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Monday, 26 October 2009

Osborne Bashes Bonuses

The Brown government is likely to loose the next General Election; but it is increasingly unlikely that the Tories will win - other than by default. There is a distinct lack of enthusiasm for the Etonians and their associates among the majority of uncommitted and undecided voters.
George Osborne the shadow chancellor made a populist pitch today, with his proposal that people in 'retail' banks should not be paid significant bonuses; but the profits should instead be used for investment in businesses.
Businesses certainly need access to funding. For this purpose, they need banks. Most banks have been foolishly, even recklessly, run in past years; but the current crop of senior managers have been retained or engaged on salary-with-bonus packages that are designed to ensure that the retail banks become once more fit for purpose. The bosses will have earned those packages, in full, if the objectives are achieved and 'real world' businesses and viable individuals can borrow responsibly in future.
By contrast Osborne appears to have backed off from wanting to ban - or draconically to limit - the bonuses that traders and product designers are due to be paid in the 'casino' wholesale financial services business. Yet that is the sector against which public disgust has most strongly been directed, the market that almost destroyed the world economy. Doubtless he has been told by his shadow treasury team that a future government would have a devil of a job balancing the national books if these 'investment bankers' and traders stopped being paid massive taxable sums in the UK. It will be bad enough for government cash-flow if part of the bonus is received in shares, or is otherwise deferred, because the immediately accessible tax take is reduced.
Thus in this area - as in so many others - there is no clear difference between government and opposition [and the Lib Dems offer no innovation, notwithstanding the forensic skill of Vince Cable].
Policymakers can only thrash around for the least-painful way out of the mess into which 'brilliant' Chancellor Brown allowed the system to propel us all. Political parties have no relevance in this crisis management, but - suprisingly - in this context, Darling seems marginally to be the better man for job; pity about his leader!

1 comment:

  1. Osborne's pitch almost looks like an attempt to out flank Labour on the left and it is certainly populist. Treasury minister Liam Byrne had great difficulty in making the government's stance on bonuses sound tougher on television last night.
    I agree with your comment that the Lib Dems are missing a trick by not being more innovative, nothwithstanding Nick Clegg floating the idea of a return to regional stock exchanges a couple of weeks ago.

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