When George Osborne became Chancellor, he took charge of a very large zombie bank with a medium-sized government attached to it. The Royal Bank of Scotland was nationalised in 2008 with assets of £2.2 trillion, almost four times state annual spending. The difference between RBS being run well or run badly could be counted in billions. The man who would make that difference was Stephen Hester, a top-flight banker who in a moment of madness had accepted the contract from Alistair Darling’s Treasury and got to work. He would not have known how his new masters would turn on him, demanding that he refuse his bonus of nearly £1 million.
Hester’s bonus was almost twice as large last year — but then, fewer people cared. Now the hang-a-banker mentality is back, and it is being encouraged by the government. David Cameron’s decision to hire a pollster as chief strategist has turned his government into a weather-vane. The Prime Minister tries to work out what people are saying, then attempts to say it louder. And if they don’t like bankers, well, it’s time to strip Fred Goodwin of his knighthood and square up to Mr Hester.
The furore over bonuses makes Britain seem less attractive than ever to foreigners who are mulling over whether to move their business here. Our top rate of tax, which George Osborne increased to 52p with his National Insurance hike, is the third-highest in the world. The UK divisions of global companies struggle to retain staff at a time when rivals like Singapore and Hong Kong are welcoming the rich with tax rates less than half ours. But the British government seems unwilling to mount any defence of its world-class finance industry, or to explain why bonuses are paid.