Brown’s new dividing line ignores that banks are our route to salvation

Rhoda Klapp

Bonuses. Is it not true that over, well over 60% of bonuses will end up in the government's pocket, whereas if the money was left a corporate profit or distributed as dividend the amount if taxation would be far less?

Bonuses are only a problem for the envious. Envy is a sin, isn't it? The conservative respons ought to be, we don't want to control the detail of how corporations work internally. We are happy, however, to take the tax, to offload the tax burden on the less well-off. Wonder what weasel words the actual tories will come out with.

R King

Have you noticed the similarity in Robert Mugabee's econmics strategy and Gordon Brown's?

Print lots of money, let the currency devalue, mass unemployment and blame the rest of the world!!

Nicholas

Brown & his gang clearly don't understand that their penchant for tabloid-stimulated, knee jerk, hastily conceived, ramrodded through parliament without debate, "tough" legislation is one of the main reasons they are so disliked.

"Toughest in the world" is not a good soundbite for a country that is already acquiring the reputation for being the first "soft" totalitarian state, spearheading the West's self-destruction of democracy. We need less of this kind of crap - not more.

Will this legislation work? Doubt it. Will it come with a whole baggage train of unintended consequences? Of course. Will it spawn yet more taxpayer funded, gold-plated pension earning socialist staffed regulatory "agencies", quangos and top heavy bureaucracy? Absolutely.

Nick

I know of three relatively senior (late 30s/head of desk level) investment bankers at RBS who have left for other non-majority controlled by the UK government banks in the last few weeks. I wonder if there will be anyone left to earn these bonuses (whether deferred or clawed back) ?

TrevorsDen

"If Stephen Hester of RBS, gets his £9 million bonus, I get my £9 billion profit" -- but what short term damage will Hester etc do to the economy to earn his money? If he is making it and the banks are as well then someone is losing it.
How can Brown rail against bonuses when his own state bank has given a massive bonus?

Ms Klapp - indeed much of the bonus goes in tax - which is why Brown was so happy to ignore bank excesses and rake it in. He was ruining the rest of the economy's ability to pay so he was desperate for mega bank profits to tax.
I hardly think a return to a previous distopia is the correct way forward.

Are we saying Hester cannot do a good job based on a million £ a year? What about nurses perhaps we should pay them 10 times there salary for doing their job. Soldiers what about nthem - our govt treat THEM like shit.

Hester has a job - if he is good enough why cannot he do it for his basic salary? " Oh there is no one better - he is the best"? What utter bollocks. His bonus is a crime a sin and I am only sorry I cannot meet the bastard to tell him to his face.

What happened to doing the right thing for serving your country in crisis?

Soldiers are getting their legs blown off to facilitate Browns place on the world stage. What does Hester do? Demand a 10 million bonus. All he has to do is buy into the QE programme and rebuild his assets or sack 25000 or run a massive margin on lending. Sodding easy money

Anyone who thinks these bastard bankers are somehow clever 'masters of the universe' are idiots. They are barrow boy scum who were happy to sup with the devil.

Flemingcrag

If you own some banks and have a majority shareholding in most others in the Country, why do you need to pass legislation to stop them paying bonuses?????

How does this weeks guff stand the test of time with last weeks, in the run-up to and all during the G20 summit we were inundated with stories of France and Gremany leading the way on capping Bankers' bonuses with America and Britain resisting this move.

Truly you have to be a New Labour delusionist to make any sense of Gordon's; "We will have the toughest regulation in the World on Bankers' bonuses".

Fearless Frank

@Flemingcrag
September 28th, 2009 11:09am

Yes, odd how we paid out billions to take over the banks, yet somehow had no control over them.
You'd almost think that we handed over the dosh with no strings attached - surely not!

G J Wyatt

Mr Darling promises an end to “automatic bonuses” for bankers, but It is not any automatic element in bonuses that puts the economy in jeopardy. It is the ramping up of risks by discretionary one-sided bonuses that needs to be reined in. Popular revulsion for stratospheric payments received by some bankers has again led the labour government to miss the point.

JohnOfEnfield

To paraphrase Adam Smith - Capitalism relies on the baser instincts & self interest of all men in order to succeed.

Just try and imagine what it would be like if we had to rely on the goodwill of all men to make the economy work.

Dean

I am really surprised to see you describe a system of "effective but loose regulation" as the route to our salvation. No-one has yet designed a banking supervisory regime that is loose but effective: it is an oxymoron. In fact, it is a very good description of the failed regime that gave us the worst financial crisis since the 1920s.

Comments like this illustrate precisely why some of us on the non-market fundamentalist right are genuinely worried by the prospect of a Tory victory at the next election. Have you learnt nothing from the catastrophe of the past two years?

mark

This is one of the very worst pieces i've ever seen posted on Coffee House.

Few points:-

1. The idea that the Government should seek to have strategic ownership of parts of financial system to create the income to fund public spending seems to come straight out of the Communist Manifesto.

2. The City is far more than just banks. The much larger proportion is privately owned and run fund managers, brokerages, advisory firms, research firms, etc. Focussing just on the subsidised mega-banks as "the City" shows a basic lack of understanding of how the London financial sector works.

3. Dividing Lines. Have a read of the speach George Osborne made at the Spectator two weeks ago - it's notes that taxpayer interest in taxpayer subsidised banks in relation to bonusses is valid. Subsidies disort markets and tend to reduce competitiveness.

4. This week is the first anniversary of the Icelandic collapse. Does anyone really think taxpayer guaranteed international lending is the way to create wealth in the UK?

5. Taxpayer funded talent. If bigger bonusses for bankers through subsidies is smart now, why wasn't higher pay for coalminers or carmakers at British Leyland? would a competitive car industry not have been a "new north sea oil" too? very wisely, the Thatcher government realised the free market, rather than govt subsidy, was the way to create wealth.

David Blackburn

Mark,
Thank you for your criticism. First, I quite clearly state that this is not a dividing line issue. Second, I do not suggest at any point that banks and The City are one and the same - that mythical monolith seems to be a creation of your mind. Third, taxpayers are not subsidising banks, they are shareholders who have no control over their day to day operation. The market is, fundementally, still in control and remains undistorted. Fourth, George Osborne did not refer to the bailout as a "subsidy". So, it seems that the misunderstandings are yours.

As and when banks start making substantial profits the taxpayer will receive dividends, which should be used to balance the public finances and fund tax cuts. Eventually, the banks will be sold to private investors at a massive profit, which should fund further tax cuts. There is no point selling at the bottom of the market. The bank bailouts are clearly compitable with the tenets of free market economics and should, theoretically, end up making the nation a very substantial sum of money - endangering that is reckless.

se1man

Trevor'sDen: "If he is making it and the banks are as well then someone is losing it."

Do you really think that's how economics works, that it's a zero sum game? If that were the case then there would never be any sort of economic growth.

Rhoda Klapp

If they bought all those bank shares in my name, why can't I have my share? wouldn't that take the debt off the books and into the hands of the poor sods who will have to pay it in the end? And we could buy and sell them in the years to come, to each other or the market at large. Capitalism, working for us.

Simon Stephenson

se1man : 2.04pm

Just as a protection racket adds nothing useful to the economy as a whole, so much of the financial sector does this as well. Most if its initiatives are in manufacturing situations (and their counter-remedies) in which the productive world has little option but to pay to be shielded from the effects. In reality this is no more than a legalised intra-sector levy, from which in overall terms society gains nothing, because there's no social reason for the situations to be there in the first place.

This is not to say that the entire financial services industry is a sophisticated scam, just that most of it adds far more cost to the general economy than it creates in value.

So I'm afraid that David Blackburn's picture of a valiant City leading the rest of the country out of the doldrums is no more than a mirage. What's needed more than anything is the realisation that shunting bits of paper round a desk doesn't produce any capital or consumer goods and services, it just makes those that are produced that much more expensive.

A Banker

This is one of the very worst pieces i've ever seen posted on Coffee House.
Few points:-

1. The idea that the Government should seek to have strategic ownership of parts of financial system to create the income to fund public spending seems to come straight out of the Communist Manifesto.

2. The City is far more than just banks. The much larger proportion is privately owned and run fund managers, brokerages, advisory firms, research firms, etc. Focussing just on the subsidised mega-banks as "the City" shows a basic lack of understanding of how the London financial sector works.

3. Dividing Lines. Have a read of the speach George Osborne made at the Spectator two weeks ago - it's notes that taxpayer interest in taxpayer subsidised banks in relation to bonusses is valid. Subsidies disort markets and tend to reduce competitiveness.

4. This week is the first anniversary of the Icelandic collapse. Does anyone really think taxpayer guaranteed international lending is the way to create wealth in the UK?

5. Taxpayer funded talent. If bigger bonusses for bankers through subsidies is smart now, why wasn't higher pay for coalminers or carmakers at British Leyland? would a competitive car industry not have been a "new north sea oil" too? very wisely, the Thatcher government realised the free market, rather than govt subsidy, was the way to create wealth.