BoJo out on a limb over bankers’ bonus

Boris Johnson has spoken out against the bankers' bonus tax. Not only is he at odds with his own party and the Government, but also with leading economists.

Boris Johnson has spoken out against the bankers’ bonuses tax. Not only is he at odds with his own party and the Government, but also with leading economists.

The Evening Standard report today that the London mayor has written to the Treasury outlining his concerns. Johnson writes:

“I have already had numerous conversations with both UK and foreign banks who are quite seriously reconsidering their earlier decisions to locate, grow or remain in London…

“These short-sighted proposals could potentially and permanently damage the competitiveness of London as a financial centre by driving away the city’s unique cluster of highly skilled people, ideas and expertise.

But Simon Johnson, a British economist at Massachusets Institute of Technology – recently awarded the title of top public intellectual on the financial crisis by Prospect magazine – dismisses arguments like that used by Johnson on his Baseline Scenario blog:

“It’s unlikely that many good people will leave, but if they do move to smaller institutions that are not Too Big To Fail, that’s good for the rest of us.”

Simon Johnson is urging the US to adopt a “supertax on big bank bonuses” but is critical of the UK approach:

The supertax structure being implemented in the UK is definitely not the right model – these “taxes on bonuses” are being paid by the banks (i.e., their shareholders – meaning you, again) and not by the people receiving the bonuses.

Essentially, we need a steeply progressive windfall income tax – tied to the receipt of a particular form of income.  This is tricky to design right – but a lot of good lawyers can get cranking.

Boris Johnson has previously defied David Cameron on 50p tax.

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