What will it take?
For four years now, taxpayers around the country have been asking themselves that incredulous question, while watching the managers of scandal-hit banks paying themselves and their staff bonuses on top of their salaries. What will it take, they ask themselves, to make them see they have no right to expect such rewards?
Now former Chancellor Lord Lawson has erupted magisterially on the subject, saying there are grounds for paying no bonuses at all at taxpayer-funded RBS this year, in the wake of the Libor rate-fixing scandal (RBS is expected to have to pay a fine of up to £500 million but may pay out half as much again – £250m – in bonuses).
With yet another mis-selling scandal by the big four banks confirmed by the regulator this week, for interest rate swap agreements, Lord Lawson is right to question the bonus culture and challenge the usual protest that, without bonuses, talented bankers will walk. "These are not particularly impressive individuals. They're all of them easily replaced, especially in today's labour market," says the former Chancellor.
In other words, being paid huge sums does not necessarily equate with being the right person for the job. Does recent history not bear that out? Was it not the handsomely remunerated generation of Fred Goodwin at RBS and Andy Hornby at HBOS that presided over the banking crisis and might British banking not have been better off with other, less "talented" figures at the helm?
On the surface, the message appears to be getting through. It is welcome news that Anthony Jenkins, the chief executive of Barclays – a bank forced to pay £290m for its part in Libor-fixing – has announced his intention to forego his bonus, as has Stephen Hester at RBS. However, neither has undertaken to cut them for other members of staff, and other banks, including Lloyds, are yet to reveal their plans. Hardly a change of culture, then.
To make banks lend more readily to small and medium-sized businesses, Lord Lawson advocates nationalising RBS, which is already 82% taxpayer-owned. It is not clear that such a move would necessarily benefit the public. In return for giving the Government greater control, taxpayers would have to take on more liabilities. There might even be reluctance by a nationalised bank to back risky ventures, such as business start-ups, to avoid losses to the taxpayer.
What is required is greater political pressure. Downing Street has publicly signalled its desire for banks to show restraint on awarding bonuses and is no doubt going further behind the scenes. The spectre of nationalisation conjured up by Lord Lawson – known to have the current Chancellor's ear – might give bank bosses pause for thought.
For the sake of disgruntled taxpayers getting by on flatlining salaries, it is to be hoped good sense prevails and bonuses in scandal-hit banks are canned.
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