    Time to hug a banker? That sentiment is right up there with the phrase, "Time to hug an estate agent". More to the point, I can't help but get the feeling that Robert keeps trying to suggest that bankers in receipt of huge bonuses (taxed or not) should somehow qualify for sympathy the rest of bank bailing-out taxpayers could not hope to receive in a million years. In case you don't get it, we pay but they win. It's that simple. Why would the rest of us feel sympathy?

    My suspicions were raised by this: "a truly astonishing number of those earning the big bucks in the City are not resident here for tax purposes" - nice to see that you've caught up with what the rest of us long suspected. How else could bankers earn vast sums and make such small contributions to the tax system other than by employing tax wheezes such as this?

  • Comment number 34.

    #22

    You forgot to mention politicians...

    Didn't Darling hire a tax advisor to minimise his own tax contribution, then have the audacity to charge said advisor's bill to the taxpayer?

    Then there are the 2nd home flippers...

    I agree the rich pay little tax, it isn't limited to bankers.

  • Comment number 35.

    The Chancellor stated that although the UK government only bailed out select banks, the tax on bonuses was being levied across the entire banking industry because everyone in that sector benefited either directly or indirectly from the bailout. But in that case, why restrict this to banking? The bank bailout was done because of the negative impact on the UK economy if this had NOT occurred, meaning that the entire UK economy benefited directly or indirectly from the bailout (if this was not the case, the banks could have been left to default with no consequences).

    So extending his logic, this special tax should have been applied across every UK company. Some might argue that it's only banks that pay these bonuses, but in that instance, the effect would be the same as is now the case but would at least be logically consistent. However, that would not be politically as popular, showing very clearly that this is banker-bashing by the government and that his arguments are false ones.

  • Comment number 36.

    > We would all benefit from a rapprochement. The question is how it can be achieved.

    That's easy enough. Sack the present lot, and hire some sociable people, not ones obsessed by greed. Look, the computer does all the work nowadays, so we don't want highly-strung "superstars". Just give us a boring set, on £50k a year. I'm a computer scientist, but I'd roll up my sleeves and sort the banks out myself for that kind of money!

  • Comment number 37.

    #11 Lorne2 - i agree.

    The gov and regulators looked the other way - the change to the measure of inflation also contributed to the boom in house prices.

    But the problem is that they need to be strong enough to stand up to the banking community otherwise it will only self destruct - or worse help to bankrupt this country and countries around the world.

    The fact that you are a rich banker doesn't mean you are always right but GB believed the hype. Also the finance has been able to hide behind the complexity of what they are doing.

    The fact that bankers themselves advised and implemented the bailout and APS etc - is an absolute scandal. Maybe a conflict of interest here I think??!!!

    The gov should be talking to the voices who spoke out against what was going on - how about speaking to some of the Hedge Fund managers who were shorting Northern Rock rather than speaking to banks that gave buy recommendations on their shares.

    GB and AD seem to think we can get back to business as usual in the city after a short telling off.

    David Einhorn (US hedge fund manager) gave an excellent speech about all of this on Oct 19 2009 comparing the financial reform on the table as analogous to our response to airline terrorism by frisking grandma and taking away everyone’s shampoo. Heres an extract from the speech...


    "In the context of the recent economic crisis, a highly motivated and organized banking lobby has demonstrated enormous influence. Bankers advance ideas like, “without banks, we would have no economy.” Of course, there was a public interest in protecting the guts of the system, but the ATMs could have continued working, even with forced debt-to-equity conversions that would not have required any public funds. Instead, our leaders responded by handing over hundreds of billions of taxpayer dollars to protect the speculative investments of bank shareholders and creditors. This has been particularly remarkable, considering that most agree that these same banks had an enormous role in creating this mess which has thrown millions out of their homes and jobs. Like teenagers with their parents away, financial institutions threw a wild party that eventually tore-up the neighborhood. With their charge arrested and put in jail to detoxify, the supervisors were faced with a decision: Do we let the party goers learn a tough lesson or do we bail them out? Different parents with different philosophies might come to different decisions on this point. As you know our regulators went the bail-out route.


    But then the question becomes, once you bail them out, what do you do to discipline the misbehavior? Our authorities have taken the response that kids will be kids. “What? You drank beer and then vodka. Are you kidding? Didn’t I teach you, beer before liquor, never sicker, liquor before beer, in the clear! Now, get back out there and have a good time.” And for the last few months we have seen the beginning of another party, which plays nicely toward government preferences for short-term favorable news-flow while satisfying the banking special interest. It has not done much to repair the damage to the neighborhood.


    The financial reform on the table is analogous to our response to airline terrorism by frisking grandma and taking away everyone’s shampoo, in that it gives the appearance of officially “doing something” and adds to our bureaucracy without really making anything safer. With the ensuing government bailout, we have now institutionalized the idea of too big-to-fail and insulated investors from risk.


    The proper way to deal with too-big-to-fail, or too inter-connected to fail, is to make sure that no institution is too big or inter-connected to fail. The test ought to be that no institution should ever be of individual importance such that if we were faced with its demise the government would be forced to intervene. The real solution is to break up anything that fails that test."

  • Comment number 38.

    'guardians of our savings'

    Mr. Peston you are a wit!

  • Comment number 39.

    Since the bankers are only in a job because they were bailed out by the govt., it begs the question whether they should be out of jail, let alone still employed - and bonuses are not relevant at all. Given what has happened, despite what is claimed by bankers, they are self-evidently simply no good at what they do at best, criminal at worst. They have failed miserably, have ruined many people's lives and are solely culpable. Why is it thought appropriate to reward them with any bonuses at all while all around them is in disarray, by their hand?

  • Comment number 40.

    certainly time to hug the millions of bank employees who have been besmerched bythose claiming to be more senior who wrought such havoc
    ordinary bank clerks get little of nothing while as ever the few have their snouts in the trough even after having performed well below par
    It is the banks not public servants who should be paying off the debt
    as for the brain drain there are many talented people just below those who messed things up let they be promoted and gain but not excessively and let those so called high flyers who get millions in un earned bonuses dissappear down that drain plughole anywhere else apart from government such poor performancewould not be rewarded witbnh bhuge bonuses and promotionsthe banks not government are at fault whatever ex young conservative and oxford university chairman the biased NickRobinson may say

  • Comment number 41.

    I have a great deal of sympathy with reponse 3 about national insurance. My wife and I have both retired early (we are in our late 50s) and have, together, a pension income of about £50,000. We are comfortably off. The problem with NI, which is after all just a tax, is that is related only to employment. There are loads of us who thus do not share the burden. Obviously I am personally quite happy with this, but it just cannot be right. I wonder what the tax rates would need to be if NI were subsumed into income tax. Has anyone done the calculation?

  • Comment number 42.

    30 danj180

    Now there is a wonderful thought for the day - investment bankers on strike - bet they aren't union members though!

    32 yam yzf

    What is a non-job?
    Is that a play educator employed to convince over-anxious mothers that the kids really should be out playing rather than being stuffed with crips in front of the box and that the kids can walk to school just as well as we all did?


  • Comment number 43.

    These Bankers are the ones that created the problem, by using our money to gamble.
    Will they share in the losses made by the banks that started the collapse ?
    Do they not see they have not only caused their own problem but have foisted huge grief on the rest of the world , that may last half a decade, and they still they should get ibscene rewards inspite of the fact that the catastrophy was so bad that rather than going bust, the rest of us mugs (through the treasury) have no option but to bail them out.
    They have built-up the myth that they NEED these obscene rewards, to continue their work.
    Well I say it is about time we counter that suggestion head on, but it will take a global stance, and ALL Governments should stand against the blackmail of these arogant money obsessed, I'm alright jack nobodies.

    The world ecconomy was put at risk by these people, they are BEAN COUNTERS , and make wealth from our money.
    The major governments of the world should club together to protect the world ecconomy, and put a reality check into the banking world, by limitting , both their salaries & bonus' to realistic levels

  • Comment number 44.

    The imposition of a bank bonus tax was always going to be a political rather than an economic act. Its function is to make it clear to the banking class that times have changed and expectations and behaviours have to change with them. The objective is to concentrate minds.

    It is rather sad to see that at the same time as New Labour seeks to impose new disciplines on the financial sector it has failed to acknowledge the other sharp reality; namely, the country has run out of money to fund the public sector so the size of the state has also to shrink.

    It is this recurrent failure over generations to understand that the state can only be funded by taxes on the population that lies at the root of our economic difficulties since the war. Every action, every deed that the state is committed to requires funding from the taxpayer who in turn requires a degree of income to facilitate that process. However, it has been apparent for a number of years now that with the reduction in value-adding economic activity the income of the taxpayer has been suffering. Hence the need for family credits and the like.

    Now with growing unemployment in the value-adding sectors of the economy, coupled to a failure on the part of the state to cut its coat according to its cloth, with the previously high-rolling financial services sector in the doldrums having been bailed out by the taxpayer; we have a very serious difficulty.

    The problem at the moment seems to be to get people to understand that the world has changed. The old familiar ways have to change. The Other Peoples' Money which has been the largesse that got the good times rolling has all been spent and the other people want their money back.

    Lastly, I am uninterested in being told we are all guilty of this mess. Some of us stood clear of the borrowing and the spending and said that we did not feel this was a good idea. We were abused in the good times and now we are being told that we have to shoulder the responsibility for the bad times as well. I can only respond to that argument by suggesting that that particular guilt trip be dumped elsewhere.

  • Comment number 45.

    "I'm Robert Peston, the BBC's business editor. This blog is my take on the business stories and issues that matter."

    Judging by the amount of posts in this blog on the subject, you seem to believe that banking is just about the only issue that matters to your readers. I think you stated in a previous entry that banking represented somewhere between 8 and 12% of the UK economy. How about reporting on the other 88 to 92% of business?

    Before anybody starts telling me that banks oil the wheels of all other business etc etc, consider these random points:

    Banks are like an extra tax collector. They abuse their privileged position, created debt and made us all prisoners to it.

    Savings should be used to defer spending, not for creation of excess wealth. Greed is bad.

    It’s a slippery slope to slavery. If things are allowed to continue there will be banks and there will be slaves. Robert Peston will no doubt still be posting about banks, but they’ll have cemented their places running the world so won’t be bothered in the slightest.

    We’re all doomed.

  • Comment number 46.

    Contrary to popular belief, this is hardly an unprecedented move and will not result in the death of the banking sector. Labour has hit both utilities and oil companies with windfall taxes in the past. Both industries claimed at the time it would severely damage them, lead to investors deserting Britain and do some long-term damage to our economy--as lobbyists always do when their sector is threatened with slightly less generous treatment.

    But the lights are still on and the North Sea is still producing oil despite the windfall tax. Equally, I'm sure banks will still be making profligate loans and creating fancy derivatives a decade from now.

  • Comment number 47.

    # 34 Drg

    thank you, how could i have forgotten Politicians!

    The story with Darling is that he is alledged to have claimed stamp duty on a flat purchase and approx £6k on furnishings then let the flat out making at least £5k pa profit after mortgage payments. He claimed for tax advice of just over £1k relating to letting out the flat while claiming living expenses at a different property.

    Not big bucks i know, but if your looking to be an example!


  • Comment number 48.

    #37

    Excellent post.

    I also think the bill for the bankers who 'advised' on the UK bailout was over £100 million.

    Don't you just love capitalism?

  • Comment number 49.

    If I was a banker, I'd have dished out the cash bonuses already.

    Someone is going to have to start paying for the financial crisis pretty soon and Darling is sharing the pain between business and employees with NI rise, which I think is pretty fair.

    The next question is what the other half of the equation (ie cuts from government) will look like. Education, Police and Hospitals are sacred cows (as is Defence according to Mandy back in July). That really only really leaves DWP or HMRC as major budget holders for major cuts. Can't see much coming from HMRC other than Gershon style efficiency savings.

    I guess that leaves benefits?

  • Comment number 50.

    I'm not sure it's healthy to call top bankers "incompetant".

    Although it's a nice image to help us understand what happened, it seems to me that they are in fact very clever.

    None at the top end have lost any money, any bonus, pensions or jobs. By bringing the world to the brink or financial collapse, they managed to maximise the profit from this planet. Then by forceing he taxpayer to inject more money, they can start the process again. Very clever.

    They are only incompetant if you believe that they had any duty to provide any social function, or care for the consequences of their actions. Since when was this is not their remit?

    Of course the little people, including those at the lower retail side of banking suffer, but that's the acceptable price of the top dogs becoming rich, isn't it?

    Business as usual.

  • Comment number 51.

    #42 That sounds like a non-job to me :)

  • Comment number 52.

    I see Michael Geoghan - CEO of HSBC is relocating himself to Hong Kong next year. This is clearly for tax purposes. HSBC is run from London. HSBC's claim that due to their desire to further expand their asian operations means the global CEO needs to be in Hong Kong, suddenly, when he may have to pay his fair share of tax is frankly contemptuous.

    The politicians are of the same breed as bankers - greedy, grasping, dishonest. Perhaps someone in the UK should form a new political party called 'Tax The Crooks' or something similar with a simple policy that imposes a 99% tax on any expense claimed in the last 10 years by any Parliamentry Member. Also a 99% tax would be imposed on any banker who has received more than, say £10k, in any 1 year - in the last 10. If they cannot pay their palatial home will be repossessed. This need not be one of those silly single issue parties like the Greens but a full cabinet of sensible people elected independently. On the other hand - you could do nothing.

  • Comment number 53.

    Nicely put #22:
    Employees:
    A single tax rate across the board. One rate, no exemptions.
    A realistic livable initial threshold of £10K ish.

    Businesses:
    likewise, but with simple defined exemptions, so it's easy to work out what is allowed and what is not. No guesses, no pushing the boundaries.

    Bye Bye lots of accountants, taxmen and public overhead. Oh and a few banking gods.
    Hello more tax revenue, and fairness.

  • Comment number 54.

    32. At 12:56pm on 10 Dec 2009, yam yzf wrote:

    "So how about concentrating on the other causes. Some that spring to mind are:

    Reckless borrowers
    Reckless govt spending
    Reckless govt taxes (pensions tax, IR35 etc)
    Reckless PFI schemes
    Reckless introduction of non-jobs in the public sector"


    None of these are causes they are all symptoms, in fact the only cause is the contradictions of Capitalism and the tendency for profits to diminish over time. It's the root of all the symptoms you listed:

    Reckless borrowers - borrowing in order to maintain their living standards in a system which is constantly diminishing them in real terms through inflation. Loans offered by banks who needed to 'find new markets' due to their diminishing profit find these reckless borrowers and then approve them for the loan.

    Reckless govt spending - In order to maintain the profits of the private sector and avoid a crisis the Government engages in public / private partnerships in order to supplement the private sector's diminishing profits.

    Reckless govt taxes (pensions tax, IR35 etc) - Required by Government to pay back for the last crisis of Capitalism which has been ensuring the build up of Government debt for years.

    Reckless PFI schemes - Again, introduced in order to maintain the profits in private corporations at a cost to the tax payer (for funding) and at the cost of the consumer (with reduced service) - in many cases these are the same people hit twice. i.e. Metronet.

    Reckless introduction of non-jobs in the public sector - Created to supplement demand lost through oversupply (overproduction) as the profit diminshes and new markets are not found as quickly as the commodities are being produced.

  • Comment number 55.

    So many questions have gone unanswered. In a down economy where the banks say that business is not borrowing money, how are they making so much money to be able to pay out large bonuses? The banks run the governments so this is really about public relations and not about having any real impact on the bonus system, which, by the way, was the fuel for the fire of the great housing shceme. As people are beginning to recognize that there are actually two economies, one for bankers and investment firms and one for everyone else, they are beginning to wonder why their representative government does not represent them. This is just another attempt to quell the public anger, justified public anger, after the banks diminished individual retirement accounts while enriching themselves. In better days a revolution would have followed.

  • Comment number 56.

    45. At 1:30pm on 10 Dec 2009, Wardy29 wrote:

    "Judging by the amount of posts in this blog on the subject, you seem to believe that banking is just about the only issue that matters to your readers. I think you stated in a previous entry that banking represented somewhere between 8 and 12% of the UK economy. How about reporting on the other 88 to 92% of business?"

    ...that's because there is denial in the media and by the Government that the rest of the business world is in recession. I suspect you don't have a powerful lobby representing you - but the banks have.

    They use the wealth they gain from you, me and everyone else to good effect. All the talk in the crisis is about banks - the concern you should have is that if the crisis in banking isn't over yet then the real recession hasn't even got started.

    In 1929 the great crash was caused by.....you guessed it, reckless lending (or borrowing if you're a lender!) which people used to buy shares, creating a share bubble which popped. The banking crisis took about 2 years to flush out but that's when the trouble for the rest of the Economy started - and lasted 10 years.

    Substitute shares for property and credit instruments and fast forward 80 years and we have the same situation today.

    The only consistency is the banks and their role in the chaos - just as they were involved heavily in the 5x lending in the 80's which led to the 88 crisis.

    I think the real problem is not so much the concentration on banking, but that the right questions are not being asked. The question should be "oh no, why have they done this again" - but what actually gets asked is "why did it happen this time" - allowing banks and Governments to make claims about 'financial headwinds' and 'credit storms' - like it's some sort of weather event imposed by a Diety over which we have no control.

    I know that businesses up and down the country are being squeezed - and it's SME's who have it worst as they cannot raise capital on the stock market generally.

    It's genocide of the SME world which is occuring here. Banks want to deal with large entities not Mr Hardy and his 5 employee shoes business and they couldn't care less if all SME's went to the wall and were replaced by fewer large corporations.

  • Comment number 57.

    I am continually amazed by the thesis that all of the problems were caused by the banking system in isolation from anything else - NO THEY WERENT

    Government reduced capital requirements to stoke up a nice fat credit boom which fed into asset inflation (houses) - made the voters feel more wealthy BUT created the incentive for banks to lend recklessly. AND people went and spent all the money, equity drawdown etc etc.
    When are people going to start looking at how WE behave and not only that but the house price explosions that regularly occur and make it less and less likely that houses will ever be affordable again?

    BUT, tax capital gains on ALL houses, and you take the heat out of the housing market, insulate the first time buyers from its effects and maybe, just maybe our children will be able to afford a house of their own before they have to retire!

    There will be huge pain to just stop borrowing more money let alone pay back the huge existing debt. Stop banging on about a sector that is yesterdays news - okay regulate it carefully so this never happens again but maybe we should also give up the reckless consumerism that only destroys.

    Remember: There will be a wailing and gnashing of teeth
    What if you have no teeth?
    Teeth will be provided (although they may have to be means tested).

  • Comment number 58.

    This country used to have banks that were run by trustworthy people
    with the "Protestant Ethic" ( Quakers ) and it also had a
    Civil Service that could really do maths and make reasonably
    accurate forecasts . Now, we appear to have totally lost our
    way as a society. At a time when the banks are considering
    paying their employees billions of pounds in bonuses, the Office
    for National Statistics (ONS) has just laid out the definitive cost
    taxpayers will have to bear for both the state old age pension and
    public sector pensions. It is in the region of £2,000 billion .
    This is currently unfunded. ( makes the £10-£50 billion cost for
    rescuing the banks look tiny! and look what problems that has caused
    to the PSBR)
    The country clearly does not have this money (and never will)and
    hence the next generation is not going to be able to retire with
    anything like the same state pensions as this generation has.
    A couple of thoughts come to mind ;
    1. Why not use a substantial tax on banking transactions to
    help fund this massive pensions deficit. It would be a far
    more worthwhile use of the money rather than creating vast
    profit pools in banks which are then used to pay bank employees
    enormous bonuses.
    2. We need to close the Civil Service's final salary pension schemes
    ASAP. It is not a case of if these are eventually closed, just a
    case of when it will become inevitable. The choice will come
    between either providing a reasonable state old age pension for
    all, or else providing massive pensions for Civil Servants and
    very small pensions for everybody else . The writing is on the wall.

    Now is the time start planning changes. The day of reckoning will
    approach within 10 years. Public opinion will currently support a
    tax on banks. Of course the Civil Service won't be willing to plan
    the closure of their Final Salary schemes - it is clearly not in
    their interest to do so . (They will probably go on strike anyway )
    So it will be necessary to get an external agency to plan this and
    to carry it out.
    If nothing is done, there will be a pensions disaster of epic
    proportions and the whole nation will be in a REAL DISCONTENT.

  • Comment number 59.

    Typical New Labour Britain.

    Find something we're good at (finance).

    Demonise it. Then detroy it.

    Meanwhile all the legitimate criticism that should be levelled at Gordon Brown is neatly deflected to the evil bankers. If only the real world was actually that simple.

  • Comment number 60.

    Just how many banks, both foreign and domestic, which have not required government assistance will be affected by this windfall tax? Plenty I would suggest. Barclays and Clydesdale Bank are the two most obvious domestic banks. Why should they and others like them suffer? This is a very transparent political move which lacks integrity and any real meaning in terms of the funds it will actually raise for the Treasury. The majority of the people being paid these bonuses were, are and will remain deserving of them and they were not the people who caused the financial crisis in the first place. It is the Boards of Directors that are responsible for setting the business culture and for making the strategic decisions within the banks. 99.9 per cent of bankers are utterly blameless. I am not a banker.

  • Comment number 61.

    Why does this bonus tax not cover Hedge funds, Corporates, Investement company's, Brokers, Big Business?

    The Debt and Collapse of our finincial system cannot be posted entirely at the feet of the bankers, surely?

    The banks did over lend, invest and in many cases buy bad debt, but was it not big business and corporates that borrowed to excess to expand and produce to a market that borrowed because they had to have all the latest gadgets.
    Keeping up with the Jones's comes to mind!
    Yet I am sure the top management at many of the Corporates and Big Business will enjoy their large bonuses which will be uneffected by this Labour Tax! But how many people have they left unemployed by their bad decisions and greed?

    The Hedge Funds, Investment Companies & Brokers were not above this either. They speculate and often force changes within companies because of their aggresive attacks.They live well from our greed and yet their bonus will also be uneffected!

    Is it only the bankers fault that mortgages were being handed out at more than 100% of the value of the property or are we not to be blamed for our own greed. Were the mortgages forced on us and did we honestly think I'll pay it all back eventually !
    It's not my fault they made me buy and made me spend!

    Have we all forgot that if we borrow more than we have we will inevitably fall short when it comes to paying back the credit companies who have no issue charging 16% or above for failed payments or expanding debt.
    Yet I am sure the Credit card companies will receive their bonus without the extra levy from the government.

    Please explain why only the bankers are being crucified at this time?
    Are they really the devil incarnet ?

  • Comment number 62.

    Every single family, (apart from the bankers families) are paying the price of greed. That these people who are now responsible for cuts in public services, hospitals, schools, care for vulnerable children, young people, families and the elderly, council services and grants to those thousands of voluntary organisations - that these people responsible for several years of increased hardship should actually complain they are not rich enough. I say give them a choice, extradition to their tax haven or the death sentence.
    One word to me about "I want my bonus" and I'd pull the switch / press the button without thought or hesitation.

  • Comment number 63.

    "If I were running a big international bank with substantial operations in London"

    ..I would cancel my afternoon golf game and spend the time in a quiet room working out where my business 'generates profits' from. When I look around my walnut office and out of the glass temple the company has built I will see that there is nothing leaving the site - i.e. nothing produced.

    I would also consider the payment for risk (which I assumed previously was the source of profit) - but then realise that recent events have demonstrated that my comapny cannot assess risk accurately - therefore how could it charge a fair price for that risk? I would also conside the limited liability and the level of losses my bank could withstand and ask myself if 13% interest on an overdraft to a small business, which is restricted to £25k is reasonable considering the Billions held in Capital and the consequent risk to the bank.

    Then, when I had thought about it for a while I would realise that in fact there is no need for me, my business or my industry for that matter - in fact the only source of profit must come from the hard work (surplus labour) of the people and businesses I lend to. I would realise I was a parasite in society, sucking the effort of others to ensure I can play golf instead of working.

    Upon realising this I would be horrified at what I was a part of, and how foolish I had been to continue in this industry without questioning it's funadmental basis. I would also be shocked to realise that it was my industry at the heart of nearly every collapse for as long as I could remember.

    I would wind the business down - cancel all the loans outstanding (i.e. do not collact them) and retrain as an Environmental scientist so that I would actually contribute to society rather than take, take, take.

    As a result I would die a happy man, maybe not surrounded with riches but knowing in my heart I did a good thing. I would also have learnt to appreciate what is truly valuable and what is not.

  • Comment number 64.

    54. At 2:00pm on 10 Dec 2009, writingsonthewall wrote:
    ...Reckless govt spending - In order to maintain the profits of the private sector and avoid a crisis the Government engages in public / private partnerships in order to supplement the private sector's diminishing profits.

    We all get it - you've read Das Kapital. Fabulous, but come on. Do you honestly believe that PFI and the rush for private sector involvement in state projects and off-balance sheet financing (a bit hello to Hornby, HBOS and more murky backgrounds to the Lloyds fiasco) was purely to prop up the ailing private sector?

    Though I admire you're doubtless enthusiasm and obvious intelligence, you're starting to sound like an irrelevance to be honest.

  • Comment number 65.

    #54 I have to disagree I'm afraid. Borrowers could have said no, they didn't. The banks did not hold guns to their head did they?

    Very little govt spending has gone to private sector - most of it has gone to expanding civil service jobs. Even though, the govt could have said "Actually, we do not need a new system as the old one works perfectly well"

    Taxes have only been used to fund the para above. A report from Reform, I think it was, shows that the level of internal spend now is way above what the govt inherited

    PFI - a prime example of off-balance sheet reporting. And how many of these initiatives are successfully completed and how many are running vastly over budget?

    Non-jobs - it would be cheaper to pay the benefits! A non job in local council or govt with a salary of £25k is not generating any additional tax income as it is being paid for by tax in the first place.

    We all need to accept responsibility for the current economic climate and only when it is admitted that no one sector is to blame will we be able to move forward.

    Or am I just showing my age by thinking people should accept responsibility for their own actions

  • Comment number 66.

    I think the basic point is, Robert, that the money system in this country should be owned by us, the people, not by the bankers.

    We've had enough of these people levering between the person who has money to deposit, and the person who wants to borrow, then spinning ridiculous yarns to both sides and giving totally incompetent service to both sides while they effectively punt the money on the horses for their own personal gain, and then call in the taxpayer when it all goes wrong.

    How do we, the people, have a chance to seize back control of the system?

    Not by getting out on the streets or storming the City, but by enacting new legislation to:

    - create a Tobin tax on all financial transactions (this should get rid of the outrageous 'high frequency trading' where merchant banks trading on their own account find out what their clients plan to do and do it first to make money out of them)
    - split commercial banks from the ridiculously named 'investment' banks.
    - limit the size of banks
    - forcing all financial intermediaries of any sort to put management accounts into the public domain

    Maybe the depositors who put money into banks should demand some level of control over what they can do with it (through having a measure of ownership)?





  • Comment number 67.

    I agree with many of the points made and understand that the lack of understanding of what caused the crisis has led to witchhunt to find those "guilty" of craeting the situation.

    However, to bring in new rules affecting only one segment of the population are the actions of a tinpot dictatorship not a first world economy, open to business.

    Mugabe believed white farmers had profited from the land that belonged to all his people and started the policy of landgrab. He took no account that the farmers cuyltivated the land, took the financial risk of developing it and employed hundreds of workers.

    Is Darlings new policy that different? He claims bankers have "profiteered" from the money belonging to the people. Financial services are 16% of GDP, employ 1mln people and is the envy of Europe and the world. The money banks made came from operating worldwide but we are lucky that the money stays here to be taxed at corporate and individual level.

    Only when it is too late, when the banks leave and 16% of the economy goes with it will we see the folly of yesterdays actions.

    It worries me as a patriot of the UK that we allow jealousy to ruin the country.

  • Comment number 68.

    49. At 1:39pm on 10 Dec 2009, jaydeehibee wrote:

    "Someone is going to have to start paying for the financial crisis pretty soon and Darling is sharing the pain between business and employees with NI rise, which I think is pretty fair."

    Fair?

    So does this mean that when you go out to work and your window is left open so a burgular gets in and cleans you out that your neighbours should have to foot the bill because if they had been watching out then they could have reminded you to close the window and you wouldn't get robbed?

    You have a very odd idea of fair. One section of the Economy appears to be at the root of the problem, and yet the rest of the Economy should share the pain?

    Did you get a share of the billions paid out by banks in 2007?

    P.s. don't cite taxation as 'our share' as this is often circumvented by the Uber-rich and the likelyhood of you benefitting from tax to the tune of £13,306 (which is what the debt per person is) is very remote if not impossible.

    I certainly haven't used £13k's worth of public spending in the last 5 years but as a working man I am expected to pay back that amount through future taxes and NI rises.

  • Comment number 69.

    #59

    > Find something we're good at (finance).

    Or, in this case, find something we're downright rubbish at (finance)

  • Comment number 70.

    57. At 2:16pm on 10 Dec 2009, EmKay

    You may wish to blame yourself for the crisis - but I blame the flaws in the Capitalist system which require banks to find new markets to exploit in order to maintain their diminishing profit.

    In the past this would have been somewhere new in the world, but as 90% of the world is now Capitalist - there are no markets left. The next logical step would be to find new market participants within existing markets (riskier borrowers).

    I mean were these same reckless borrowers around in 1929? What about all the crises in between - are they the same people?

    Also your argument regarding regulation is one that nobody to date has answered yet - who is going to pay for this super regulator? All you will create is a mammouth institution that will have to grow exponentially to keep up with the financial sector and it's growth. Nobody can answer how this will be funded - and yet everyone see's better regulation as the solution.

    There has been better regulation in the past sarbanes-oxley, the up-tick rule, Glass–Steagall etc - and each one has been removed by Governments keen to please the world of finance.

    Bigger and stronger regulators are not the solution - they simply give you bigger headaches and more problems.

  • Comment number 71.

    To me one of the interesting results of this mess is the popular realisation that:-
    (a) the earnings ratio between the top earners and bottom earners appears to be greater than it has been in living memory;
    (b) the top earners believe that in a free society they are entitled to whatever income they can get;
    (c) nobody else believes this is justifiable.
    The obvious answer is for governments to consider what legislation can be passed to limit this ratio to a more sensible number. Personally, I cannot see why employee or director of a company should earn more than 10 or 20 times what the lowest full-time employee is paid. 100 times is unjust. 1000 times is indefensible and immoral.

  • Comment number 72.

    When we talk about how "the state must shrink" because we can't afford it, try thinking in slightly different terms.
    Do we have the same number of workers in government funded jobs*?
    Do we have the same amount of lumber, asphalt, steel and cement*?
    Do we have the same amount of expertise*?
    The answer of course is yes! So why are we unable to keep people employed?
    The reason lies with the entire concept of usury. We value everything in terms of money, rather than what money is actually used for (an intermediary to make trading goods and services a simpler and fairer system) and as a result the usurers of the world remove wealth from the economy (not add to it Robert!) in order to maintain their own grip on wealth and power.
    Not so many years ago usury was illegal. Over the years those who perform this role have not only had their activities made legal, but have usurped the true role of the banks (to store savings, and redirect them in order to finance ventures at a modest profit for themselves and their savers) into power houses of obfuscated financial wizardry and confidence tricks that, to be perfectly honest, have been fleecing the public for the better part of a century.
    That there are people on here defending their activities and derrogating the tax imposed as being pointless because they will simply sidestep it without referring to the simple fact that such acts are morally reprehensible, is a sad indictment of what has happened to our society!
    Stop thinking in terms of money!
    Intrinsically, money is literally not worth the paper it is written on. Instead think in terms of actual resources - doing so will make it a lot harder for the financial institutions to hoodwink you!

    *or as near as makes no difference

  • Comment number 73.

    #59 Ziggy_Stardust wrote:

    Typical New Labour Britain.

    Find something we're good at (finance).

    Demonise it. Then detroy it.

    Meanwhile all the legitimate criticism that should be levelled at Gordon Brown is neatly deflected to the evil bankers. If only the real world was actually that simple.

    --------------------------------

    ...and there ends your first lesson in politics!

  • Comment number 74.

    60. At 2:25pm on 10 Dec 2009, gdocherty wrote:
    "Just how many banks, both foreign and domestic, which have not required government assistance will be affected by this windfall tax? ....... Why should they and others like them suffer? ...... The majority of the people being paid these bonuses were, are and will remain deserving of them"

    Deserving of them? The tax only affects bonuses over £25,000. Who 'deserves' a single bonus which is more that the annual average earnings? In some cases, certain individuals are getting a single bonus which is ten times what an average individual can hope earn in an entire lifetime?

    In these rewards Western society has lost all sense of relative values and objective judgement of absolute worth. History shows us that all civilizations eventually collapse. I truly believe that we are living through the collapse of ours.

  • Comment number 75.

    yam yzf

    Can you explain to me how you put a roof over your head in this country while abstaining from debt?

    Can you explain to me how our young people study for degrees such as medicine, science or engineering without debt?

    No gun, but the alternative in this country with our capitalist system would be people living in tents provided by Oxfam (been to Aberdeen in the winter have you?) and no tertiary education for the ordinary Joes and Josephines. Just imported engineers and doctors from Africa where they clearly are needed more than we need them.

    You are not thinking.

  • Comment number 76.

    Maybe most of the bank bonuses have been paid prior to the PBR and therefore missed the need for the levy to be paid as the government spun it so well in advance that there would be a tax of some sort? And others will wait until April 2010 so that they miss the levy too. Just a bit of financial planning, really. An odd crown appeasing piece of the PBR, don't you think that might not make a hap'worth of difference to anyone in the banking sector?

  • Comment number 77.

    Wow 'Writingsonthewall' somebody somewhere must have really hurt you at some stage. Was it a banker ?

  • Comment number 78.


    Am I being dense here?

    I was under the impression that all bank bonus payments in the past were taxed on the individual recipient at 40% (now 50%). How does this square with the banks themselves now being taxed on issued bonuses at 50%?

    Surely this is a zero sum game for the Exchequer? - or worse, it will actually raise less tax revenue than the original system.

    Please enlighten....

  • Comment number 79.

    16. At 11:53am on 10 Dec 2009, copperDolomite wrote:

    'For all those who want to 'go back to business as usual' I have a question? Did you watch Sir David Attenborough last night on BBC2, and if so why do you want business as usual? '

    I saw this last night... rather sobering.
    Has western civilization as we know it peaked?

  • Comment number 80.

    77. TheBorg

    The whole thrust of many posts is that we believe the banking crisis has damaged us all even if not all individuals have noticed so far.

    The Borg are of course not individuals so I expect you are not able to understand a range of personal ideas, suggestions and feelings!

  • Comment number 81.

    I am a self employed working Joe, husband and father of three, and here is a memory from some years ago. It’s not as poignant as the Christmas one but still I reckon it deserves a mention. We’re back in the early 90’s again with an example of the damage and misery that reckless financial institutions wreak on the optimistic general population.

    I was last call at a small but attractive detached house before a possession order was applied for.

    Husband was a salesman, wife worked part time if I remember correctly, and they had three kids, all girls.

    He had been lent a substantial amount of money to buy a ‘dream home’, his income being assessed on both a high multiplier and the bonus commission he earned in his best year.

    Recession hit, as recessions do, they couldn’t keep up with the payments, husband and wife fell out because of it and split up. The strain of it all was clear in the children’s eyes, the mother broke down.

    There was no hope for them, none, a possession order was going to be applied for, family had already split up and was soon to be destitute.

    The wife’s parting comment as I left was ‘why does it have to be like this’ or words to that effect. I had no answer only a Gallic shrug.


    Mr Peston asks, do I wish to hug a banker? my answer is, no I don’t think I do, but if they need hugging, then you hug 'em Mr Peston

  • Comment number 82.

    #73 - Got it in one.

    Second lesson in politics -- sidle up to the largest [and once seen un-biased] global broadcasting and news agency -- to make sure that they constantly feed or support your policies. That way in the end "joe public" actually thinks your speaking the truth.

  • Comment number 83.

    The bankers are a side show.

    I got curious re what cutting the deficit means in real numbers so went to the Institute of Fiscal Studies website.

    They say that 'increasing the basic rate of income tax by 1p would raise £4.5 billion in 2011-12.'

    So assuming it's the same for 2010/2011, to solve the proposed £78 billion fiscal deficit for that year alone would require a 17.3p increase in the basic rate of income tax (assuming all other taxes stayed the same).

    So the basic rate income tax needs to rise from 20 pence per pound to 37.3 pence per pound, or by 86.5%.

    That's before we start repaying the debt; this is just to eliminate the current structural deficit.

  • Comment number 84.

    #80 Kit Green

    "The whole thrust of many posts is that we believe the banking crisis has damaged us all even if not all individuals have noticed so far.

    The Borg are of course not individuals so I expect you are not able to understand a range of personal ideas, suggestions and feelings!"

    Actually I can break away from the hive mind when I regenerate, so I am capable of individual thought and feeling.
    I think the vast majority of normal bankers (not necessarily the investment bankers who do not live in the real world) would accept that a substantial amount (not all) of the damage was caused by the banking system - and most of them were in such lowly positions that they did the job they were asked of, like most people do, and were not capable of influencing the major strategic decisions which caused the problems. Many were under great pressure and in fear of their jobs. Many have now lost them. Why does Mr. Peston and most of the people on this blog assume that most of these bankers are not feeling the pain ? I'm sure you will all be very pleased to hear it but let me assure you - unless you are an investment banker - they are !

  • Comment number 85.

    Robert, perhaps there may be a few (hyper-altruistic?) souls, who might take up your suggestion to "hug a banker", to help ease them through this (potentially) crippling personal financial tsunami that they now face.

    Though I also suspect the possibility of any "hugs" being dished out to them, being of the two handed variety, centered around the neck area...

  • Comment number 86.

    On hearing the bankers advanced Pre-Budget wailing it is clear that they still do not get it. Trillions of pounds have been fed into the markets by various governments to stabilise conditions and bankers think , because they have bet a few quid on a market bounce, which any GSCE Level student could have predicted, they should be worthy recipients of bonuses.
    Yesterday the Chancellor has been soft on the financial services...

    Things could be a lot worse.

    Although an unlikely future event(politicians also to blame, and British Law Courts can be bought by the rich), in the short term, there are some highly specialised lawyers currently looking at the Treason laws at the moment.
    [The Fall: The Funnel Of (Money) Love coming soon to a turntable near you. Jan 2010.]

  • Comment number 87.

    The most disgusting thing out of this was watching Sarkozy greeting Brown like a crocodile meeting a mouse. And Merkel pouring on the false "charm" because we have (in Brown's terms) led the world again with the bankers' bonus tax. You know when Sarkozy praises the Brits we have been shafted. And out of all this will come greater strength for the Paris and Frankfurt markets. Fitting up the bankers (for a mere pittance in income but a mighty potential loss in value to the City) will eventually lead to something bad for us and our economy.

  • Comment number 88.

    84. TheBorg

    The bank tellers and sales people may not have dreamt up the derivatives market, but they were the ones dolloping out the advice that huge mortgages and credit cards were a good idea.

    Being a lowly cog in the wheel does not absolve anyone from moral and personal responsibility.

    Imagine the boss at a care home tells you as a care assistant that from now on, you will be required to provide the elderly patients starvation rations in order to maximise profits. Do you or do you not go along with it because you are only doing what your boss tells you to do?

  • Comment number 89.

    Most bonus systems are generally one way rachets which
    work on a "Heads I win, Tails you lose basis". When the
    market/profits go up, the bonuses go up, when the
    markets/profits go down you don't have to pay back your bonus.
    So volatility pays - maximise the boom / bust its good for
    bonuses . . .
    Whose money is it in the markets anyway ? Generally, it is
    not money from individual bankers, it is mainly money
    from shareholders and particularly the big pension funds.
    So guess what . . ,
    the bankers get big bonuses whatever happens, and the Pension
    Funds end up with massive deficits and the pensioners lose out.
    It simply a legalised form of robbery - the continuous transfer
    of money from Pension Funds into the pockets of bankers by
    manipulating the markets and maximising their bonus systems.

  • Comment number 90.

    #75

    "Can you explain to me how you put a roof over your head in this country while abstaining from debt?" Rent perhaps - that is what I do. If you cannot afford the price being asked, don't buy it. If you take a mortgage that you can afford, then do you need the latest gadgets, gizmos etc. There is nothing wrong with buying furniture as and when necessary and then even buying secondhand

    "Can you explain to me how our young people study for degrees such as medicine, science or engineering without debt?" Get a job while studying and forgo some things which are not essential - cabs, eating out etc. It is what a friend of mine is doing to get through uni. It is hard work, but possible.

    This has nothing to do with the capitalist system - it is to do with people making sensible choices and living within their means. If they do not, they have to accept responsibility for those choices

    "You are not thinking" No, I am, and was, thinking and that is why, living through my third or fourth recession, I don't go looking to blame everyone else.


  • Comment number 91.

    Robert, You said

    "It is striking that the French President, Nicolas Sarkozy, today put his name alongside Gordon Brown's to an article in the Wall Street Journal which says "we agree that a one-off tax in relation to bonuses should be considered a priority, due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system""

    Derr, don't suppose the new Froggy european banking supremo made the running on this and TOLD Broon and Ali Baba how and what to tax?

  • Comment number 92.

    Leave me out of it. I don't accept blame for the economic vandalism of the last decade. I've spent six or seven years being laughed at as being a doom-monger ("property crash! What planet are you on?"), and I have quietly reduced my exposure to property and shares. Unfortunately, I consequently have savings, and the one-eyed bandit has raided them through interest rates...

    You and Gordon can shoulder the blame, alongside the bankers, property developers and the like.

  • Comment number 93.

    3 bluntjeremy: So, you admit it! You voted for them twice. It's all your fault...

    Well, plus millions of others.

    At least I have a clear conscience.

  • Comment number 94.

    #88 copperDolomite

    "Imagine the boss at a care home tells you as a care assistant that from now on, you will be required to provide the elderly patients starvation rations in order to maximise profits. Do you or do you not go along with it because you are only doing what your boss tells you to do?"

    Its not a bad example, except that the one you quote is clearly on the wrong side of what is moral. Notwithstanding, there have been numerous examples of ill treatment in care homes. Do you blame the management or the employee? It tends to be the owner that gets taken to court.
    With hindsight you might argue (and I'm sure you would) that what bank employees were doing was not moral, but it did not seem like it to them at the time, and hindsight is a wonderful thing. It takes a very brave person with mortgage, kids etc. to resign with nowhere else to go on a moral issue. I welcome some rationale debate, but I maintain that 99.99% of people working for banks do not deserve the villification that comes to them through this blog

  • Comment number 95.

    I notice the draft legislation does not apply to Limited Liability Partnerships, Partnerships or Limited Partnerships.

    Is the route of anti avoidance the banks are going to take.......

  • Comment number 96.

    People are talking about the fundemental flaws in capitalism.

    The most fundemental breach of the ruls of capitalism was the "too big to fail" approach to banks.

    THe schadenfrude part of me would have loved to see them fall like dominios until none still stood but I accept the propping up argement.

    I the bankers were willing to accept that government intervention hept them all going, that would be a good sep forward to rehabiliation

    Adam Smith documented the greed of man many years ago. How do we control this?

    The irony about these free marketeers, is they work in one of the most closed industries in the worls were the entry requirements are impossible to overcome for the man in the street. If more people could become Banks or Bankers, the rewards available would start to fall as goold old demand and supply kicks in.

    Is there anything that can be done to increase the number of Banks and Bankers? Sound a peverse thing to say but it will solve the problem in the longer term



  • Comment number 97.


    I can understand why those banks who have taken huge handouts should be prevented from paying large bonuses. After all, it's taxpayers' money that would be used to pay those bonuses and it's hard to see large bonuses (particularly in a year of spectacular poor performance) as a good use of public money.

    But I don't understand why banks who haven't taken public funds are subject to this law. Surely it is their decision how they spend their money? If the argument in respect of these banks is that "the bonus culture" harms the economy because it encourages risky financial deals, surely the appropriate action is to ban the risky financial deals, not the bonuses?


  • Comment number 98.

    I thought the untouchables would become the unreachable by becoming non-doms. Flight of "Human Capital" and all that nonsense. It appears they are both untouchable and unreachable...in London and the Home Counties.

  • Comment number 99.

    I am a simple person however I Imagine the £1,100 an hour tax partners are poring over schemes and I reckon the bankers will avoid the 50% tax on their bonus pools.

    What they will do is set up an LLP or SPV whcih is not a company somewhere on earth, this LLP or SPV will invoice the bank for a transaction which they create and equates to the bonus pool. They will do some legal stuff to ensure it appears to be a bonefide commercial transaction.

    The bankers will then subscribe to some sort of insurance / investment / endownment policy in an LLP which pays out profits once a year again somewhere in the world which will be a beneficiary of the money paid to the LLP by the bank.

    This way the money gets to the banker without ever entering a bonus pool and gets paid to the banker by an LLP or trust etc avoiding the new legisation entirely.

    Watch this space........

  • Comment number 100.

    Dear Mr Peston, I always enjoy reading your views as they are very often on the leading edge of turning events or opinions.

    I'm hoping this is another such example - we are coming dangerously close to doing significant and permanent damage to a vital part of our economy. There have always been, and will always be, three groups of people collectively responsible for what happened. It is quite possible that the level of hatred leveled at the banks, constantly vilified in the press will be remembered as one of Mr Mandelson's most effective diversionary tactics ever, and a narrowing in the polls suggests he is indeed proving successful.

    Hardly surprising when you see some of the headlines in some of our dailies.

    While he should surely be commended on his skills, the damage that could result is very, very serious and will have long term effects on all of us. I am happy to put up my hand and claim my share of responsibility as a member of one of the three groups (a general public only too willing (and greedy itself) to take on excessive mortgages and debt to try & make a fast buck), but I have yet to see any real critical analysis and apportioning of blame in the press when it comes to government and regulators.

    I am still bright enough to remember phrases like "no return to boom and bust", "prudence" and "light touch regulation". I can also remember watching public spending slowly climbing as a percentage of GDP and wondering how sustainable it all was.

    Why are we not talking about these issues? Surely the unstoppable growth in public spending fueled a hunger for growing tax revenues, which in turn encouraged the "light touch" approach. Does this resonate or should I be subscribing to UFO weekly?

 

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