City bonuses set to rise following withdrawal of payroll tax

A new study has shown that Alistair Darling’s ‘bankers’ bonus tax’ reduced the amount paid out in City bonuses, reports Left Foot Forward’s Claire French.

A new study has shown that Alistair Darling’s ‘bankers’ bonus tax‘ reduced the amount paid out in City bonuses. But research suggests that bonuses will rise again following its withdrawal.

Research published today by the Centre for Business and Economic Research (CBER) shows that City bonuses fell in 2010 by 5 per cent to £6.9 billion. A spokesperson for CBER told Left Foot Forward that there is evidence to show that banks have reduced the size of bonuses to avoid paying the tax – a sign of the policy’s success. The research comes as RBS boss, Sir Philip Hampton, revealed that the bank was “paying a lot of people who aren’t worth it”.

The chart below shows that following this year’s dip, bonuses are set to rise following the removal of Darling’s supertax. By 2014, bonuses will be close to their pre-crash peak.

For the first time this year, more than half of City bonuses have been paid to the Treasury due to the 50p tax rate and increased National Insurance Contributions. In addition, the temporary bankers’ bonus tax, set by Alistair Darling from 9th December 2009 until 5th April 2010, is projected to raise £3.5 billion.

Mr Osborne yesterday bashed the bankers without setting any policy to achieve his aims. He told the Conservative Party conference:

“I want to see genuine talent rewarded. But we will not allow money to flow unimpeded out of those banks into huge bonuses if that means money is not also flowing out in credit to the small businesses who did nothing to cause this crash.”

But Mr Osborne does not have any plans to continue the payroll tax, which raised revenue and changed behaviour.

Instead, the Chancellor introduced an annual £2bn levy on British banks in his Budget speech in June – accounting for 0.04 per cent of the total balance of British banks. But with the levy bringing in £1.5 billion less than the payroll tax, the IMF has called for the levy to be tripled. The CEBR research shows that it will do little to depress bonus levels.

Greg Beales, former member of Downing Street policy directorate, tweeted earlier that half of the bonus tax would pay for the child benefit cut that the Chancellor announced yesterday.

20 Responses to “City bonuses set to rise following withdrawal of payroll tax”

  1. Shamik Das

    City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M reports @leftfootfwd’s @clairee_french

  2. Ross Haffenden

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  3. Artisan Cupcake Co.

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  4. emma dow

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  5. richut

    RT @leftfootfwd City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M – We're all in this together. What? Oh.

  6. Will Straw

    The bankers' bonus tax DID affect bonus levels. So why does Osborne want to scrap it? //bit.ly/c2qd2M by @claireefrench 4 @leftfootfwd

  7. bethan john

    RT @wdjstraw: The bankers' bonus tax DID affect bonus levels. So why does Osborne want to scrap it? //bit.ly/c2qd2M by @claireefren …

  8. Claire French

    RT @shamikdas: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M reports @leftfootfwd’s @clairee_french

  9. Jordan Hall

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  10. Dominic Smith

    RT @wdjstraw: The bankers' bonus tax DID affect bonus levels. So why does Osborne want to scrap it? //bit.ly/c2qd2M by @claireefren …

  11. Redstar PCS Stoke

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  12. John Turner

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  13. pam lorenz

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  14. Mr. Sensible

    Clare, how can we all be in this together when bankers’ bonuses are set to go up, meanwhile people on middle incomes are set to lose their child benefit?

    Further to the bank levy, I believe that is at least parcially canceled out by the Corporation Tax cut.

    The bank levy should be trebbled, the bonus tax should be reintroduced and the Corporation Tax cut should be scrapped, at least for the banks.

    That is the way to match banker-bashing rhetoric with banker-bashing substance.

  15. Balham Bugle

    Of course, to be completely accurate, it might be worthwhile mentioning that Darling explicitly introduced the Banking levy as a “one-off” (see Hansard 9 Dec 2009 : Column 367), and the briefing from the Treasury was keen to emphasise this. The Tories haven’t withdrawn the levy; it’s no longer exists. Labour, as far as I have heard, have made no mention of any plans to reintroduce it.

  16. Hazico_Jo

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

  17. Paul Evans

    City bonuses set to rise following withdrawal of payroll tax //bit.ly/cBTO3V

  18. Daniel Rees

    Somebody tell Osborne that £1bn child benefit cut is choice not to keep bank bonus tax or increase bank levy //bit.ly/cegLrZ @edballsmp

  19. jeff marks

    you may have your maths wrong

    i don’t think city bonuses were almost 12,000 billion in 2007.

    always best to check/proof read otherwise with the simpler mistakes people think you don’t really know what you’re talking about

  20. One Society campaign

    RT @leftfootfwd: City bonuses set to rise following withdrawal of payroll tax: //bit.ly/c2qd2M

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