There was plenty of bluff and bluster in this speech,
picking up particularly on the headlines about bankers bonuses and fat cat pay,
Dominic made it clear that his 160,000 members were mainly front-line staff, predominantly
female tellers and administrators in branches. These people are as disgusted
about the bonus pots as the average person in Britain, but they take the flack everyday
defending these people even though the staff Dominic is concerned with are typically
on just £14,000 per annum, pretty much one of the lowest wages in Britain.
In fact, Dominic was quoted in the Evening Standard that same day.
The Standard had led with the story of 78 UK bankers being paid
over £1 million bonuses as HSBC announced their profits (Barclays revealed the
following week that, of the bank's 139,200 workers, 373 were paid between £1
million and £2.5 million, 50 took home between £2.5 million and £5 million and
five earned more than £5 million) .
Dominic’s statement in the Standard went as follows:
“Long serving HSBC staff earning as little as £14,000 a year
are having their pensions attacked while the bank announces astronomical profits.
In an act of sheer pettiness the billion dollar bank is snatching two days
holiday a year from its staff and cutting sick pay. The savings the bank is
making from these changes are a drop in the ocean compared to its profits and
the bonuses being awarded. HSBC can easily afford to provide decent pensions to
all its staff.”
He’s right of course, and this dialogue is one that has gone
on and on and on for ages.
I’ve blogged about bonuses regularly and the fact is that it’s really easy to pick on tis as the soft underbelly of an
issue that will raise anger and ire amongst the public.
Forget the money that the financial system generate or the taxation
on the profits and bonuses that the system contributes to the UK economy, the
fact is that anyone earning ten times salary or more than £5 million is
Forget the jobs that go around the banking system and the spend
which the banks put back into the system, the payment of a bonus is just plain
Forget that the world is changing and most bonuses are now paid
at higher rate taxes with clawbacks and deferrals, a bonus is still wrong.
Forget that regulations and governance mean that bonuses are
no longer tied to excessive risks taking for no accountability, bonuses are still
In fact, it integrated me that this was an area that I was
recently asked to comment upon for a European media report.
The Europeans cannot understand why the UK is angry about
the EU bonus cap when this clearly a good thing and makes perfect sense.
What I tried to tell them is that we’re happy to have a
bonus cap as long as we apply the cap in the UK and not Brussels.
It is nothing to do with being anti-EU that we feel this
way, but all to do with protecting the economy in the UK.
Banking and its associated industries contributes over £1 in
£10 of our GDP and £1 in £5 of our taxes.
That means that any threat to such a major industry in the UK
will be an issue and the fact that the EU regulations will weaken London as a
global financial centre is the core issue.
And there is the issue: London is a global centre.
It’s not a European centre or a UK centre, but a global centre
competing with New York, Hong Kong, Singapore and Shanghai.
Anything that damages the global competitiveness of London is
the issue here, and that is why we need global banking bonus rules, not European
or UK ones.
It doesn’t matter anyway as banks will always find ways around
Whether it be loans, gifts or payments in other kind, the bonus
cap is not the biggest deal.
And a final note.
Why is that shareholders are not arguing against paying
Equally, as the Royal Bank of Scotland is a taxpayer owned bank,
how come they are also paying million pound plus bonuses to almost 100 of their
If the government believed bank bonuses were wrong, why
aren’t they cracking down on this and supporting the EU?
The answer is simple and builds upon the above discussion.
In fact, the answer is best illustrated by this report Taxation
of banking, Standard Note SN5251, 28 February 2013 from the UK Treasury.
It shows the government reversed the previous government’s
approach to taxation on bonuses, recognising that this targeted the wrong area
and would be worked around.
The 29 page report makes for interesting reading all round, but
I will just extract this one piece from the top of page 20:
In the New Year details on the bonus arrangements at some
banks lead to calls for the reintroduction of the bank payroll tax from, among
others, Ed Miliband, leader of the Labour Party. The issue arose at Prime
Ministers Questions on 12 January 2011:
Edward Miliband: … Labour's payroll tax on
the banks raised £3.5 billion in addition to the corporation tax that they pay.
[The Prime Minister’s] banking levy is raising just £1.2 billion. In anyone's
language, that is a tax cut for the banks. Why does the Prime Minister not just
The Prime Minister: … The bank bonus tax
raised a net £2.3 billion … the bank levy will raise £2.5 billion each year
once it is fully up and running … we will raise £9 billion compared with his
£2.3 billion. Even the shadow Chancellor can work out that 9 is bigger than
In other words, taxing banks rather than bank bonuses is the
right way to change behaviours.
Take note bonus bashers.
We have a repeat evening of this debate at the Financial Services Club on 14th May with:
- Charles Middleton, Managing Director of Triodos Bank;
- Dominic Hook, National Officer for Finance and Legal with the Unite union; and
- James Daley, Head of Money Content with the Which? Consumer’s Association
This was part four of a series:
- Fixing Our Banks: Part One
- Fixing Our Banks: Part Two - the Bank View
- Fixing Our Banks: Part Three - the Shareholder's View
- Fixing Our Banks: Part Four - the Employee's View
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...