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Our leaders don't want to tackle bonus culture

With much of the UK still wrapped in the twin grip of austerity policies and rising living costs, Britain's biggest bank paid 93 of its senior UK staff more than £1 million last year.

They weren't the only ones, worldwide 239 of HSBC's staff were paid seven figure sums. How does this keep happening? Why is it that the apparent greed of fat cat financiers cannot be reined in effectively?

This is not simply the politics of envy. It certainly offends a sense of justice to see rises of 15%, 20%, or even 30% in the rewards on offer to the mega-rich, even as some of Britain's poorest people face pay freezes, zero hours contracts, benefit cuts and slashed services. It is not just the recipients who are angry at the way cuts have impinged most heavily on single mums and the disabled.

But in countries and cultures where rewards are more evenly shared, there is increasing evidence a whole range of social benefits follow. A causal relation is hard to prove, but these have been claimed to include higher levels of trust and longer life expectancy.

We pay a price for living in an economy where chief executives earn hundreds of times the salary of their lowest-paid worker. The public understand that. But leaders in the finance industries do not. They like to paint such inequality as rewards for achievement.

On the back of an £8 billion loss, RBS last week announced top executives would forego their bonuses. That seems reasonable - though little comfort to the 30,000 predicted to lose their jobs to make good the deficit.

Such grotesque inequality is a new phenomenon. In the 1970s, average pay for financial services workers was between 10-20% below that of scientists, engineers and academics. Now financial services workers are paid, on average, at least twice what those professions earn.

This goes hand in hand with a growing geographical imbalance in pay and privilege. Almost two thirds of the top 5% of earners live in London and the South East,whereas in the 1970s it was around half.

But we seem stuck with a society which is increasingly skewed. In banking, the brazen disregard for public opinion is remarkable. HSBC frankly admits new higher fixed-pay allowances for staff are to get around EU rules limiting bonuses. Other institutions are expected to follow its lead.

Meanwhile, Lloyds Bank chief executive Antonio Horta-Osorio has defended his own bonus, worth £1.7m, as in the interests of taxpayers, who bailed out the bank. The reward for lesser staff for their part in the bank's recovery is a mere 2% pay increase.

George Osborne asked the Bank of England last year to examine whether it needs more powers to control banks' risk-taking. He said he understands public concern that those apparently responsible for the financial crisis are avoiding the pain it created.

Then he announced the UK Government was to challenge EU rules on bonuses. His support for bankers will be paid for by the taxpayer in legal costs. The simple explanation for our inability to undo the bonus culture is this. Our leaders don't want to.

Contextual targeting label: 
Finance

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