Rachel Reeves, Labour MP for Leeds West, reports on the Tory-led government's failure to take action on bankers' bonuses, despite all the pre-election rhetoric.
Rachel Reeves is the Member of Parliament for Leeds West
The new year kicked into life this week in Parliament – but the City will be feeling like it is Christmas again. First, Bob Diamond confirmed to the Treasury select committee that at no point have the Chancellor or the prime minister asked him – or presumably any other banker – to show restraint in the size of his bonus. And second, George Osborne took to the floor of the House on Tuesday to confirm the huge shift from the pre-election rhetoric to the post election inaction.
Bonuses this year are expected to total around £7 billion, and it looks like, just three years after the global financial crisis, bankers can breathe a sigh of relief, with their bank balances – if not their reputations – intact.
While welfare is being cut by £18bn, the VAT hike will bring in £13bn, with the banking levy bringing in just £1.2bn this year, compared with the £3.5bn bonus tax revenues last year.
Mr Diamond came before the Treasury select committee in the wake of the government’s refusal to take up the recommendations of the Walker Review in relation to disclosure of pay and bonuses. Pre election, the business secretary, Vince Cable said that:
“… for banks in general, transparency is a minimum requirement. All highly paid staff in regulated institutions with a compensation package in excess of the prime minister’s £200,000 should publish details of their remuneration.”
But post-election, George Osborne now refuses to adopt this practice unless there is EU-wide agreement, which is unlikely. Taxpayers – and shareholders more generally – can’t possibly scrutinise board decisions if they can’t even see high level pay and bonuses.
And nowhere does the cry of ‘we’re all in this together’ seem more hollow than when it comes to the nationalised banks – RBS and Lloyds. In 2009, George Osborne said that:
“… there can be no justification for using taxpayer support and guarantees to pay cash into the bankers when the rest of the economy is in such desperate need of that cash. Cash for the economy – not cash for bonuses.”
And then that favourite line:
“We’re all in this together.”
Around the same time David Cameron called for a £2,000 bonus cap for as long as the taxpayer retained a stake. Yet the chief executive of one of those banks – RBS – looks set to receive a £2.5m bonus. A quick glance at the financial pages of the papers shows the RBS share price up 40.4p yesterday, compared to 52.5p this time last year, and Lloyds shares are valued at 66.4p, compared to 64.5p a year ago.
My constituents in Leeds West would not expect a bonus for that sort of performance, businesses up and down the country wouldn’t expect a bonus for failing to increase the value of their business, so how can it be right that taxpayers’ money will be used for bonuses in our nationalised banks?
As Alan Johnson put it, George Osborne seems to think that children and students, rather than bankers, have the broadest shoulders. But there is an alternative. An alternative where the institutions responsible for the financial crisis must help with deficit reduction and rebalancing the economy. That’s why Ed Miliband committed on Monday to extend the tax on bank bonuses which brought in £3.5bn last year alone. The legislation is there, it would have support across the country and, I believe, on all sides of the House.
But with the new year being defined by this inaction, I fear that expecting the Tory-led government to regulate bonuses ‘robustly’ is a little too much like thinking that turkeys might vote for Christmas. The banks have been let off.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.