Bankers’ bonuses for some time seem to have attracted broad consensus. Almost everyone, on the left and the right, thinks that the bonus culture in big banks spiralled out of control and was a contributing factor to the world wide financial collapse.
So it is perhaps a little surprising to see George Osborne opposing further measures to help curb bonuses as happened last week in a meeting of Finance Ministers from across the European Union where Mr Osborne found himself the only dissenting voice in the room. He was predictably roundly ignored. You could almost feel sorry for him if it weren’t for the fact it was another example of the Tories ‘not getting it’ when it comes to EU negotiations. My colleague, Arlene McCarthy, put it well in the Guardian:
“Yet again, we have an example of the government’s failure to proactively engage in and influence EU policy in Britain’s national interest. Why has the UK government failed in the last 18 months to put an alternative proposal on the table, and waited until the last minute to raise objections?”
This doesn’t exactly bode well for any attempt the the Tories may make to renegotiate powers.
So we have the Chancellor fighting a losing battle on the wrong side of the argument. And it is the wrong side, as the measures proposed are very sensible. The failure of banks to self regulate on bonuses or to exercise restraint means that we are now introducing a bonus cap with a 1:1 salary to bonus ratio. This should help put an end to the excessive risk culture which led to taxpayer bail-outs and bank collapses.
These rules are designed to make banks safer, more accountable and ensure they focus on lending to the real economy. It will put an end an unsustainable banking model where a bail-out bank with £5.2 billion losses, £1.1 billion fines for mis-selling, £390 million fines for libor-fixing, in 2012 continued to pay out over £600 million in bonuses.
This is neither ethnical nor sustainable. The industry has had two years to sort this out and their failure to tackle the culture has resulted in these tough rules.
It’s ridiculous that Osborne sought to defend this broken bonus culture. This government says they want reform of the banking sector yet they are the only member state to defend the status quo by maintaining the current rules around bonuses.