Ed Milliband’s line of questioning at PMQs today was telling. Sod the amount a tax-payer, in this case “the banks” pays. What’s more important is the detail of HOW that money is raised. Punishing “The Bankers” is more important than raising money for a near-bankrupt treasury (thanks, Labour) or ensuring that the credit needed for the functioning of the economy is made available by the banks (thanks, Basel III) or that the treasury gets as much as possible back on its investment in 2008.
Bonuses are a way by which Banks, and other businesses match their wage-bill to the success of the business in any given year. Large bonuses have often been in the form of shares – tying key revenue generators into the long-term success of the businesses. Whilst there is a case for politicians to have a majority or major shareholder interest in the remuneration policies of RBS and Lloyds banking group respectively, Barclays, HSBC, Standard Chartered and others which avoided a government bail-out should be able to pay what they like to whomever they like. It is a matter for them and their shareholders.
The (temporary – just wait for the Labour screams when the marginal rate falls) 50% tax band sees to it that HALF of the biggest bonuses go to the treasury, but Labour are suggesting that temporary measures like banking levies and micro-management of private business should be continued, as if the Laffer curve did not exist and the banks had nowhere else to go. That may be true of the bust domestic banks, but the big, profitable international banks currently based in the UK would go elsewhere, unless idiot politicians calm down the rhetoric.
Now I am sure that the performance of Bob Diamond yesterday has seen to it that the coalition huff and puff for public consumption, but basically do nothing, allowing the banks to do what they do best – make money.
It isn’t the city-boys who went bust, a point eloquently made by TravelGall to the squaddies. It was the bri-nylon end of banking: salesmen who flogged loans to people who couldn’t afford them to buy houses for much more than they were worth in return for sales commission, who caused the crisis. This process was encouraged by a government which wanted to “improve access to home ownership”, and regulated the housing markets as if they were a one-way bet. The failure was not of “de-regulated” banking, that end of the market survived the crash nicely and would have done so more profitably had they been allowed, but of the tightly regulated retail and mortgage end.
If left to it (and that includes paying bonuses to people who are making the banks money) the banks will pay more tax to the exchequer, pay back Government loans and shareholdings quicker, beef up their balance sheets to Basel III standards over the next few years AND lend more to people and businesses as the recovery cranks up, and the “cost” of this is that a few key people facilitating this get rich. Aside from a deeply ugly outbreak of the politics of envy, I fail to see what the big problem is…