British bankers rhymes with wankers. Not original, but what else can you say about the juvenile reaction to the news that the UK Labour government plans to impose an immediate 50% super tax on bonus payments to bankers.
“Bankers in the City of London reacted with fury,” started the Financial Times report overnight.
“In his annual pre-Budget report, outlining government spending and revenue plans, Alistair Darling, the UK finance minister, announced a 50 per cent levy on discretionary bonus pay-outs to curb big bank bonuses that have provoked public anger. He said banks that had been battered by the financial crisis should be rebuilding their capital rather than paying out generous bonuses to their staff.”
Well stuff me with a banana and call me Westpac. Fancy that. Bankers upset at having their bonuses (not their base pay) taxed a year after many were rescued by British taxpayer money from the biggest financial mess they had helped create in decades. Who would ever have thought that?
“The UK Treasury estimates the move will raise £550 million and affect 20,000 bankers, although some bankers suggest it could raise up to £4 billion if — as seems likely — banks press ahead with bonus pay-outs regardless. The first £25,000 of bonuses will be exempt,” continued the FT.
“Bankers said the new tax — on top of the 50 per cent top rate of tax, due to be introduced in April, and an earlier squeeze on UK-resident non-domiciled individuals — could damage the City as a global financial centre.
“Damage the city as a global financial city”. Doesn’t this w-nker remember what happened a year ago when the banks sought the help of the UK government and anyone else as they slid towards the financial abyss? That was in part due to the business activities, blind greed, cupidity and just plain ignorance of these same bankers now moaning about having their bonuses taxed?
They all forget how Lehman Brothers failure triggered a rolling tide of pressure that saw two banks were bailed out (Lloyds/HBOS and RBS), Northern Rock nationalised, building societies saved, all bank deposits protected and tens of billions of pounds of emergency capital pumped into these banks, and the economy to stabilise and save the country from collapse. Two banks, HBOS (latter badly merged into Lloyds) and RBS were hours from total collapse and the Bank of England and governor Mervyn King, with government backing, found close to £70 billion in emergency funds in a couple of days to halt their implosion.
Major European banks such as Fortis, ABN, Commerzbank, Dexia were all rescued or taken over, as was the huge German mortgage group, HRE, while West LB, a big state bank in Germany has just been rescued for a fourth time in five years.
The FT reported: “One investment banking chief said the ‘contract between government and business is broken’, warning that up to 40% of the city’s activities were ‘mobile’ and would move overseas to more welcoming jurisdictions, such as Switzerland and the US.”
The contract between business and government was badly damaged by the credit crunch and recession, for which the same bankers and their employers can be blamed, in part of wholly, depending on where you sit.
The London Telegraph got it right in pointing out how the city folk (the moaning bankers) had gotten off lightly in the government’s pre-Budget report, with UK middle classes to be whacked with £7 billion in new taxes and charges.
The moans and groans (and their reporting) from bankers again emphasise (as we have found in the past week with Gail Kelly of Westpac and her management team), how out of touch many in business are, especially the financial sector. They may talk a lot about the national good, but it’s just hot air.
The Australian taxpayer, through the Reserve Bank or through the federal government, effectively underwrote the stabilising of our banking system a year ago, which enabled it to escape the pounding that the more adventurous and poorly run and regulated UK economy didn’t escape. The UK taxpayer are on the hook for far more, billions of pounds of capital for the broken banks and others, huge losses in terms of rising unemployment and falling property values, and now tax rises and other charges to pay for the mess created by the banks (with assistance from the UK government, dud businessman and greedy home buyers who wanted profits, but not the pain).
Our price will come next year and in successive years as the federal government cuts spending and raises taxes, but it won’t be anywhere near the pain that the UK (and Ireland, Spain, Greece, Japan and the US) will be feeling.
But have no sympathy for bankers, UK or otherwise. Not for a generation or three.