The bankers' windfall tax has failed to curb the bonus culture. The Government should listen to over 100 MPs and announce a High Pay Commission.
As this week we brace ourselves for the New Year round of announcements on UK bank profits (which will be kicked off by JP Morgan this Friday), it’s significant that over 100 MPs have now signed up in support of Early Day Motion 191 that calls for a High Pay Commission.
JP Morgan are expected to report bumper profits coupled with plans for excessive bonuses (despite the Bankers’ Windfall Tax), with other banks bound to follow suit. Soon after, a number of things will begin to become very clear.
First, that the popular one-off Bankers’ Windfall Tax, first championed by Compass and others, will almost certainly raise billions in extra revenue for the Treasury, not the modest £500 million originally forecast in the pre-Budget report in December – this is good news for the government in clawing back some of the hundreds of billions spent in bailing out the banks.
Secondly, however, and perhaps more important is that as a short-term, one-off measure, the Bankers’ Windfall Tax is likely to have largely failed to curb the culture of excessive rewards in the City – which the Chancellor, Alistair Darling, stated in December was the chief reason for introducing the one-off levy. This should worry us all.
We literally cannot afford as a country to allow the City to go back to business as usual – because if the government fails to act and we allow the culture of excessive rewards to continue unchecked then watch out for another financial crisis – something we would be unable to pay for.
As a result there is now a more compelling case than ever for the government to urgently establish a public High Pay Commission. Only then will the government be able achieve the aim of a lasting and long-term settlement to the issue of high pay and excessive rewards and effectively tackle the bonus culture.
That is why growing numbers of MPs, from a range of parties, are supporting the call for a High Pay Commission and the reason why the number will only keep growing in the days ahead as we hear of more windfall bank profits coupled with plans for exuberant and largely unearned windfall bonuses.
So while we should all be delighted that the Bankers’ Windfall Tax will raise billions of extra revenue for the government to use for socially useful purposes, not least in helping our unemployed young people, we must now see the government take further action to curb the excessive bonus culture. It would make a very good start by committing to establishing a public High Pay Commission so we can find a lasting solution to the problem of excessive pay.
Our guest writer is Gavin Hayes, General Secretary of Compass
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
9 Responses to “Darling must listen to MPs’ call for High Pay Commission”
Roger
The bonus tax really does seem to have been designed around a complete misunderstanding of human nature.
Bankers who have paid themselves six, seven or eight figure bonuses every year have developed a profound sense of entitlement to them which it is simply impossible for them to abandon.
So rather than rein-back the bonuses they have chosen instead to let the shareholders (which in the bailout banks case means the taxpayer) take a lower bottom line.
But what did Gordon and Alastair expect?
Tyler
High pay commision? What are we, communists now? If you do it to bankers, then you have to do it to everyone. The banks themselves only think the “banker tax” will only raise £3-400m over and above the 50% tax band.
Even ignoring the inevitable corruption, loss of tax revenues and destruction of GDP growth (not only banking – who would even start a business if after a certain amount of earnings the Govt stepped in and relieved you of it) its a stupid idea. Bankers pay and have always paid tax -how do you think Brown managed to spend so much on the state in the last 10 years (ok ok, apart from borrowing heavily).
Probably the most ridiculous thing i’ve ever heard.
Charles Barry
Gavin Hayes asserts that the bonus tax will raise billions. But he doesn’t provide any hard evidence of why this should be happening. It just sounds like optimistic nonsense to me.
Secondly Gavin Hayes makes the usual mistake of thinking that somehow high pay makes bankers incompetent. It is not the high levels of pay paid to the majority of the staff that drives the bank to bankruptcy. Most bank workers are allowed anywhere near the kind of cash that could seriously threaten the bank’s balance sheet. The people who have the power to endanger the bank’s solvency are the top 10, maybe top 25, and any scheme devised by them would almost certainly have been signed off by the board or the chief exec.
The issue is not about high pay, but about proper corporate governance for financial firms, where the complexity of their products means that it is difficult to see what the end result will be of a given transaction. For example, Lehman Brothers’s CEO and COO (paid in shares, not cash bonuses) betted huge amounts of money on commercial and sub-prime real estate (over $14bn worth), whilst downstairs, the average bonus paid worker was making huge quantities of money betting in the opposite direction.
In fact if it weren’t for incompetence by the chief exec of Lehman Brothers, it could have been bought out by a bigger bank in Jan 2008 and that would have been the end of that.
The point is not to have this ‘politics-of-envy’ style High Pay Commission, but instead improve the regulation and scrutiny of financial firms.
Charles Barry
Just to correct a spelling mistake, paragraph 2 sentence 3 should read “Most bank workers aren’t allowed anywhere near the kind of cash that could seriously threaten the bank’s balance sheet.”