Despite record fines for everything from mis-selling to Libor rate fixing and even money laundering, it has been another season of bumper bonuses. Yet against this backdrop our chancellor finds himself in Brussels arguing against a plan to rein in excessive bonuses.
Ed Balls MP is the shadow chancellor
This has not been a great week for rebuilding the tarnished reputation of Britain’s banks in the eyes of families and businesses.
Even though the Bank of England has been giving cheap credit to the banks, figures on Monday showed that net lending has continued to fall. And despite record fines for everything from mis-selling to Libor rate fixing and even money laundering, it has been another season of bumper bonuses.
Yet against this backdrop our chancellor finds himself in Brussels arguing against a plan to rein in excessive bonuses.
How on earth did he get himself in this position? It shouldn’t take the European Union to rein in excessive bonuses, but George Osborne has dragged his feet and refused to act in Britain.
And he failed to engage with these sensible proposals to limit bonuses to a maximum of a year’s salary or double that if explicitly backed by shareholders – proposals which even his own MEPs have backed – until the very last minute. It’s no wonder that in Brussels today he was outnumbered 26 to one.
There should be fair rewards for performance, but it is right that there is action to rein in bloated bonuses which are a device for keeping traders focused on the weeks ahead, rather than years ahead. In the absence of action in Britain, George Osborne is on very weak ground trying to stop or unpick these proposals.
There are several measures Labour has proposed which George Osborne should take at home. He should repeat Labour’s tax on bank bonuses to fund a guaranteed job for young people out of work for a year or more. He should put into effect the law Labour passed to force banks to reveal how many people they pay more than £1million.
And at a time when millions on middle and modest incomes are being asked to pay more, he should cancel his £3 billion tax cut for the richest people in the country which will mean an even more lucrative bonus round for bankers next year.
I want the banks to succeed – so that taxpayers get their money back, consumers get a good deal and small businesses get the loans they need to grow. But we need to reform our banks so they work for the long-term interests of the economy.
As Sir George Cox says in his report for Labour’s policy review today, we need to end the short-termist culture in British business. That must include ensuring that executive remuneration is more based on long-term results, as Sir George recommends. It must also include radical reforms of our banks, which the government is continuing to water down.
I look forward to discussing this with the chancellor next Monday when the House of Commons debates the Second Reading of the Financial Services Bill.
It’s time George Osborne showed some leadership.
This piece was originally posted at Shadow Chancellor Blog.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.