Darling Bashes The Bankers Where It Hurts

I completely agree. These are the same people that put us in this situation in the first place so let them go to pastures new and maybe we will get some good replacements who can do a better job.

Hitting the bank with the 50% tax will lessen the blow. I would have liked to see the tax levied on the bonus recipient. Surely taxing the banks means that ultimately the tax payers foot the bill as we are the majority shareholders! If the bankers aren't happy with the situation let them go elsewhere. There's millions without jobs just queueing to take their places.

As far as I can see and unless I'm missing something (perhaps I am), this article is misleading and Mr Darling is pandering to the taxpayer by creating sound-bites for the press.

As soon as the 2010 tax year starts, these bonuses can be paid with impunity. It's nothing more than a slight delay and inconvenience, for these "talented?" people. Naturally, this is not something either side wants to publicise.

This government had a once in a lifetime opportunity to clean up the corrupt banking system and like most other things it has touched, failed miserably. But what can you expect, when the very core of government (the MP's) are corrupt themselves?

What complete and utter nonsense.

Our economy, unfortunately, is inextricably linked to the success of the city as the (not "a") financial capital of the world.

Just look at the effect of Sarbanes Oxley on New York: bad regulation (and punitive tax regimes) will make investment bankers, traders and hedge fund managers run away (probably to Zurich).

The effect will be disastrous for many people in the South East and not just the fat cats.

A friend of mine (yes, I do have banker friends), of about the same IQ and experience, has a nice place in the USA and a large house in the country. His wife doesn't work. He spends money like no tomorrow. He used to own a small 2-bed London place like mine.
He has been understandably worried about losing his job during the banking crisis.
On the other hand, I'm still in my 2-bed flat. The last two companies I worked for went under due to lack of finance from banks, and most of the employees got nothing, not even a final salary. I (and others) worked like a dog to help keep those companies afloat, and a 12 hour day was normal.
Don't tell me bankers earn their bonuses.

I'm sure Bambip's right and that most bank workers are ordinary, conscientious people just as worried about their futures as we are, just as most school caretakers aren't Ian Huntley. But the problem is bonuses, which should be an additional reward for getting better-than-expected results. Once you start viewing your bonus as your right, and an essential part of your "true" salary, you're headed for deep trouble, particularly if you have to take big risks in order to get results. Unless the bonus culture in finance as a whole changes, recent events will happen again and again. I'm afraid we have to call the industry's bluff. People should do the job they are paid to do for a reasonable salary in return, and big bonuses should be the exception rather than the rule. If it's so important to keep companies here, then tax the individual bonus earners, not the companies that employ them - have a different income tax structure for bonus payments. In these uncertain times there will be bright people willing to work for a decent salary and modest bonuses in place of those who take their debatable "talent" overseas, and if we set an example, other countries may follow. Ours is not the only economy that bankers' folly has damaged. The greedy may find there are fewer and fewer places that will let them run unacceptable risks with other people's money for huge personal gain.

Of more significance is the 1% increase in NI for all employers and employees as from 6/4/11, closely followed by even worse hits 2012-2015; see

http://simon112.magix.net/website

So everybody employed for a bank has to suffer. That makes sense... not! Absolutely those in areas of responsibility need to be held accountable. There needs to be a clear dividing line between Investment Bankers and other areas of a bank. I have been employed in banking for over 10 years, have nothing to do with investment banking and I am no more or no less responsible for the recent crisis than my plumber or electrician, however I am now being discriminated against through this tax.

The only people affected by this will be the hard working middle of the road employees. The banks will find a way to pay the higher flying traders, investment bankers and hedge funds (offshore or otherwise) and will use this tax as an excuse to prevent payrises and bonuses of lower paid staff.

This article is absolute garbage and many of the comments illustrate the lack of understanding on the part of their contributor.

Firstly, the banking bonuses you complain of are paid to people to reflects their contribution to the profitability of that bank, in other words these people work in a profit center. If a banker generates a £30mil profit for the bank, what is wrong to incentivise that with a £300K bonus? In both cases, the government kitty benefits through corporationtax, income tax and national insurance bourne by both employer and employee. People who work in a cost center should not by right be entitled to a bonus, for example those civil servants working in the immigration department. If the bonus is needed to secure their performance, it should be part of their annual remuneration.

Secondly, without being profitable, a bank is almost worthless. Kill the incentive that brings a bank's profit and you render that company worthless. Not exactly good for those banks that we the tax payer own, no chance of ever getting your money back.

Thirdly, if you drive away the tax revenues from the financial services sector and you wave goodbye to nation's prosperity as it generates an absurd proportion of this country's GDP. You may think that is wrong and unsustainable (which incidently I do too) and wish to redress the balance in favour of a manufacturing industry but that is a wholy separate arguement.

Lastly, if you think banks will not move abroad easily, ponder this. A large foreign investmentment bank has recently moved its operations from one european capital to London in order to reduce its local tax bill. This is not exactly difficult as all transations are electronic these days; it is just a legality of whose name you are conducting business in and in which country that company is incorporated.

And just in case you think I have a vested interest, I am not a banker and have never been the beneficiary of a bonus. Just a pensioner with experience and ablility to see the wider picture.

bambip67 - 'Most bankers are diligent, professional, conscientious and do not earn the huge bonuses that the press seem to think are wilfully distributed to one and all.

Most bankers have been and still are worried about their professional future and what the world of finance has in store for many of them.

Many bankers are family men and women who earn a decent but not preposterous salary and raise their eyes every time the press go into banker bashing mode.

We do not all live in vast country piles eating truffles and driving Tarquin and Amelia to private school in our 80K Chelsea tractor.'

Please support this anecdotal evidence with appropriate primary research based on sound qualitative or quantitative methodolgy. Citations should be expressed using the Harvard referencing system. Opinions such as this are not valid without explicit evidence.


bambip67 - 'Is it not time to stop the cheap side swipes and sweeping generalisations that seem now to tar the profession of choice for many diligent and professional people???' - No.

This article is spiteful and short-sighted. I am all for fairness and equal opportunities but cheap bashing such as the tone of this article is as helpful as Darling's pre-budget is to UK's fiscal deficit.

As much as you might feel banker pay is unfair, jobs and people are not created equally and most banking jobs require tolernce for drudgery, high stress and extremely long working hours. Many may be queuing up for jobs but I know many others who will not tolerate the stress of a banking-job whatever the pay (throw in absolute lack of job security and a lot of people say 'no thank-you'). Despite headline numbers and tabloid stories, most bankers are normal people also trying to raise families and make ends meet in expensive London.

London is special but it is special because of the opportunities it offers and the multi-national and multi-cultural talent pool that it attracts. Sitting on GMT does not make special. As one comment above noted, many other European cities have the same timezone advantage - trading can be done in Zurich, Paris, Frankfurt or even Dubai (all that cheap office space). Bankers work all hours anyway, and it is not difficult to shift 1-2 hours up or down and very few bankers in London cover areas outside of Europe, Middle East and Africa. There are bankers in the Americas and Asia too.

The question the UK government should address is whether driving away global businesses from London is good business for the UK. The UK competes with many other countries and in an increasingly mobile and virtual world, it is completely plausible for another European city to take London's place as financial capital of Europe in 3-5 years. Take away high-earners and it will have direct negative impact on the service sector (which is most of the London economy) and the real estate sector (although some correction there is probably a good thing). Have you talked to London cabbies recentlty? They are feeling miserable!

Let's address pay-inequality by increasing education opportunities, helping develop diverse industries, and providing transparent, accountable backdrop for businesses. Shooting random groups by changing the rules of the game in the name of social justice will only scare away producers within the economy.

Why not take direct action?
I have for some months voted against the AGM resolutions regarding remuneration put forward to shareholders in various banks.

If enough shareholders did the same we might see real results and lower bonuses!

I can't be the only one that has seen a flaw in Darlings plan.

Whats to stop the Banks paying the bonuses in installments, thus making each under the 50% threshold, and avoiding the tax.

Spread 100k over 5 monthly payments.

On the topic of bonuses, why don't we let the RBS board resign, and the other bankers leave to newer climates, I'm sure there are millions un-employed that will happily do the role for alot less than them and especially equal bankers made redundant by other companies will step into there shoes for less money, just to have a wage coming in.

The next thing they need to do is introduce a Super Tax on all the oil tankers sat off the coast of the UK waiting for the price to go up, when they decide they want to unload, but fluctuate the level depending on how long they have been sat there and when the order was placed.

Time to call John Galt

I suppose how you feel about this article may depend on your current situation: I am expecting unemployment in January 2010 and I know that it is because of the recession. The recession is caused by the banks. So, in my opinion anyone involved with a bank is guilty: if you didn't realise that giving out so much credit was wrong, or you didn't notice that your job had become more sales than banking, then you have yourself to blame for not being more alert. And if you did notice these things, you should have told someone about it or taken some other action. I appreciate that many people working in banks are in the lower ranks - more ordinary people - and they have a limited view and restricted power. So I would reserve my ire for those higher up: make amends for what you have done. Give your money to the poor. Give away your belongings. Bring yourself down to the level of a police officer, a fireman, a soldier, an electrician, a maintenance engineer, a lab assistant. Make yourself the same as Mr and Mrs Average with 2.4 children, a semi-detached house in a large town with a five year old Mondeo and a seven year old Clio on the drive. Then work your job; and direct the excess of an average income to the benefit of the country.

If they wish to leave, if any of the rip-off banks want to re-locate, if our custom isn't good enough for you now that you have bent us over and taken what you want, and the taxes that you have brought upon yourselves are too harsh for you, then leave. I'm sure I could run a bank at least as badly as you.

Now that I have that off my chest, I'll get on with looking for more work.

I have no doubt that many, many conniving, arrogant, selfish "wealth and job creators" are looking to leave the sinking ship. The same ship that they have managed to hole beneath the waterline. The rest of us will just have to keep bailing. Hopefully this will signal an end to the UK's over-reliance on these untrustworthy and shiftless individuals who care nothing for the organization they work for, and even less for the country they work in.

Tens of billions of pounds being delivered to the front door by the treasury. Most of it being wheel-barrowed out of the back door by "talented" executives. How much talent does it take to catch rain in a bucket? When money is being showered like confetti at Jordan's wedding onto their marketplace it's no surprise the banks have made "profits".

We should separate the loans / deposit banking services from the investment banks and nationalise them all. let the barrow boy risk-takers take their risks, but not with everybody elses money. Would anyone care if they lost their shirts / jobs / houses? Probably not, as I suspect very few bankers could give a toss about the misery they have inflicted on the world as a result of their unsustainable rapacious greed.

Hello MoneyHoneyBlog,

"I have to laugh when I read the 'if they want to leave, good riddance' comments. A country that doesn't appreciate and value wealth- and job-creators (that includes entrepreneurs and bankers who are all vilified and taxed to death now) doesn't deserve to benefit from their efforts, money and taxes.

You're kidding yourself if you think the UK doesn't need these people far more than they need the UK. The top 1% earners pay 24% of taxes and the top 10% pay 54%. Many wealthy people have already left and many more will do so now. Most other countries are more welcoming to productive and enterprising individuals (and businesses) now than the UK."

I think that British people rarely think about the job and wealth creators, but if they had to they would probably be positive about them - my employer pays me and I am happy about that. But when such people create a massive amount of hardship in a whole nation, such people as bankers rather than my employer, our attention is drawn to them and we think negative things about them.

I don't ask banks and bankers to leave, I ask them to realise that the pain they have caused will have a repercussion on them and so they should expect a considerable degree of pain. If they publicly flay themselves now and behave better in future I would be much happier.

But if they do leave, well, more opportunities for me to start my own incompetent, half-baked, moronic, give money to anyone, treat customers badly, close branches, money-grabbing bank myself. Doesn't matter if I mess it up - the government will bail me out and I can still take my Croesus-size pension.

One thing that worries me is that Darling is NOT taxing the Banker's on their bonuses but the Banks on awarding these bonuses - now correct me if I am wrong, but isn't it US the poor old tax payer who bailed out the banks in the first place that effectively will end up "paying for" this additional tax? (especially in the case of RBS and Lloyds who are owned by us)?

Let's not pretend that the bankers carry the entire blame for the UK being on the verge of bankruptcy. Sure, banks had a partial blame in the financial crisis (along with the govt and useless regulators - after all banks have always been heavily regulated), but they aren't the reason why we're the only G20 country still in recession, and with one of the world's highest budget deficits. You have to look at our incompetent government... no wonder Brown is so keen to cast the blame at everyone else. The "bad rich" are always the easiest target I guess.

As said, it's not just bankers that are being penalized, but also any middle and higher earners, so exactly the people the country needs. We know that the 50% income tax won't generate any extra tax revenues, and will most likely cause the exact opposite. It's a purely populist, vote grabbing measure, and short-sighted and idiotic at that. At the time when even Germany is set to massively cut taxes and many other jurisdictions offer very low tax rates to attract enterprising individuals and businesses, the UK will be paying the price for these policies for decades to come.

People seem to be forgetting who has been contributing the lion's share of tax revenues over the last couple of decades. Without them, the govt would not have had the trillions to squander as they have, on ever growing bureaucracy and the undeserving.

(And btw, I'm not a banker.)

I am retired now but I was a proper Banker for 20 years and qualified YES in Banking.
Now there are Two types of Banking:- (1) where you interface with the customer and (2) where you think that you are either in Monte Carlo or Las Vegas.
Who were the "Banks" that cocked it all up? (1) Northern Rock (2) Bradford & Bingley and (3) HBOS. Note these were all ex Building Societies . . and their Chief Execs were (1) Adam Applegarth -unqualified (2) Steve Crawshaw - unqualified and (3) Andy Hornby - unqualified. MBA's are not banking qualifications!. Where did they get it wrong . . . . Lending Long - Borrowing Short. Was their Security in Lending Sound - No it was not.
Now the other rogues were gamblers - playing with Derivatives (Ihave to say I used to call this Derive - atives . . I was not a spiv you see),
Swaps - there's a boyhood term. It is this last group that make millions in funny money, but remember what they use to play the the markets - Bank Current and Depositors account funds less Money Lent. So let them GO to wherever they can spiv around in the hype.
BAH!

Something wrong with my keys - "Amendment".

I doubt if bankers will find too many friends over this bonus issue following the dogs dinner they got the banks into, but we shouldn't allow it to cloud the real issue behind the crisis and that is the one of burgeoning Government debt which has cast thousands of pounds worth of debt onto every man, woman and child in this country.

As we are all aware, we can as individuals borrow money to improve our lives, but we all know that the day of reckoning will arrive whereby this debt has to be repaid. Governments have to apply the same rules too, but politics being what it is, by borrowing billions to spend, or waste, on some scheme that is little seen by the majority at least within the space of a couple of elections, climate change actions possibly being one such issue, then when the debt has to be repaid in the run-up to an election, it is far more convenient to borrow extra money and pass the bill on to future generations.

This is the position the Brown government has taken, but it wouldn't be any different whoever governed this country I'm afraid.

This is a dreadful article about a dreadful measure.

The worst thing about both of them is that they are a sensationalist distraction from the absence of effective measures to cure the real problems with the banking industry.

1. The tax will probably net no money at all. It is easily avoided, as other posters have already suggested. Darling knows this and so do the bankers. It is all just huffing and puffing, to disguise the fact that nothing more far-reaching or long-term is going to be done. He is not bashing the bankers - he is colluding with them.

2. It appears to treat bonuses as if they were the problem. They aren't the problem. The problem is they are calculated so as to reward unprofitable behaviour. In an industry where profits are volatile, people's earnings *should* vary significantly from time to time according to how much profit has been made. In an industry where profits aren't known for sure until some time a lot later, bonus calculations have to be smoothed over time. Not beyond the wit of man, nor of today's computers, I think.

3. Into the bargain, we risk a return to pre-Thatcher "politics of envy", just when we really don't need it. I'm not a great fan of Mrs Thatcher. I think that her "reforms" of banking regulation are partly to blame for the fragility of our banking industry. And she was by instinct far too much of a centralist. But she did at least realise that you don't have wealth creation without wealth creators, and if the country wants to be wealthy it has to avoid discouraging (i.e. taxing) wealth-creators too much.

4. A colleague of mine recently said (in a different context) "no wrongs don't make a right". Even if this tax did make bankers leave the country, and even if we were better off without such an excessive reliance on financial services, where are the other industries to replace them? They won't suddenly spring out of the barren earth left by the departed investment banks and asset managers.

5. As a taxpayer, I want my stake in NatWest and Lloyds back, and sooner rather than later. A profit on the risk would be nice, too. That means that those businesses will need to make some handsome profits over the next couple of years. I doubt whether that will happen without letting the managers of those organisations manage. If HMG has any doubts whether the people now in post are fit for the job, it should replace them. But the test is not whether the board does the politically correct thing about bonuses. There are more important issues at stake.

This is probably the poorest article I have ever seen on the Motley Fool, written with jealousy, a real lack of understanding of the financial world and quite frankly some degree of maliciousness.

What the Bankers have done has been allowed if not encouraged by the last three governments and in fact the tax on their bonuses was much sought after by Mr Brown.

The Government and indeed the BOE had been alerted to issues on derivatives and indeed ABS on many occasions notably by some of the very bankers now being vilified. Journalists who now lay the blame at the feet of the bankers should take a closer look at their own actions encouraging investment in poorly researched investments rather than bank bashing to divert attention away from themselves. It wasn't that long ago that a certain online investment advise vehicle was extolling the virtues of Icelandic Banks savings accounts - whereas most bankers would have avoided them and actively advised against them.

I agree with those who think this article is full of cliches and just pandering to the self-righteous mob. Since when was it a good idea to encourage hard-working people who have helped build a very profitable business to leave the UK? The argument that London is in the right time-zone is ridiculous: there's the whole of western Europe in the same time-zone waiting to employ these people if we tax them too heavily and, more importantly, provide a cultural and economic environment that endlessly criticises them for being in business, or simply existing at all.

The fact is that Darling was just indulging in gesture politics: this 50% tax can be easily avoided by just deferring the bonus until the next tax year. More importantly, he sent all the wrong signals about the UK being a good place to do business, and may have irreversibly damaged London's position as a world financial centre. Where in the PBR was the dramatic support for businesses that is so desperately needed? Who do you think is going to do the competitive work, make the profits and pay the taxes that will dig the UK out of its debt mountain and pay for luxuries like the over-inflated social security budget, schools and the NHS and the hundreds of thousands of jobsworths who work in the public sector? The NI tax should have been cut, not increased, to encourage employers to take on workers as the economy recovers; Darling should have raised the personal rate of income tax back to at least 22%, which was so stupidly cut by Gordon Brown to celebrate his last Budget.

If investment bankers leave, we lose a long tail of jobs for those who work in support industries. And for those who say "Britain needs to return to manufacturing", we are already still the fifth biggest manufacturing economy in the world. Nevertheless we are never going to be able to compete with the Chinese or Indians on cost, and will never be able to convert millions of jobs from the financial services sector into manufacturing.

The British public is an unpleasant group when it gets vengeful - self-righteous, self-regarding, envious of people who earn more than a "correct" amount of pay, bleating on about "equality" and "fairness" - and never showing the slightest sign of understanding that the UK is not owed a living and we need to trade our way out of this recession. Bankers and all the other financial services industries should be encouraged to stay and make profits in the UK, and the same applies to every other industry and every potential entrepreneur we can find in the current circumstances.

By the way, I don't work in financial services. I just recognise what has been a very effective line of business for the UK, one of the very few in which we have a collection of people with global expertise, and one of the few that are going to dig us out of this recession. This Government clearly fails to recognise this, has lost its nerve and regressed to its worst political instincts.

Would one of these entitled bankers writing here about how the remainder of us fail to understand the whole edifice of opacity that seems to be modern finance, why I, a degree level qualified engineer (and ex-army so used to lower pay levels), have no debt other than a mortgage, live within my means with my family, yet have a pay freeze this year although I have absolutely nothing to do with the financial chaos. I have friends in the police and many other professions who are experiencing similar pay restrictions.

Yet financiers, who even the most impartial would surely have to agree had a more significant role in the devastation that led to massive bailouts, remain indignant, throw their teddies out of the pram and threaten to run away unless we pay them extravagant and frankly unneccessary amounts of money (and I mean we as the whole financial edifice is now propped up by Govt guarantees). Do they fail to see how the rest of us, of similar intelligence and work-ethics are having to shoulder the burden.

Pure arrogance and other-worldliness.

Rather than bash the rest of us, they should try and understand our irritation at their greed. We have no issues with the deserving earning large amounts of money, much of finance has proved itself to be undeserving. I am not envious of a wealthy entrepreneur who employs and pays taxes, I am resentful of a self-serving trader (on others accounts) who insists on lining his pockets before even the consequences of his gambles are fully realised and avoids as much tax as humanly possible through internal accountants' wheezes. Should they then go pear-shaped, he is still sitting pretty and the hated Government comes riding in once again. We are not stupid and the same old arguments do not work anymore. Take your self-serving "talent" elsewhere, let those of us with a sense of responsibility rebuild.

And another thing!

Banking, in any or all of its various forms, is not an inherently parasitic or loss-making activity. The Swiss economy has a huge and long-standing exposure to the banking industry and is considered to be the most (or by some only the second-most) competitive economy in the world.

It's not banking (or financial trading, or financial advisory work) that's wrong, it's the way we have been doing it in the last couple of decades.

Johnnymup - Oftentimes a little research is a good thing UBS are one of the most affected banks Globally and had one of the biggest exposures to sub prime - along with many contentious cases with US tax regulators. I think you will find there is very little difference between UK and Swiss bankers (swiss bankers are still allowed to be a bit more secretive though and seldomly are attacked by the public they help sustain with their tax francs) Where there is a difference is decisive government action and an ability not to go to town vilifying a sector that has helped their economy for many years - that must be the reason that you were not aware of the Swiss banks issues rather than the normal journalistic approach of ignoring the facts to score a cheap point.

PS Credit Suisse was also one of the first banks to fully endorse the trader management structure and embrace a true trading approach after its acquisition of First Boston - in fact many European banks looked at CSFB as a model to follow.