Bonuses: a question of political economy

Rhoda Klapp

Don't those bonuses attract 50% tax and some NI too? Kinda hard to see a problem exchequer-wise. Ridiculous envy-wise, that problem I can see. But it is wrong, so wrong, to worry about it.

strapworld

Whilst this blog is indulging in bashing the Lib Dems. Perhaps readers would like to know the thoughts of Iain Martin on Cameron and the Conservatives now!

"When David Cameron was leader of the opposition it was the widely accepted wisdom that he would, if he became Britain's prime minister, have the most terrible difficulties with the European Union.
His party, it was said, would be almost unmanageable on the issue. Remember that he encountered all manner of problems when he helped to establish a new center-right grouping in the European Parliament, breaking away from the far-right EPP. Surely that was just a taster before the main course in government? Relations with Chancellor Angela Merkel in Germany and President Nicolas Sarkozy of France were likely be fraught, as the Conservatives forced their leader to block initiatives coming from Brussels. Britain led by Mr. Cameron would be on a collision course with its neighbors. The resulting impact might destroy Mr. Cameron's carefully calibrated attempts to present himself as centrist, moderate and reasonable.

Absolutely none of this has happened. Why?
Almost unnoticed, his MPs have voted for a list of measures that would a few years ago have triggered full-scale Tory war. There was the expansion of justice and home-affairs powers, involving the extension of the so-called European arrest warrant. The European External Action Service—or EU diplomatic service—was nodded through. New regulations for the City of London require the establishment of three pan-European supervisory bodies. This was accepted by the Treasury and if there were protests from the Conservative benches they didn't make much noise. A higher budget for the EU has also been approved.Ask senior Conservatives about all this and they point to the coalition with the Liberal Democrats, enthusiasts for integration. It necessitates compromise.

But that is the myth designed to make Lib Dem leader and Deputy Prime Minister Nick Clegg feel good. Mr. Cameron had decided long before he failed to win an overall majority at the general election that he was not going to die in a ditch over Europe. He prepared accordingly, removing his commitment to a referendum on the Lisbon treaty on the grounds that it was too late and would look ridiculous.Mr. Cameron also put in a lot of effort into wooing Ms. Merkel and Mr. Sarkozy ahead of the election, reassuring them that he would be a good member of the European leaders' club. This work has continued since he took office.
He is aided by having William Hague at the Foreign Office. One of the most enduring myths of public life in Britain is that of Mr. Hague as Euroskeptic. He was once so minded, when he lost the 2001 election heavily pledging to "Save the Pound." Since then he has kept the reputation while moving steadily onto mainstream establishment territory. As a fellow Conservative puts it: "William has a couple of years ahead of him doing an agreeable job, and then a lifetime of book signings and profitable speech-making afterwards. He's not going to do anything confrontational that puts all that at risk." The prime minister is a relentlessly pragmatic sort and not particularly Eurosceptic. He liked to say in opposition: "Isn't it great that the Tory party hasn't had a row about Europe for ages?" Now he doesn't want any trouble that might destabilize his government and distract from its priority of eliminating the deficit by the next election.Britons, more concerned post-crisis about the economy than Europe, don't seem particularly fussed either. They will tell pollsters that they are notionally sceptical of the EU and many of its works, yet recoil from leaders and parties that bang on about it. A campaign for a referendum on withdrawal began recently, but I wouldn't rate highly the chances of Mr. Cameron signing up. What a tranquil scene. A subject on which Conservatives fought a civil war has faded into the background. If it is not the death of U.K. Tory Euroscepticism, it looks a lot like it."

Reconstruct

The size of the bonuses is a reflection of the monopolistic structure of the global market for financial services - the monopolies/oligopolies are simply extracting collosal economic rents because they can. The answer is not to tax them, so much as to act to break up the oligopolies. One could do this by legislating to encourage a post-bank financial system based around a fundiflora of money market mutual funds. Who, after all, needs commercial banks in a world in which information distribution costs are practically zero?

Nickle

If you bash the bankers hard enough they will leave. They are rational at the end of the day. The focus is on making money.

What Cable and Cameron are doing is trying to distract people from the disaster of government.

5,000 billion of debts compared to a banking bailout of 40 billion.

Not surprising that Vince is mouthing off.

I struck more and more by the analogy of monkeys at typewriters trying to produce Shakespear.

Cable is the political equivalent.

In the meantime politicians are buying Astrology software on expenses.

Senor Frizby

Most people are bored by banker bashing. All based on finger pointing envy. That is a disease we should eradicate provided all is legal. If a banker makes loads of cash for his employer then why would he/she not be rewarded handsomely. I darn well would expect to be... especially considering the hours they work.

crowbait

Quoting Strapworld ''If it is not the death of Tory Eurosceptisism,it looks a lot like it''. What it is in reality is the death of the Conservative party. The diehard Tories who provide the PBI comes election time with knocking on doors,posters etc. will not turn out for this socialist euro shower.

Richard of York

I thought the 50% bonus tax was a one of.

Osborne replaced with a 2b levy and then handed back 5b in lower corp tax.
Hard to see why any banker would be worried about that.

gordon-bennett

What Rhoda Klapp said, but first remember that in Banking the offer of big bonuses is the incentive to earn big profits to justify the big bonuses.

If you cut the bonuses and incentives then the sector will decline and HMRC will get less tax.

The only people complaining about big bonuses are the politicians and trade unionists who are incapable of earning those big bonuses.

Tiberius

Cable may be doing the politics here - fair enough - but if he really did say the bankers were a greater threat to the country than the unions, then he must know something that many of us don't.

alexsandr

Reconstruct - suss out ZOPA. Peer to peer lending. Must be the way forward.

TrevorsDen

The banks are paying bonuses that compensate for the tax. Get real.
The bankers did their best to ruin us - we have baled them out and they still rake it in at our expense. You will not get me defending them.

Oh spare us a load of rubbish from Mr Martin Strapworld. There has been nothing happening thats special on the EU front. I think national solvency is the real threat.

There was no point in having a referendum on the constitution when the law had been passed and voted on. It would have been a joke an expensive one and would probably have been boycotted by opponents. Then what?

Rhoda Klapp

trevorsden, if they have half or more taken in tax, and spend the rest on goods and services, it's a benefit both for the exchequer and the rest of us. It should not matter to you who gets an undeserved bonus, it is only a matter for the shareholders. This is just envy. I understand that some view it as a sin. Maybe not, but it is an unproductive emotion. Get over it. It really does not matter.

Noa Zrk

I'm completely and utterly sick to death of 'leaked' speeches, which consequently lack any appearance of spontaneity and in consequence, impact.

The last thing I want to do is hear John Humpity-Bumpity discussing anyones speech before they've actually made it.

It's perverse!

Simon Stephenson

Rhoda Klapp : 7.10pm

This is not about envy. It's never been about envy. It never will be about envy.

It's about the fact that the financial sector has the opportunity to wealth-strip other sectors, and that the major proportion of its declared profits comes from such stripping - innocent fraud, as Galbraith called it. To all those of us who see nothing whatsoever virtuous in this sort of activity, the payment of gigantic salaries, and mega-bonuses, to encourage the best brains to come and do it, is a sign that our once-great Western civilisation is terminally ill.

Hugh

If you are motivated by money, you become a banker.
If you are motivated by power, you become a politician.
If you are motivated by holidays, you become a teacher.
if you are motivated by interfering in people's lives, you become a social worker,
If you are motivated by creativity, you become a poet
If you are motivated by sadism, you become a tax collector

We all make our choices in lives. We all get our rewards. Let's keep envy out of it.

TGF UKIP

Just how does The Mekon give you the line to take James - phone, fax or e mail?

Rhoda Klapp

Simon S, to take exception to the behaviour of the banks is not envy, of course. Banks will do what they do, and must be regulated. It was the system of regulation which failed, for reasons I won't go into here. But the bonuses? That is not directly connected to the banks' piratical behaviour, and those who object to them cannot escape the accusation of envy. Other people getting richer do not make me poorer. Wherever there are large amounts of money, some sticks to undeserving people. As well to worry about the rain, or gravity, for all you can do about it.

Simon Stephenson

Rhoda Klapp : 8.47am

"Other people getting richer do not make me poorer."

But the whole point of the wealth-stripping argument is that they do make you poorer. Neither I, nor many others, have a problem with created wealth belonging in the first instance to those who have created it. We do have a problem, however, with the assumption that all legal money-making is newly-created wealth, because we see this as a mass self-deception of which we are largely unaware. The money-makers have rationalised their behaviour to maintain self-esteem, and their critics have taken the line that what is going on is blatant and deliberate dishonesty. Both camps are wrong.

You may find this article of some interest:-

http://www.allbusiness.com/management-companies-enterprises/1185984-1.html

Rhoda Klapp

simon, I think one could only count all legallay earned money as morally the same, if only for the reason that nobody I know of is fit to make that kind of judgment, that one man's fair wage is good, but another's is a 'windfall', or in some way undeserved. Especially unqualified to make such a distinction is some lazy-thinking troughing bastard politician, with an unending appetite for tax money and no compunction in frittering it away. By whom I refer to, well, pretty much all of them.