BBC BLOGS - Peston's Picks
« Previous | Main | Next »

Will biffing bankers also biff Britain?

Robert Peston | 09:48 UK time, Monday, 7 December 2009

With the exception of the Mayor of London, Boris Johnson, and a number of "Londonophiles" (probably not a real word, but you know what I mean), there is a wide perception that the UK economy became too dependent on the City and financial services.

Measuring that dependence is not enormously easy, however.

Banks at Canary Wharf, LondonAs a share of GDP, financial services contributes somewhere between 8% and 12% (according to which survey you believe).

More germanely perhaps, in the boom years before 2007 the City was directly responsible for about a third of all the UK's economic growth and a disproportionate share of tax revenues (whose best measure, perhaps, is the black hole that began to open in the public finances when a host of finance-related activities stopped yielding as much some two years ago).

But if the City became too puffed up and important to the UK's capacity to generate wealth, there are two ways of correcting that imbalance - which some might characterise as the "road to prosperity" and the "road to ruin".

The route to sustainable growth would be to build up other productive parts of the UK economy - manufacturing, the creative industries, tech, pharma and so on - as fast as possible.

Penury, of course, would stem from a rapid shrinkage in the City that was not counter-acted by growth elsewhere.

So the chancellor, Alistair Darling, will be acutely aware in calibrating his super-tax on investment bankers' bonuses that it should not lead to the wealth-generating City baby being thrown out with the stinking bathwater of excessive bonuses.

If top bankers were rational, they would not migrate to Zug or Hong Kong on the basis of a one-year super tax on their bonuses.

But a few will flee, because they are disgruntled by what they increasingly see as a hostile climate in the UK.

Which is why, as I mentioned in my note last night, the shadow chancellor George Osborne chose in the end not to take the initiative in proposing such a super-tax on bonuses, even though he has looked in detail at imposing a special levy on banks' distributed profits, or the combination of bonuses and dividends.

In fact George Osborne gave a very public nod in the direction of a bonus and dividend tax in his autumn speech to the Conservatives' annual conference.

And as a senior Tory said to me, he is not going to fall into the trap of publicly opposing such a super-tax as and when it is announced, because many traditional Tories are bonding with Labour voters in their visceral contempt for bankers and their bulging bonuses.

Osborne and Darling both believe that banks should not be paying big bonuses on the back of profits that they perceive as a gift from taxpayers (see my note "Banks face windfall tax" for more on this).

They want those profits retained in banks' balance sheets, to strengthen them.

That said - as the deputy governor of the Bank of England, Paul Tucker, has argued - there is a very strong case for banks (rather than bankers) to pay a levy (an annual one, probably) for the insurance we now know that they have to have from taxpayers: banks survived last autumn because taxpayers provided essential capital that the markets would not provide; banks should now pay for permanent access to this "capital-of-last-resort" facility.

But that's another story for another day. The government does indeed want such a charge to be imposed on banks, but won't go alone in introducing it. It is therefore swinging into international diplomacy mode to persuade the White House in particular that some kind of tax on financial transactions is good for the world.

For now what interests me is the behavioural impact of a one-off super-tax on bonuses.

As I've already mentioned, such bonuses will largely be paid in shares this year - for reasons of balance-sheet prudence ordained by the Financial Services Authority.

But if those bonuses are taxed at say 80%, it would be rational for the owners of the banks - the big investment institutions - to instruct banks' boards not to pay bonuses at all, because to do so would be to squander precious share capital.

In other words, such a super-tax might have the desired political effect of preventing bonuses from being paid.

But there might be almost no revenue from it for the Exchequer (even less than the few hundred million pounds expected by the Treasury).

Some would say, however, that the revenue implications are less important than the distributive and social justice of biffing bonuses.

Which may be so. But within any individual bank there'll be lots of individual shouts of "it's not fair".

Think about a typical trading desk at Goldman Sachs, for example: the British contingent, and the few others domiciled here for tax purposes, would pay the tax; but the non-domiciled Asians, Americans, French and Germans would not.

So if a bonus super-tax were introduced, we would be disproportionately hurting our own, as it were.


Page 1 of 2

  • Comment number 1.

    No easy solution for this I'm afraid and in reality nothing will change.

    As an employee, I accept that part of my compensation will come by way of a performance related bonus. So to find that my ability to perform is taxed at a punitive rate, that would make me disincentivised or alternatively, ask my employer to explore legal tax loopholes for me to exploit.

  • Comment number 2.

    This "one-off super tax" no doubt sounds great to whichever New Labour focus group recommended it, but in reality syuch a scheme would do nothing except line the pockets of the smart accountants hired by the bankers in order to avoid it. This latest proposal is typical New Labour populist electioneeering, not a serious, practical policy. [Unsuitable/Broken URL removed by Moderator]

  • Comment number 3.

    Surely the non-doms should get biffed too. Their status exempts them from income tax, not super-bonus-tax. If they want to go to Hong Kong, so be it.

  • Comment number 4.

    any chance of a bonus for those of us struggling to survive on 65 pounds a week job seekers allowance.

  • Comment number 5.

    "visceral contempt for bankers and their bulging bonuses.". It may be useful to acknowledge how many bankers are fat cats and the hundreds of thousands of bankers who are ordinary Joes and Jo's working hard to the best of their abilities for a fairly "normal wage" i would suspect 99% fall into the later category."

    I have highlighted the rapid decline in Manufacturing before from 31.7% of GDP in 1971 to around 12% today on a fairly straight line basis, but why should both not be developed, there should not have been and should not continue to be some kind of trade off between the two.

    Finally with the lowest 10% of earners paying a 46% tax rate compared to the highest 10% of earners paying 32% tax rate when all taxes are taken into account, there seems a lot of scope to up the tax rate for all "fat cats"

  • Comment number 6.

    I don't think the distinction you draw between the "road to prosperity" and the "road to ruin" is a real one. For decades the UK government has adopted policies designed to favour the city at the expense of manufacturing industry (interest rates being a principle one).
    So long as the city's prosperity ranks higher in importance than the rest of the UK, manufacturing cannot fill the gap.
    In other words, government has to make banking activities less profitable before the big banks will return to their historically crucial role of funding industry, and the exchange rate has to fall significantly before manufacturing can become more competitive.
    Yes, there is a lag between the pain and the gain. There always is.

  • Comment number 7.


    Please stop calling it the "wealth-generating City baby" when it is the "bonus-generating, pension fund killing, tax payer burdening City bloater".


  • Comment number 8.

    Just for the record here is RBS's current bonus scheme

    Executive directors on the RBS board will receive no bonus for performance In 2008 and no salary increase in 2009. They will have no cash bonus for 2009, but can receive a bonus in shares, deferred until 2012, which could be clawed back as per the G20 summit agreement on bonuses].

    Other executives across the group have had their salaries frozen in 2009, although some employees essential to the bank's recovery who might otherwise be "at serious risk of leaving" will receive bonuses paid In three annual Instalments from 2010 in RBS bonds. The bonds will represent "subordinated debt", which means that, if the company becomes Insolvent, the holders are less likely to get their money than the main "senior debt" holders, but more likely than if the payment was in shares,

    For 2009, the bonus for employees with an annual salary of above £39000 will be paid in three annual instalments from June 2010. Those with salaries below that may receive cash bonuses of up to £12,000 to be paid in March 2010, with larger sums deferred.

    People Management 3/12/09 p21

    I suspect many 'high bonus bankers' on the 'capital' side of banks are either not actually in the UK (Banks are multinationals) and if they are have arranged non dom status... so they won't move but don't pay much tax

  • Comment number 9.

    Will biffing bankers also biff Britain?


  • Comment number 10.

    Those expecting large bonuses are already facing increased tax. The government and FSA is demanding a large portion of bonuses to be withheld for a number of years and/or to be paid in shares. Tax on this money is not liable now, but on final payment. Tax for these people will be 50% by then. Expect to see some people leave even without a supertax.

  • Comment number 11.

    Well biffing industry did, but we still didn't care. Perhaps biffing financial services will force us into balancing our economy and focus our efforts on being PRODUCTIVE - rather than paying ourselves with money we've borrowed.

  • Comment number 12.

    Nos 1
    'No easy solution for this I'm afraid and in reality nothing will change.'

    Maybe we need education in the wider good and social consideration - not just short term selfishness . Probably to late for the likes of you and others who have shafted us and now want to take more and probably shaft us again .

    Wasn't it mega incentives that caused the risk taking in the first place or has that been conveniently forgotten ?

    Nos 6 - well said

  • Comment number 13.

    ...just noticed that my point has been far more effectively put by Cassandra at #6, so see above!

  • Comment number 14.

    Biffing? Is that negative toff language?

  • Comment number 15.

    As the bosses of the world, including those who claim to be regulating and tax-engineering your behaviour, wouldn't it be better if you bankers just came out and decreed what is to be, instead of all this petty-fogging?

  • Comment number 16.

    Mr Peston wrote
    'As a share of GDP, financial services contributes somewhere between 8% and 12% (according to which survey you believe).'

    Alright well lets say it's 10%. Are those who create 10% more important than those that create the other 90%?

    Well are they?

    Perhaps we the 90% are equal to them the 10%.

    And if we are equal perhaps we should pay the same gross amount of tax.

    We the 90% will pay 50% and you the 10% can pay 50%.

    Oddly enough if you had a state owned national bank, that handled both individual and business deposits and loans, and provided for pensions;
    then all those private banks could do what they wished, and pay themselves what they wished.

    Anyway I reckon we're going to take another hit and have to bail out more banks with more money, I have this sinking feeling that it's not over yet.

  • Comment number 17.

    Not a biff only a scratch! hardly even a tap.

  • Comment number 18.

    As #7 on this blog post and many others on the previous one have said, perhaps it would be time to stop referring to financial services as "wealth generating"; they are no more "wealth generating" than the average retailer who buys in bulk and resells with a benefit (and actually, the retailer is much less likely to damage the economy). This isn't to say they are not fulfilling a useful purpose, and facilitating life for others. But I don't see how taking a cut, even if it's perfectly justified, generates wealth - except for the taker.
    Would you refer to a GP or a teacher as "wealth generating"? And yet, having an educated workforce in good health looks to me as a better warrant of a prosperous future for a country than being a "financial centre". Wealth generation is not the same as juggling with money, in my humble opinion.

  • Comment number 19.

    My wife being a teacher said this morning ‘will I get a bonus if the kids I teach have an improved result at the end of the year?’ Before I had chance to answer, she said ‘no I won’t because that’s my job’ ‘No matter what I manage to achieve this government will just give me higher targets to hit’

    She carried on for another few minutes whilst doing her hair and set off work in a bit of a temper. She was not amused. And as I sit behind my desk here at work, I am also not amused, although oddly enough, not quite as much as my dear wife.

  • Comment number 20.

    Financial Services Industry 8 - 12% of GDP.

    How much is exported and how much is internally generated? Even if we became the worst bankers in the world that % would not drop to 0 as we would all still need to bank.

    I used to work for a company that had a financial services arm that did very well thank you. So well that the owners neglected the rest of the business and it took a major effort to put the business as a whole back on track - which is about where I see the UK right now.

  • Comment number 21.

    Let's take another viewpoint on this. Perhaps British people would like bankers and financiers who can deliver customer-focussed and outcome-focussed services rather than banker's wealth-focussed ones. Perhaps British people would prefer a financial industry led by people with integrity and whom they could trust.

    Perhaps it's time for the low-integrity, low-loyalty bonus-chasers to sling their hook somewhere else, because perhaps, just perhaps, they aren't wanted or needed here.

  • Comment number 22.

    The next twelve months are going to be tough for everyone - why should bankers be excluded?

    The private sector has had to endure pay freezes / cuts for the last 18 months, with more to come.

    The public sector should now follow should the Bankers.

    As someone recently said "WE'RE ALL IN THIS TOGETHER" least we should be!

  • Comment number 23.

    I could have sworn you said on the radio this morning that they might take their talents elsewhere. Is that the talent for pocketing large amounts of dosh for ripping off the taxpayer, or is there another which they are hiding under a bushel?

    Suggesting the City is good for Britain is like suggesting cancer is good for the body. Its a parasite that does nothing for the ordinary people of this country. The sooner the BBC moves to Salford and escapes its pernicious influence the better.

  • Comment number 24.

    Struggling to work out the reasons for this supertax.
    Is it due to the amount of public money pumped into the banks? If so, surely the Government should have put safeguards in place to stop this happening. This would not have happened in private companies where any increase in salaries or bonuses would have to be agreed by the new owners.
    Is it to plug the gap in public spending? No as it a relative drop in the ocean.
    Is it politiking? Seems the only answer that works.
    Sorry bankers but Gordon needs votes so you have to be seen to pay.

  • Comment number 25.

    It is not only in the last 15 years that the British Economy has been run in the interests of the City at the expense of manufacturing (in its broadest sense) Nothing better symbolises the extent of this burden than the bonus bun fight when 2000+ steel workers are due to be thrown into the reserve army of the unemployed. Why no attempt to bail them out? Why has the 'free market'got to impose its iron law on people who make useful things but not on those who just make money?

  • Comment number 26.

    " Think about a typical trading desk at Goldman Sachs, for example: the British contingent, and the few others domiciled here for tax purposes, would pay the tax; but the non-domiciled Asians, Americans, French and Germans would not."

    They wont be paying tax on that, eh Robert? Bonuses are salaried employment Robert - if you pull a salary in the UK you get taxed on it, whether you domicied or not and the same goes for bonuses as that is also proceeds from salaried employment.

    How you became the BBC Business editor is beyond me.
    Maybe try politics in your next life - there you can spout any nonsense you like.

  • Comment number 27.

    A lot of talk here on how to get more balance in the UK economy - i.e. more wealth-generating industries (manufacturing, etc), and less emphasis on financial services industries, which, as many point out, actually generate little wealth (i.e. they do not add appreciable value to some raw resource).

    How about this for a proposal? Pay the bankers their bonuses, and have these bonuses taxed at a high rate - EXCEPT if the bankers invest a certain proportion of their bonus (say a minimum of 75%) in a wealth-generating business. That part they invest will be taxed at a much lower rate (or even tax-exempt), compared to what it would otherwise be taxed at if kept as a bonus. The profits (or at least some of them) created by the business can flow back to the bankers, and these profits could also be taxed at a low rate (or at least at a much lower rate than just the plain bonus).

    The big elephant in this room of course is - just what businesses are suitable for this kind of investment in today's world economy? I don't pretend to have the answers to that, but I bet there are some think-tanks that might have a good idea.

    So, instead of the government using our taxes it doesn't have to spend in the economy, get the bankers to do it. As people who have proved themselves as being able to operate in the field of high finance, they will certainly make much better investments than this shower of a government ever can.

    Anyway, just a thought at a way of not scaring off high net worth individuals in the banking sector while at the same time addressing the imbalances in the British economy.

  • Comment number 28.

    If the purpose of this tax is really to deter banks from paying bonuses for a relatively short period (1-3 years), rather than raise revenue, then it makes sense. It certainly will not be a revenue generator. However, as described by RP, it is attractive, superficially at least, as a means of creating a level playing field. We have the problem right now that banks with large government shareholdings (RBS especially) are to be subject to draconian bonus restrictions. However, other banks (especially Barclays) will not. Result? Cherry picking of, say, RBS talent by, say, Barclays. To given an example. Barclays continues to build its capabilites in equities after buying parts of Lehman. RBS has some talent in that area that Barclays may well be interested in hiring. If RBS cannot pay bonuses but Barclays can, poaching that talent becomes easier. Ally D's proposal makes it less attractive to move: any short term bonus would just be taxed away.

  • Comment number 29.

    Mr Peston....perhaps a little discussion on the etymology of the verb to 'biff'.

    Does it not derive from the Latin 'bifere' ? Meaning to divide brothers to neither's gain ?

    The Present, Indicative, Active being :


    As you can see, the third person plural is rather irregular. Wonderful, is it not Mr P, what advantage a classical educashun brings.

    And has not the Govt bished the economy ? Where does the verb to 'bish' originate, do you think ?

  • Comment number 30.

    The value of banks to society and to the real economy is very much skewed by the need of banks to feel needed when in reality they are far less needed than we think.

    More importantly hey know it that is why they want to tie every creative and wealthy person in with them because if they stop creating these evermore stupid instruments of money making they will realize there is a far better way for society and technology to prosper and banking as we no it will not be needed.

    Indeed as we have got to the point when the biggest asset of banks and nations is debt then as they say the writing is on the wall. It is only be a matter of time before some one gets tired of bashing their head against the wall and we do something very different.

    That is not your New Capitalism Robert valid and interesting as much of that is we have to think far more radically than that because anything else leads back to 2008.

  • Comment number 31.

    It's all very well to say the rational banker won't relocate to Hong Kong to avoid a tax that's only going to affect one year. But if a banker is going to see their £1m bonus taxed at 80% instead of 40% that's a difference of £400,000 in tax, in one year. I'd move abroad for a year if it meant saving nearly half a million quid.

    It's also avoiding the question of what happens next year. When income tax was introduced it was supposed to be a temporary measure - governments are very good at using terms like "temporary" to get measures approved but the end can then easily slip until it either becomes permanent, or lasts long enough to get a permanent replacement.

    There's obviously a lot of anger about huge bonuses, much (but not all) of it justified. We can't be using taxpayers' money to hand out vast bonuses to people who have demonstrably failed to do their jobs and we can't afford to have industries where people feel automatically entitled to become exuberantly wealthy purely by virtue of working in the industry regardless of their abilities.

    Rather than fussing over taxation of bonuses (which ultimately comes back to the politics of spite and envy, and tends to hit unintended targets while missing the obvious ones) we could take a number of other steps to rein them in. Where the State is a majority shareholder in these banks, the State can cast an over-ruling vote. So with that in mind a few basic rules can be enforced:

    1. Bonuses to be paid on confirmed (i.e. realised) profits. If a profit isn't realised it can disappear as fast as it appeared. Bonuses on unrealised profits can be included in the year the profit was realised, assuming the trader is still in their post at that time.

    2. Bonuses to be paid in shares at the current market value, and may not be cashed in for some designated period of time. Perhaps three tranches of shares which can be cashed in at 12, 24 and 36 months from the date of payment.

    3. In the interest of not rocking the boat too hard, some limit to be set below which bonuses are paid in cash and anything above that limit paid in shares.

    Of course any bank not in receipt of vast amounts of taxpayers' money can do whatever its own shareholders will accept.

  • Comment number 32.

    Fretting about bonuses is just displacement activity. The real issue is bankers gambling with borrowed money - taking bonuses when they win, and passing the bill to the taxpayer when they lose.

    The government needs to ensure that when they get it wrong banks can go bust without taking other banks and the economy with them. When that is done, the issue of bonuses will sort itself out.

  • Comment number 33.

    I find it outrageous that Banks that lost so much money over the last 2 years that they ended up being largely owned by the taxpayer can seriously contemplate paying bonuses to their senior staff. Talk about a short term view: most of the potential recipients bear a share of the responsibility for the ruination of their businesses. I would be reluctant to see such Banks paying bonuses until the taxpayer has been repaid.
    On the other hand if businesses who did not receive public support are making money why should they not pay their bonuses? That is the market. It may be a rigged market with QE and no interest but that is the Government's choice and the profits are a small part of the price we have to pay now and in the future. Better 40% tax here than 0% if they go elsewhere.
    Our political class are getting too fond of "one off" windfall taxes as a political gesture. Sooner or later you stop being a serious country where people can expect to make money and trade profitably. Super taxes or windfall taxes are the wrong way to go but if retail banks like RBS end up losing out in the capital markets that is the price of failure.

  • Comment number 34.

    As you say Robert, it's silly. To say government-funded banks can pay huge bonuses tax-free through offshore entities to non-doms while our own citizens would have to pay punitive taxes is ridiculous.

    Since bonuses are discretionary it's entirely possible for two people who theoretically deserve the same bonus to actually get totally different amounts. So we could see our taxes paying American and Japanese bankers vast sums while their British colleagues get nothing.

    Using British taxpayers' money to make rich foreign bankers even richer while punishing British taxpayers is an utterly absurd outcome of this situation, but sadly one I wouldn't be at all surprised to actually see happen.

  • Comment number 35.

    The City is an extremely important part of UK plc. But it has become far too dominant in political and economic terms - the tail is wagging the dog.

    From no matter which department, the vast majority of Cambridge students I have taught reply 'investment banking' or 'finance' when asked what they want to do when the leave education.

    For instance, many of the Cambridge-educated medics I know have not devoted themselves to helping others - instead they enriched themselves in private equity or hedge funds. The incentives are so skewed that the brightest are pulled towards the City and away from socially vital activities. Another acquaintance, of Irish birth, living, working and bringing up his family in London for the last twenty years, has not paid a penny of tax, as his multinational conspires with him to claim that he is employed in Bermuda. The HR department of that company, and the employee, should be facing long prison terms. That would be the case in the US, where tax evasion is not seen as a game.

    Finance is home to a self-selecting, Oxbridge-dominated, greedy elite. Most of them have an incredible sense of entitlement and an astonishing lack of knowledge about the real world. They will squeal like pigs about tax increases but that is what greedy people will do when faced with their social responsibilities. They will bemoan public sector waste (of there is a vast quantity) whilst never questioning whether their huge salaries, massively expensive offices on extremely expensive land - all subsidised an underwritten by the taxpayer - represent good value for money. These are people who didn't care less when Rover went under and thousands of families in the Midlands lost decent incomes. They'll argue Lehman should have been saved but tell manufacturing to go meet its maker.

    These people are greedy. The City attracts the greedy - greed is what the City is run on. One of those former Cambridge medics I spoke of made £700 million personally from betting against Northern Rock and HBOS. How did he thank UK plc for the education, opportunities and low-tax environment it had provided? He relocated to Monaco, long before there was any talk of taxing bonuses, etc. He is simply a greedy b******.

    We need to remove limited liability from non-utility banking activities. We need to make doctors becoming hedge fund managers socially unacceptable. We need to restrict doing business in the City to UK residents and the UK-domiciled - i.e. those who pay tax. And we need to ensure that those who choose to claim not to live here any longer for tax purposes - be that Lewis Hamilton, Tracey Emin, Philip Green, or 'Rich-hedge-fund-mamager-former-Cambridge-medic' - fear even treading on British soil for serious risk of arrest, an enormous tax bill and prison. The option to opt-out of UK plc, having benefited enormously from the opportunities it provides, must be removed.

  • Comment number 36.

    What a splendid seam of bile we have struck today ! If the discussion was about "Jews" rather than "bankers" it would certainly open a few deluded eyes. Strange as it may seem, bankers are not all identical and interchangeable. Some will have worked in banks that didn't go belly up, some will have worked in banks that did. Some who worked at the former may have behaved stupidly, some who may have worked at the latter may have performed splendidly. And so on, ad infinitum. Collective guilt is no doubt fun for the accusers, but to the dispassionate observer it gets a bit ugly after a while.

    And people who think that banking does not create wealth are welcome to contemplate a society without them.

  • Comment number 37.

    Am i the only one thinking we should have let the lot of them go to the wall and waited to see what happened.

    I have a car loan with a High Street bank which is at 8.5% with base rates at what - 1.5%?. Thats by my calculations roughly 500% profit on that interest rate.
    Please explain to me how that can be fair and how Credit card interest rates at 18% + can be justified at the moment?

    When i saw the last stop the city protest i thought what a rabble, seems like they might have had a point after all.

  • Comment number 38.

    "Think about a typical trading desk at Goldman Sachs, for example: the British contingent, and the few others domiciled here for tax purposes, would pay the tax; but the non-domiciled Asians, Americans, French and Germans would not."

    So we shouldn't levy a tax on bonuses paid to domiciled bankers because their non-dom colleagues aren't penalised in the same way? Are we forgetting that everyone else in the country is helping to pay for those bonuses whilst getting penalised in the form of higher taxes with no bonuses or non-dom status to ease the pain?

    Give me a break! What the taxpayer wants is a little fairness: bankers should share the pain simply so that they can understand how the rest of us feel.

    Well, actually, what the taxpayer wants is to go back a couple of years and be asked if they wanted to bail out the banks in the first place...

  • Comment number 39.

    Sounds like Comrade Darling's approach can be summed up in three words




  • Comment number 40.

    I would raise a couple of further issues in respect the proposed "bonus tax". The first is the contention that it is unfair, with UK-domiciled staff paying the tax, and non-doms avoiding it. This should not be the case, assuming the non-doms are actually resident in the UK for tax purposes. Ally D will no doubt make sure it hits all tax residents (just like the non-Brits at all these banks pay PAYE/NIC just like the Brits to the extent they actually earn their money in the UK). Non-doms do have some more flexibility, it is true. However, it should not be beyond the Treasury's drafting to ensure that bonuses paid to UK tax residents are entirely subject to UK income tax, even if some of the work causing the bonus to be paid was undertaken outside the UK. Even if the bonus is paid via a non-UK company, the individual can still be kept within the UK tax net.

    Secondly, would large numbers of people relocate away from the UK to avoid this type of taxation? On its own, I suspect the answer is a resounding "No". But it all depends on whether there are other factors and this one is "the last straw". We have seen a succession of announcements from Hedge Funds, for instance, that they are moving staff (especially to Switzerland), so much so that these cannot be dismissed as one-offs anymore. However, that has been driven by a succession of issues, starting with taxation of non-doms, followed by tax hikes for UK doms, and finally proposed EU regulation of Hedge Funds. Would Ally D's proposed bonus tax cause the same to happen in the profitable bits of UK banking? Probably not, assuming he puts a clear time frame on the duration of the tax (eg three years). Also, it needs to be kept in mind that wherever people are minded to go can support them. The Hedge Fund evidence, for instance, suggests that the numbers moving can be measured in the hundreds or very low thousands. However, it has already caused pressures in the preferred Swiss cantons. For instance, finding family accomodation is getting challenging, and all the international schools are full. So there won't be a mass exodus from the UK because of this proposal.

  • Comment number 41.

    *35 Excellent Piece couldnt agree more

  • Comment number 42.

    #27 - wonderful idea but in practice this would just lead to massive investment by the bankers in accountancy fees for clever little wheezes that used this intended incentive to create loopholes around paying the taxes. So you would at least share the money around but I don't think the City accountants who help rich people dodge taxes are any more deserving than the investment bankers themselves!

  • Comment number 43.

    36. At 12:01pm on 07 Dec 2009, BeebLeeMoore wrote:
    And people who think that banking does not create wealth are welcome to contemplate a society without them.

    Banking creates wealth for Bankers, it doesn't create wealth for those upon whom they feed.

  • Comment number 44.

    I've said it before. The bonus issue is just a symptom.

    This issue been leaked nicely 3 days before the pre budget statement presumably so that we can come up with some ideas for them.

    In concentrating on bonuses there seems to be an unstated acceptance that we want the banks to carry on generating massive profits so that the state can get its share.

    If these profits are coming from overseas then ok fine. Thats the game.
    But many bloggers on this site and elsewhere are convinced and have eloquently explained how these profits are being generated off the backs of the British people and we want it to stop.

    So regulate what the banks do. Stop the gambling.
    Start looking after the people of this country.
    If you don't we will find another way and we will hold you accountable.
    (Not you personally Robert)

  • Comment number 45.

    The question to ask really should be: why the big banks make such big revenue (and profits)?

  • Comment number 46.

    It took HMG 15 years to re-privatise Rolls-Royce and heaven help us if we have to put with this every year for the next 15 years.

    The key condition is not rectifying the initial problem; the RB211 was resolved relatively quickly, it was a fundamentally good product, whereas what RBS was engaged in was not. The problem is getting RBS to the point when the state can sell its stake and I find it difficult to believe the Treasury's projection of 3-4 years for that to happen. We've a long way to go so your talk of a once only super-tax makes no sense. This will happen each year that the state owns RBS and it will corrode confidence in the bank. I would be inclined to sack the board if they are so short sighted.

  • Comment number 47.

    This article should have been titled

    'Will biffed by the bankers Britain finally biff back?'

  • Comment number 48.

    the british taxpayer is the forced shareholder in the banks so it is in our collective interest for these organisations to move back into profit as soon as possible so we can get our money do that we need the star performers incented to do their jobs and perform and a PC way to do that is instead of paying cash bonuses pay them in shares in their own company...they are then in the same boat as us in needing their organisations to perform with the vital difference that they can actually make it happen...if they jump ship they forfeit their shares but if they stay they enjoy dividends and can eventually sell their shares at a profit along with the simple it must be fatally flawed!!

  • Comment number 49.

    I seem to recollect that a former senior HBOS employee in their risk assessment department had been sacked earlier in the decade for repeatedly drawing HBOS Directors and Senior Managers to the serious risks they were taking in running the bank.
    It would be interesting to learn if these same HBOS Directors and Senior Managers continue to work for the group and if they are beneficiaries of a recent bonus?

  • Comment number 50.

    I love the term 'disgruntled', it's as if the whole thing is nothing to do with them.... i can see how this works mentally, but only if you think you are something a little special and not part of a group!!!

    There is also a presumption that bothers me.... and that is that we don't want our economy to be over reliant on the Financial Services Industry but there are other countries that do, apparently!

  • Comment number 51.

    I disagree with the right wing view that there is an urgent need to reduce the government deficit, but there is a case for a super tax on the very wealthy - not just bankers. Extra higher Council Tax bands would also be a good idea.

    This would reduce the amount of unspent wealth, which does nothing help to create the extra demand that the economy still needs, and is fueling new asset price bubbles.

    The extra revenue should not be used to reduce the deficit, a low priority at the moment, but to provide more fiscal stimulus by, for example, by raising the income tax threshold, so that the UK recovery can catch up with those in Europe and the US.

  • Comment number 52.

    The phrase ‘performance related bonus’, pre-crash, was a fair statement and still is in most other industries. However, today some of the profits banks are generating are the result of the benign conditions put in place by the government/BOE to help banks recapitalise.

    It wasn’t intended to help individual banker’s remuneration.

    Can you give assurances that not one penny from QE/tax payer’s money is going into bonuses?

    Yes we are dependent on banks, they are an essential utility...this is where part of the anger/frustration comes from. Otherwise we would have let them go.

    They still don’t ‘create wealth’ though.

  • Comment number 53.

    Its a matter of degree. There still appears to be a bit of group think going on here. How can it be right to follow this line when the bankers on the counter are being made redundent and getting bonuses of about £47 and no I havent missed the "k" off.

  • Comment number 54.

    Before a bonus is paid someone has to appraise performance against objectives and differentiate in the workforce. Most employers have a 'bell curve' that forces a distribution - often 10,10,70,10 with the last cohort being pushed near the exit door.

    The fact is that in most businesses this is a complete waste of time since performance measurement becomes very subjective and grossly unfair.

    I actually think that measures that discourage bonuses are good and will probably save millions in wasted management time on performance measurement. If 70% of staff do an 'ok' job there isn't much point in wasting time on appraisals.

  • Comment number 55.

    The banks are only paying bonuses because they are 'profitable'.
    They do not want to separate the retail side from the investment side.

    Reduce the profitability of the banks by reducing the retail bank charges to £12 in line with credit card comapny charges.
    Employ a load of temps to troll through the last 6 years of personal accounts reducing the charges and refunding the customers.

    The result, slightly reduced profitability of the bank and so reduced bonuses. Increased fiscal stimulus due to large numbers of people having a little bit extra in their accounts (a populus bonus in fact) and banks would get a much needed bit of positive PR.


  • Comment number 56.

    I do find it amusing when you hear bankers saying that if you tax their bonuses too much then all the top banking talent will go elsewhere.

    Would that be the same top banking talent that brought several British banks to such a perilous state that the only way they could avoid total meltdown was massive government intervention?

  • Comment number 57.

    #29 Amusedtodeath - Biff - taken from that prime example of literary genius - The Beano. No link to Latin declensions or anything else. Infinitives split at a whim, et al.

    #44 Uboot - Agree that the bonuses are only a symptom. Also agree that the spin is there so that we do not concentrate on the next set of dastardly acts by this incompetent and uncaring government, with the Autumn Statement on Wednesday.

    Lots of air time, paper and blog space taken up with being incensed about bankers getting bonuses, to cover up the greater misdemeanour of having made a bigger mess than they've admitted to so far.

    Come Wednesday and a good overnight think about what is being said. Whichever way the words go, the meaning and impact on the UK will not be nice.

    All MPs need to sign a declaration that they will serve the country with honour which means they will serve, tell true and not self-serve. All prospective parliamentary candidates and incumbents should sign such a document before the next election. That will tootle pip all those who made profit out of our tax.

  • Comment number 58.

    Unfortunately if you make one arbitary, retroactive tax change then any 'promises' that it is a 'one-off' are not worth the paper they are written on, with the inevitable consequences for the City and therefore tax revenues in the future.

  • Comment number 59.


    You wrote ...

    "The route to sustainable growth would be to build up other productive parts of the UK economy - manufacturing, the creative industries, tech, pharma and so on - as fast as possible."

    I couldn't agree more. Perhaps you could explain to us what the government is doing to drive that idea forward? And maybe even tell us how much success they are having? It sounds like the ideal way to apply a "fiscal stimulus" to the economy. The reason I ask is that I don't see any evidence that this government is doing anything at all to build up the non-finance sector. In fact, they seem to be doing the exact opposite - raising taxes on the productive economy in order to subsidise failed bankers. Reply 27 (conedia) looks like a good idea to me.

    Just a thought.

  • Comment number 60.

    If you have to come up with a law to target bankers' bonuses then it's going to be highly specific. Why not then make it a bit more specific and tax the bonus at source, regardless of bank, regardless of employee so that it affects UK tax payers and non-doms equally.

    Bottom line is that UK tax payer monies protected the market and created the opportunities for banks that operate in the UK, based here or not, and the only winners should be financial security (banks and market) or the tax payer. Bankers collectively who collectively created the problem should get nothing.

  • Comment number 61.


    Your last paragraph but one is shoddy and populist nonsense.

    Before you go spouting off about tax, I suggest you take some time to understand the difference between tax resident, not ordinarily resident, domiciled and non domiciled. Then you could go on to investigate the options that non-domiciled individuals have. Finally you might like to understand the effect of tax treaties and credits for tax paid overseas.

    I think you will find that if you are tax resident here which means you are here for more than 93 days(whatever your domicile) you will pay tax on all your UK income and capital gains generated/earned here in the UK. Rules about taxable allowances are influenced by the stance you take regarding overseas income.

    Even if you are not tax resident, you will be taxed on dividend and rental income etc.



  • Comment number 62.

    I'm very sorry, but nothing will actually happen other then some general "fudging" of the real issue.

    These people don't want things to change, how will they pay for their children's educational, next yacht or the swimming pool in the basement?

    People keep banging on about "broken Britain". Margaret Thatcher "broke" this country in the late 80's and subsequent governments have heaped more ruin on top of ruin.

    The "market" needs to be regulated and controlled, never should any institution be allowed to become too big to go down.

    Where are all the smart people in this country?

    It's just plain common sense.

  • Comment number 63.

    The bankers (as a corporate group) have held us to ransom once when we had to bail them out because we (our governemnt) had not regulated them to stop them taking undue risk. We (our government) paid - although we (the public) still await the bill.

    Now the bankers (particularly RBS) are trying to hold us to ransom again - you (the government) own us so you had better let us pay huge bonuses otherwise our best staff will leave us and you (the government) will lose your investment that will put you (the public) even more in debt.

    That is why you should never pay ransoms or accept being blackmailed. They keep coming back for more.

    Whether it is better or worse for the UK to pay these bonuses it is ESSENTIAL that a stand is made or the banks will not learn that a risk is a risk for them (the banks and the bankers) and not for us (the govenrment and the public).

  • Comment number 64.

    Biffing bankers also biff Britain ? No.

    BTW Since when do you get a bonus for doing your job badly ?

  • Comment number 65.

    While we're on the subject :

    As a tax-payer I am now a part-owner of various banks.

    Where are my shares / dividends / bonus ?

  • Comment number 66.

    The 'super tax' is all a bit silly. We've seen the headlines about £6bn being distributed in bonuses etc - important to point out this is already being taxed and its only the additional which is available for taxation.

    The more important question is all those non-doms who dont pay tax - time to look again at this status. Suggest if people have a job in this country then they should be legally obliged to pay tax - dont know if this will cause problems with treaties regarding tax but if they want to move away then they should.

    I suggest that the super tax is quite simply electioneering - lets see a FAIR progressive tax system that doesnt allow non-domiciled status for people in this country with jobs in this country and this should apply to ALL sectors not just the public whipping boy of the moment.

  • Comment number 67.

    Is the British Public a benign but substantial shareholder in the banking industry but completely without dentures! It is monstrous that the executives of RBS as an instance, have the affrontery to threaten to resign en bloc if the government should interfere with what they wish to pay themselves. What will they do next from that bastion of the City of London within which they get so much protection. If they are incapable of justifying their worth against the most simple of yardsticks the answer must be, good riddance! They should not be allowed to hold the people of Britain to ransom.
    I think it is time that we ask, no demand to know, what they actually do to earn such rich pickings. Do they sit behind their desks in well pressed suits and polished shoes and watch while the system rachets up obscene profits from which, no doubt, their bonuses are assessed. Profits from what, from where, from whom?? And what have they done? Ticked a box or two and thereafter rise and make off without having raised a sweat? What is the mystery in this world of finance where clerks rule clerks ruling clerks, that rewards this sort of success when many must be left penniless as a result. I need convincing that they have truly earned what they claim but quickly before they run off with it.
    Mr Peston clearly has a deep insight into the workings that spawn these shameless tycoons and can no doubt filter out the jargon that confuses so many of us. If he can give us a no holds barred insight, I for one would be most grateful.

  • Comment number 68.

    To work in a bank, you need to be rational. Anyone who truly believes they need millions of pounds each year to live on is irrational. QED: The current set of bankers are not fit to work in banks - they are too anti-social.

    Make them obtain a diploma through training (like Electricians and Plumbers) to show that they are a "competent person", i.e. not too greedy to be a banker. You would not employ a colour blind electrician, so you should never hire a greedy banker. Problem solved, let's move on.

  • Comment number 69.

    I own a small business, plus do a bit of accountacy. I understand value and value creation, it is hard work and takes time. This is how great business's are built. This type of business is at the root of the economy creating real jobs adding real value, making a social and economic contribution to the communities within which they operate.
    Funding is critical to business, much like the road & rail network are. We need an infrastructure to deliver funding and this should be managed as an asset of national importance.
    I no longer have trust in the privately run and loosely regulated system that we have, it is too cynical and narrowly focussed. It is currently embarking on an excercise of punitive value extraction from small business up and down the country, in the form of huge fees, cripling interest (despite all time low rates) and excessive charges. When not doing this it is facilitating the transfer of value off shore, sucking benefits out of the country that rightly belong to us.
    This debate is indicative of a shift in thinking. Politicians need to look to alternative mechanisms to the 'bank'! one which will serve the interest of small business and the tax payer, the service of which is entirely consistent with the national interest.
    So I am OK with the big tax on big bank bonus', it is helping to force this issue up the agenda, and focus some great economic minds to look for a better solution!

  • Comment number 70.

    A silly idea to biff the banks much as we would like to see them suffer. The sad thing is that the Government are going to sell lots of bonds to meet their borrowing requiremnt and so they will need the banks to find the investers etc so HMG is well and truly stuffed. That is the problem with getting policy wrong over much of the last 12 years. Making the bankers public enemy number 1 is understandable as they have got away with losing £trillions and yet we do not see many senior bank directors who have lost all their loot including their ill earned pensions and they are now to get bonuses on the back of our capital and selling public debt to fund their bale out.It is very unfair but when governments have overspent throughout history they have ended up cap in hand to those with the loot as they need to borrow it. Mandelson is right, we have to rebalance the economy to make it less reliant on trade deficits and financial services but it is a bit like climate change- will we have to courage to change without being forced to when things get so bad we will not have a choice. It is simple- we need to use less- cars, fuel, food, energy, water, credit- or it will start to run out. At the same time we need to become less reliant on buying stuff on the cheap from overseas. Trade is about exchanging goods- not us buying the goods and then trying to pay for them by finacial alchemy. We all have to get real here.

  • Comment number 71.

    Bonuses are given to creAAAte the illusion that GDP "growth" was/is a function of efishent bankingk rather than a caaalculaaated debt creation ponzi pye in the sky driven upwards by central banksters loose monetary policy

    One that leaves johnny foreigner with the SEEMINGLY forever upwardly mobile horn of plenty where he does n't want it.

    What happens when johny foreigner [realising that his assets in stirling related vehicles are d00 d00med to the compostors heap]trades in his chips and goes east .

    With the East ONLY happy to trade in their currencies?

    At the moment foreigners are happy to trade with our currencies since they think that THEIR trade surplusses used to purchase gilts will produce interest gains that can be realised without the original capital value being diminished through currency errosion .

  • Comment number 72.

    @19 Dempster,

    So your arguing that a bonus culture within Teaching would motivate the staff and therefore improve results,

    Couldn't agree more!

  • Comment number 73.

    BBC report on Labour cost savings announcement this morning:

    'In its report, Putting The Frontline First, the government points out there are now 4,300 senior civil servants compared with 3,100 in the mid-1990s. Mr Brown said public sector workers earning an "over-generous" salary would be "named and shamed", as many had "lost touch" with normality.' And: 'Government spending on consultants would be cut by half and communication spending by a quarter - saving £650m.'

    So Labour admit to:
    - allowing the number of top paid civil servants to increase by 38%
    - allowing many of these people to earn an 'over-generous' salary which has 'lost touch' with normality
    - spending £ 1 billion a year on 'communication' (just maybe with a postive spin on Labour's policies) and £ 800 million on consultants

    Yet whenever the Tories have suggested there is potential for significant savings, Labour have always jumped up and down and gone mad about cutting services.

    By their own admission, Labour have not husbanded the vast amount we pay in tax carefully; instead, they now admit to more or less throwing it away profligately. Whoopee.

    No wonder taxes will now have to rise, and rise massively: it is Labour who by excessive spending and borrowing have thrown our money away and plunged this country into what pretty much amounts to a debt crisis (albeit one they hope to postpone until after the election).

    Tha bankers are I admit a simply brilliant red herring: but Labour alone are responsible for this country's massive debts, and for the tax rises and spending cuts that will be necessary to rebalance the books. If I were in their shoes, I'd also try to blame somebody else. The ex-fox hunters?

  • Comment number 74.

    One thing people seem to have overlooked in their rush to spew bile at that vaguely defined group of people called "bankers".

    Let's take a very simplistic view of a bank that has three departments and one hypothetical year at the bank.

    Dept A makes a profit of £200m
    Dept B makes a profit of £300m
    Dept C makes a loss of £10bn

    It's entirely right that those responsible for the monstrous losses at C get fired, without redundancy, payoff bonuses etc. But what about the people in A and B who did a brilliant job and made a big profit? Shouldn't they be rewarded for that?

    Before anyone cries foul at people being rewarded for doing their job, would you say the same to a car dealership who sold millions of pounds worth of cars despite the manufacturer making crushing losses? Should they be denied their commission?

  • Comment number 75.

    They have had over twelve months now while the banks were restructuring themselves to seperate retail from investment. This Brown has refused to do.

    Nigel Lawson advocated this on Straight Talk with Andrew Neil yesterday. He also blamed the tri-partite system set up by Brown which failed at the first hurdle for many of the problems we all face.

    Stifling the banks for trying to trade themselves out of the present crisis by punitive taxation on those clever enough to do it is like a company faced with bankruptsy sacking its best salesmen.

    People are furious with the banks but they also blame the government.

    Another six months of everyone blaming everyone else is not helping any of us and only prolongs the agony of seeing everything deteriorating around us and does not provide any real solutions on how to solve this crisis which is far from over.

  • Comment number 76.

    Biff them Darling! Biff them 'till their ears and their eyes bleed, then biff them some more!

    If it does happen, which I'm dubious the current regime will have the guts for, then it will have been a long time coming and couldn't happen to a nicer bunch of guys.

    I must say, I hadn't ever properly considered before the positives of a great depression.
    But who knows, a little social justice, even the tiniest scrap, might be one of them.

  • Comment number 77.

    72. At 1:29pm on 07 Dec 2009, Mark wrote:
    @19 Dempster,
    'So your arguing that a bonus culture within Teaching would motivate the staff and therefore improve results'

    Well, what I know about teaching you could fit on the back of a stamp and still have room for the Lord's prayer.

    My dear wife on the other hand is just very annoyed and somewhat argumentative at the moment….. it’s this bankers bonus thing. In fact she'd argue about arguing if you'd let her.

  • Comment number 78.


    Two words have become virtually unusable in polite company - bonus and banker. It is a shame that they have been devalued because any society needs to work on rewards for doing something good - like the teacher giving out a sweet or a voucher for the best essay. It has gone on forever, and is no different in pinciple to a bonus. Banking is an honourable profession, where it involves prudent care of our money and lending us the resources to buy a house, car or something else we need or want.

    Bonus has become totally discredited by just a few spivs, who were paid huge sums without any audit of their performance to see that they delivered what they were paid for. It created jealosy and a clamour for equality. But when a bank went bust those responsible for its demise never had to pay anything back. A bit like the players at Leeds United or Newcastle, who were paid huge salaries in anticipation of success but simply left when the club went bust or was relegated. I am in favour of reward for outstanding performance but only after it has been clearly demonstrated. And with clear rules and contracts to make sure that what is paid is completely honestly achieved.

    As far as banking is concerned, one day the spivs will be gone and we will go back to retail banking and building societies, and rules of conduct. Where the names Lloyds and Royal Bank of Scotland will revert to their original position as sound and prudent banks. The case for "our" RBS might be enhanced if the spiv element, which is making all the money and which is the part where bonuses are envisaged, were separated from the retail bank, not by chinese walls as at present but by its sale.

  • Comment number 79.

    #74 Your analogy is over-simplified.

    If there is a pot of money to pay Deps A and B then they can have a bonus.

    If the losses incurred by Dep C brings the whole thing down then there is no money to pay A and B. It is bankrupt.

    Going cap in hand to the tax payer to pay A and B is not allowed either!

  • Comment number 80.

    My company operates a bonus scheme. This year our bonus is that we get to keep our jobs (sadly a few people haven't) - and with the current climate, I'm fairly happy with that! Banks and bankers should be thanking their lucky stars that they still have jobs and a company to provide jobs given the mess they've created.

  • Comment number 81.

    There appears to be an essential point being missed here amongst commentators.
    It is not a matter of debate who gets a bonus; how much the bonus is; if or not they deserve that bonus etc.
    The point is......public perception!!!
    The only reason that we are in this mess is that the 'cowboys' in the City of London and elsewhere were happy to line their own pockets while the ship steamed towards the iceberg.
    So, having shown an incompetance which beggers belief, the great and the good in the City of London are now sitting back and telling the country that it is business as usual.
    Which planet are they living on?
    So they threaten to leave and find jobs abroad. Go ahead! Let's see who else's economy you can bring to it's knees.
    For once the government is responding to public anger.

  • Comment number 82.

    You and many of the contributors here are too young to remember how the bonus payments in Industry eventually led to the downfall of industry in this country. The same bonus schemes have now led to the downfall and failure of the bloated financial sector.
    It’s simple really pay a living salary to all, commensurate with their contribution to the wellbeing of the Company or organisation, during the financial year the books that show a profit then a payment is made in profit sharing. This payment being made six months in arrears, would again be commensurate with the relevant position and based on the annual salary, with 50% of that lump sum also to be added to each individual’s salary.
    Believe me it works and works well, before we went on to that system we had 15% of the market place, after the changes we raised it to 65% of that same market place within 5 years.
    So the solution to the Banking bonus problem is not that “Darling’s” tax initiative but a wholesale restructuring of the remuneration packages across this country.
    But there is no politician in this country willing or has the guts to say what is needed to get us out of this unholy mess we are now in.

  • Comment number 83.

    Lets take the word "banker" out of some of the comments are replace it with "footballer". These footballers are totally overpaid and get bonus for winning (making profits) which is simply them doing their job properly. Disgrace lets tax them at 70%, no 80% no 100% of everything above a set amount - after all they do not need £1m+ a year to live on and in any case they are wholly dependent on the public in any case. They produce no wealth they are not social responsible etc etc.

    Ah yes look what happens - all the good footballers ask for transfers to Spain and Italy, not all get them because Spain and Italy only take the best, but enough that all the premiership teams are much weaker. The teams do not do as well in Europe and the English national team does not perform as well because of the lack of competition.

  • Comment number 84.

    If the Super Tax is announced it will get bogged down in red tape and never implemented.

    The Human Rights Industry will see to that!

  • Comment number 85.

    Mr Peston wrote
    'So if a bonus super-tax were introduced, we would be disproportionately hurting our own, as it were'.

    I don't know perhaps we would, my goodness that won't do will it, lets stick to the average working Joe or Jane instead, at least they're used to being bled to the point of death.

  • Comment number 86.

    SO they generate around £12.5 billion in corporation tax and £18 billion in personal taxes a year.

    Yeah lets biff em and biff em good.

  • Comment number 87.

    #83 You seem to miss the point on purpose.

    What happens to said footballer's salary and bonus when his club files for bankruptcy?

    The entire banking industry has collapsed and is being temporarily propped up by governments across the globe.

    All banks are benefitting either directly or indirectly.

    Bonuses should reflect this!

  • Comment number 88.

    If there is any belt tightening to do its in the public sector

    Here are some statistics. I use 2007 to minimise comments about the banks

    Government Spending

    2001: 362,000,000,000
    2007: 543,000,000,000

    Spending up by 181 billion pounds per annum or 50% in six years

    Did you get an 8% rise per annum?

    Net Public Debt

    2001: 322,000,000,000
    2007: 602,000,000,000

    Debt up by 280 billion pounds or 77% in six years

    Could you borrow 12% more per annum every year? Did you get increases in pay to cover this sort of splurge?


    2001: 1003,000,000,000
    2007: 1342,000,000,000

    GDP up by 33% in six years (some of this increase is government spending, much of it dead spending on property)

    How did a 5% per annum increase justify the Governments actions

    Public Sector Employment

    2001: 5,378,000
    2009: 6,000,000

    PSE up by 662,000 in eight years, more since

    Its still going up, see below from the ONS:

    Public sector employment increased by 13,000 (seasonally adjusted) in the second quarter of 2009 to 6.039 million.

    Employment in central government increased by 21,000. Employment in local government decreased by 5,000 and public corporations decreased by 3,000.

    The number of employees in the Civil Service (included within the figures for central government and public corporations) increased by 1,000.

    Employment in the private sector decreased by 230,000 in the second quarter.

    Well before the crisis with HBOS, RBS, and Northern Rock etc, the government serpent had eaten its tail and was chomping its way up the body.

  • Comment number 89.

    Any bankers not happy about this tax, GOOD, take a walk. We all know the banks need new blood and to clear the dead wood.

  • Comment number 90.

    # 82 Oldmack,

    I was very interested in the example you gave. I knew well a multi site retail company who used bonuses as the carrot to shop managers for making their individual targets. In year 1 around a third of the shop managers made their target the bonuses were honoured despite the cashflow difficulties this caused the company as a whole. In year 2 a second criteria was given that the company also needed to reach its budget for bounuses to be paid which it did not reach. In year 3 the the company did well and approx two thirds of managers received bonuses. Year 4 was even better, however most managers were upset with their bonus as they did not raise pro rata to the previous year. From then on bonuses were almost a hinderence in terms of motivation.

    During that period i would say that 90% of the managers who recieved bonuses were no better than 90% of those who did not, the environment was the major factor, managers who recived bonuses were already getting all the pats on the back while thoughs who did not had all the worry of being asked what was going on and for their future.

    I can also think of another company who paid their "best staff" the maximum bonuses irrespective of how far short of target they were, as they used to this level of renumeration and were in fear of losing them.

    Personally, i suspect indiviual bonus as being motivational will at best only be effective for the short term and yes did lead to silly risk taking in the banks as well as enhances the selfish culture.

  • Comment number 91.

    Dear Mr. Peston,

    I am very worried by your characterisation of Londoners as not living in the real World. It is not just Londoners who can see that The City of London is the Goose that lays the golden eggs.

    If governments past and present have failed to take those eggs and invest them in economic growth elsewhere - that is surely the fault of politicians, and no-one else.

    It seems to me that a more accurate characterisation would be to think of Labour's Mr. Darling, and before him, Mr. Brown, as the Goose-Herders.

    The Labour Party has driven the country's economy to the verge of starvation, and their solution is to kill the fat Goose - and to hell with her golden eggs, just one of which will feed 5,000.

    But the Labour Party's attempt to clip the wings of the Goose (a.k.a. International agreement on bank regulation) is a failure - and the Goose is no fool.

    Our Golden Goose will simply spread her wings and fly away. She will take a million jobs with her, according to the British Banker's Association Chief, Angela Knight.

    If the Labour Party really thinks that sticking it to Bankers will really persuade voters that they had only a supporting role to play in the banking collapse of 2007 - they must believe in fairy stories...

  • Comment number 92.

    #83 - I think I can agree with your comments of comparing bankers and footballers - they are both overpaid, greedy and bad for the country as a whole.

    So yes I agree - lets tax footballers at 70 or 80% too.

    So the best will go and play somewhere else and the British clubs will sell them and make obscene amounts of money which hopefully we will get from the clubs as tax revenues.

    Then British clubs will not be paying such obscene wages any more, British players will get more of a chance of playing at the highest level and the cost to the fan (the normal everyday man in the street) will fall.

    Sure we won't win as many Champions League trophies but there will still be a league to watch every Saturday and our country will be a lot fairer in its distribution of wealth.

    Here, here I say to your suggestion - tax footballers at 70-80% - have you got any other overpaid groups of people who do not add wealth that you would like me to consider??

  • Comment number 93.

    These bankers and businessmen have milked this country for all they can get, quite deliberately slashing wages and throwing people out of work for years. And what happens to the jobless? They are labelled as feckless, uneducated, lazy spongers, detested by the majority.
    Did these rich bankers offer to pay higher taxes to help out the folk who suffered at their hands? Nope.
    Did they create decent jobs with decent pay? Nope.
    They could easily have sorted out the housing problems in this country with their great wealth. They didn't.
    They could have used the money they were making to wipe out poverty in this country. They didn't.
    Instead, they kept it for themselves, making full use of every tax dodge they could find.
    They could have gifted so much to the NHS. They didn't.
    Now the bankers just as unwanted, unloved as the jobless they help throw on the scrap heap. And surprise surprise, now the the shoe is on the other foot, the poor wee rich darlings don't like it.

    Well tough. Sauce for the goose is sauce for the gander.
    The mines were subsidised so had to go.
    THe steelworks were subsidised so had to go.
    The shipyards were subsidised to had to go.
    The car manufacturers were subsidised so had to go.
    We've lost so many industries and been told that is the way it has to be since they were not profitable. The banks are only profitable by funny accounting and tax payer subsidy.
    The banks are subsidised so have to go.

  • Comment number 94.

    Old Mack

    At 72 I probably don't fit into the category of being too young.

    You would have to explain a bit more how the profit sharing idea really differs from what is being proposed at RBS. You say "the books that show a profit then a payment is made in profit sharing.

    There are real chinese walls in RBS, and what you would have is the vast majority making a big loss. Their books show a loss and so there is nothing to share in profits. Which is followed by the bail out. As far as I know none of these people are in line for a bonus, but if they were then the national hue and cry would be fully justified. But within the overall name of RBS lies a self-standing business that makes a stonking profit. These are the people who contend that they have nothing to do with bringing the business down and want the bonuses they may well have been promised for the profit they produced. Whether you call it a bonus or a share of the profits they want it, and dont want it shared with all the loss makers. That is why they are thinking of walking.

    I am not pro or anti bonuses, but the public perception at the monent is that no-one in RBS should get one penny above their salary because to do so would be for that money to be coming from the tax payer's support.

    I did hear a rumour that the Board of Lloyds were in line for a bonus. In my view I think Eric Daniels and his Board should work for nothing for at least the next two years as a form of retribution. If I were asked to mark their score card it would none out of ten and appalling.

  • Comment number 95.

    The bankers bonus issue is a populist red herring and will do nothing in terms of raising revenues or amending banking behaviour.
    The issue at hand is how we are going to reign back this governments excessive spending .Its been quite clear to all (Except the treasury) that the forcast for £175 Billion borrowing this year will fall short.
    We need to make cuts now and fast or the consequences to front line services will be savage post the June election. The government is running this country on a credit card and when the credit stops the effect will be millions of people not being paid / severe (20 % reduction) in terms and conditions.
    P.S Anyone who says more taxes should be driven to the nearest mental institute and given a long holiday.

  • Comment number 96.

    There is a huge diversity of functions in banking, and some of those functions are useful to the functioning of the economy and are valuable to UK and European industry - and I'm not just talking about 'normal' commercial banking (ie traditional corporate lending) but also large parts of what is generally referred to as "investment banking". The functioning of the global economy relies on international capital markets. Most of what investment banking should be about is making capital markets work - putting together investors/savers (pension funds/insurance companies) together with borrowers/issuers (companies who need money). Capital markets enable borrowers/issuers to raise money more quickly and cheaply and make the economy work faster and better. Any investment banker who contributes to this core activtiy is doing something useful - and there are lots of functions (advisory, research, institutional sales, market making, etc) which do that. Boring, but important. The issue is that there are other bits of investment banking (call it the 'casino' if you like) which are effectively about taking bets with the bank's own capital to chase short term profits, often on a leveraged basis. It's not completely straightforward to disentangle the 'value-additive' bits from the 'casino', but anyone with a little nous and the time to study it could figure it out. That's what the Govt should be doing - and should then be taxing / regulating the hell out of the casino bits (or separating them out and ringfencing them so they can't drag the rest of the bank down with them). This would make banking more stable, less profitable (in good times) and less likely to fall over (in bad times) and would drive alot of bankers focsed on casino-type activities into something more useful. Mervyn King is rightly focused on this point. But that's all a bit complicated and there's an election coming up, so the Govt is ignoring Mervyn and going instead for a tax on all bankers, regardless of whether they are doing something useful or not.

    This is probably good for popularity but could be poor long term policy. This is not to defend the level of pay and bonuses generally in the industry (investment banking is not as difficult technically as being a doctor, for example, and comparing its usefulness would be ridiculous if not obscene, so it's obviously not just that it's so far better paid). It's also clearly unjust that bankers who so poorly mis-managed their institutions should now emerge from this environment being paid large bonuses, buoyed by the support of taxpayers, while the broader economy struggles on. Ultimately if the Government makes 'casino' activities not worth devoting resources to, pay in basnks will be lower and less variable, and this will involve a major sea-change in culture. But in the meantime politicians and media (and bloggers) shouldn't lose sight of the fact that away from the casino there is a real world-leading industry on our shores which serves an important role not just in the UK but also the global economy - a massive proportion of capital markets activity in Europe is conducted in London. This industry has attracted alot of people to the UK to work, pay taxes (except non-doms, something clearly has to be done to close that loophole) and spend. Brits are fortunate to have language, cultural and georgraphic advantages in competing for work in the industry. This is a valuable strategic position for UK taxpayers and we should take a little care over it while the Government figures out how to bridge a fiscal deficit of £10-15bn per month. Let's be clear - this tax will hardly make a dent in that number, and could make it worse if it reduces the tax base.

  • Comment number 97.

    #85 Dear Mr Dempster

    Put banking to one side.

    Ask yourself what government should do?

    Are we so diminished or criminal that we need play supervisors?
    Shouldn't we ask the reasonably well off retired folk to pay for bus fares
    Do you need nice printed marketing material from your local council or NHS trust (yes I've had one from the Trust next door to the one I use)
    Do you need you Council to put up 'we are nice and environmentally friendly' signage as you cross the boundary or 'we are planting 1000 trees a year' banners?
    Do you need the government to put 500 pounds per baby in bank accounts with RBS etc to be locked away for the next 18 years
    Wouldn't it be better to increase personal allowances that have some complex working family tax credit nonsense
    Do we need the BBC to provide television services in the USA and then send Dimbleby out to cover US elections
    Do we need the BBC to provide international versions of anything however they are paid for
    Do we need to pay public servants bonuses
    Why should public servants get bonuses and final salary pension schemes
    How many quangos are required?
    How many paid board members of public bodies and paid councillors?
    How much money was lent by RBS and HBOS to fund government policy by the back door through housing associations PFI schemes, PPP, Joint Ventures?
    What were the FSA, BOE and Treasury doing in their new roles established by Gordon Brown
    Did the Treasury complain about the tax take from the financial services sector up till 2008?
    Do they complain about the take from the profitable bits
    Didn't they lose about 14 billion in revenue from reducing VAT and you know my underpants did not go down by the requisite amount - how many retail items have you bought for strange amounts reflecting the difference.
    Do we need Trident when suicide bombers are the more likely threat
    Do we need identity cards along with all the other identity mechanisms?
    Do we need databases of info about how green your house or rented flat is - can't you see double glazing or ask how old the boiler is?
    Do we need to rebuild every secondary school?

    Look how public sector debt soared between 2001 and 2007 before this nonsense and ask

    If the ordinary Joe is being bled dry, who has been spending the money


    Mrs Bloggs

    BTW, If I ever get enough time, I might try to assess how much money in total was lent to further government schemes that weren't funded by GILTS. The Housing Associations got over 40 billion from the UK banks. I'm sure PFI, PPP and JV schemes got something similar. It might be interesting to know how close the total is to the 131 billion actually 'spent' by the government ao far.



  • Comment number 98.

    The City of London has been likened to the goose that lays the golden egg. It may have a golden shell, but the internals have detonated, doing considerable damage to those around it.

  • Comment number 99.

    83. Justin150 wrote: Lets take the word "banker" out of some of the comments are replace it with "footballer".

    Can we, goody, and while we're at it lets add all the other people who also earn obscene amounts of money for doing very little. Senior executives, directors, in both the private and public domain, spin doctors, celebrities, the list just goes on. any-one who earns, say over 500 grand a year (who in their right mind needs any more?). Lets cap their wages too, at that amount. Any bonuses etc on top, could then get taxed away to nothing. We could call it, let me think, hmm.. . how about, the maximum wage? Could be a nice bookend to the miniumum wage that the majority of ordinary people seem to working at these days. Who knows, might do something to turn around the ever-widening gap between rich and poor that's been ballooning on for the past few decades and is at its worst since the industrial revolution.

    I know, I know, all the arguments against, all the high earners, so-called entrepreneurs, 'wealth creators' and the likes of Tracy Emin etc will simply turn their noses, flutter their little wings and fly off to the nearest tax haven.

    But let them go, I say, just make sure you burn their passports on the way out so the little darlings can't come back. Ever. But I'll bet they don't all go, and that much of theit bluster and talk is mostly just hot air.

    I mean after all, Paul Daniels had been threatening to go for years and last time I checked the little wizard is still here.

  • Comment number 100.

    #62 Nice One Son
    Where are all the smart people in this country?
    Just like the risk manager at one of the banks who warned the board, they lost their jobs. Most have already left these shores as economic migrants, escaping the dole.
    My niece is one of those smart people. After a year of being told she is over-qualified, over-experienced and too clever for jobs, she's stopped signing on for £65 a week and fled the country - just like so many of her friends who left in the '90s.
    Don't you know history, our educated, smart, skilled people are our greatest export.


Page 1 of 2

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.