Tag Archives: treasury

Bankers invent new way to get paid too much

26 Feb

HSBC boss Stuart Gulliver. Photo by World Economic Forum (Licence here)

HSBC boss Stuart Gulliver. Photo by World Economic Forum (Licence here)

This week HSBC announced it would in future be paying its top bankers ‘fixed pay allowances’, in order to circumvent new EU rules restricting bonuses. According to the Guardian the bank’s chief executive Stuart Gulliver will be taking home at least £4.2 million a year in future.

New EU rules restrict bonuses to 100% of a banker’s pay, unless approved by shareholders. With approval from shareholders the cap may be raised to 200% of pay.

Last week our Prime Minister spoke of his ‘moral mission’ in welfare reform. He said ‘our long-term economic plan for Britain is not just about doing what we can afford, it is also about doing what is right’. If the moral mission does not include tempering the excesses of the banking sector, is the mission at all legitimate.

The highest paid employee at HSBC in 2013 earned £7.06 million through salary, bonuses and other payments. It would have taken me in my last job nearly nine hundred and fifty years to earn this figure without overtime. If the government allows this to happen is that doing what is right? Is this level of decadence even slightly defensible when the government’s 2008 banking bail out ran into the hundreds of billions of pounds?

According to the National Audit Office the banking sector at one point owed the government £1.162 trillion in various loans, schemes and shares. Much of this has now been paid off, but the cost in terms of businesses destroyed, jobs lost and lives damaged thanks to their irresponsible actions is immeasurable. Given this legacy wouldn’t the socially responsible thing to do be to make more jobs and help more businesses?

According to Reuters, HSBC chief executive Stuart Gulliver has slashed 40,000 jobs globally in the last three years. He has also ‘sold or closed 60 businesses’. As a result the bank saw a rise in pre-tax profit of 9% to £13.6 billion. It seems that £3.9 billion of this has gone into the so called ‘bonus pool’. Between this excess and a handful of Londoners claiming £80,000 in housing benefit the Prime Minister has made clear which he believes requires the more urgent reform.

Perhaps it’s time someone at the Treasury sat down with a calculator and worked out how many small businesses or secure jobs could be made for £7.06 million. Alternatively Chancellor George Osborne may want to take a look at Royal Bank of Scotland, the bank in which our government holds an 81% share.  A number of news agencies are reporting that a Treasury agency is permitting the nationalised bank to spend £550 million on staff bonuses for 2013. Perhaps this is a reward for a successful year? RBS has not yet disclosed its profits, but Reuters and Sky report an estimated loss of around £8 billion.

Inside sources also tell Reuters RBS could cut up to 30,000 of its workers in coming years. How many of these job losses come from low level staff and how many come from those in line for millions in bonuses?

What is the government doing to deal with these excessive bonuses? Well, the Prime Minister has made clear that, at RBS at least, bonuses will not inflate further from their current ridiculousness.

The government will also be taking its opposition to the EU bonus cap to the European Court of Justice. If you’re wondering whether you read that right – yes, our government is legally challenging a rule that restricts bankers from taking home more in bonuses than their normal salary. It seems our government is worried the rule will simply lead to higher normal salaries to make up for smaller bonuses.

Apparently it has occurred to no one that bankers should just accept a more reasonable wage packet.

Our banking sector has cost us infinitely more economically and socially than any problems with the welfare system. Unfortunately our government seems more interested in making things harder for struggling households than holding the super-rich to account.


IMF visit sparks media buzz

9 May

By Chris Hansell

Photo by altogetherfool, via Flickr

Photo by altogetherfool, via Flickr

For the next two weeks the UK will be haunted by a gang of economists from the International Monetary Fund (IMF). The 67 year old organisation has let slip a few surprises in recent weeks, but the amount of media attention on the visit has also left me a little surprised.

At one time our Chancellor may have welcomed the visit, reasonably expecting a public pat on the back and a few positive column inches on the side for his austerity programme. This may not be the case for this visit. The IMF’s Chief Economist, Frenchman Olivier Blanchard, has recently been making comments suggesting the Chancellor needs to rethink his plan and perhaps ‘slow down’ the deficit reduction programme.

To ramp up the pressure on George Osborne the Trade Union Congress (TUC) craftily chose this week to publish a report on the economy. Some of its findings will have pleased union leaders, providing probably enough ammunition to last the entire two weeks of the IMF visit.

The news media have so far stuck to their respective political trenches on the IMF visit, churning out the kind of opinions and observations we have come to expect from each of them.

The Spectator likened the visit to an Ofsted inspection. Spectator blogger Isabel Hardman said IMF reports have tended to be ‘so oblique that anyone occupying any part of the political spectrum can find something to cheer them and something else with which to prod their enemies’. This is obviously intended to undermine the visitors before they have had the chance to say anything, but I find that I must agree despite myself.

The Chancellor will still not be getting my pity though, and the idea that Mr Osborne might feel sympathy for teachers seems a little comical considering the government’s education policy.

In a foreseeable move the Guardian married the IMF visit with the TUC report in an article that labelled the recent comments of Mr Blanchard and his colleagues as an ‘embarrassment for Osborne’. Economics reporter Katie Allen also described the UK economy as ‘flatlining’ and pointed to the IMF’s reduced forecast for UK growth.

IMF growth projections for 2013 and 2014 (Made in April)

IMF growth projections for 2013 and 2014 (Made in April)

The intention here is clear: point to how the IMF has cast doubt on the government’s austerity drive.  The intention of the Independent seems to be much the same in their article. Of course the IMF has spent decades producing forecasts and has often got things wrong. While I agree with the anti-austerity sentiment using IMF figures to build a case may not be the best strategy.

Before I move on I’d like to tackle one more example. Financial news website this is money has been showing up in my news searches a lot recently (isn’t my life just rock n roll?) so I thought I’d have a peek at what they say.

The website lines up a number of arguments the Chancellor could utilise against the IMF, but one nugget stood out for me. ‘Osborne’s hand has been strengthened by reports that more than forty global companies are considering moving to Britain to take advantage of low corporation tax rates’ the article says. One industry insider tells the website that this could raise £1 billion in tax revenue.

This is not the trump card it seems, and cuts to corporation tax are not really austerity policies. The cut of corporation tax from 28% earlier this year to 20% by 2015 will no doubt cost the Treasury so much a boost of £1 billion will be redundant.

Now let’s get to the point. You might have noticed in the first paragraph I said how surprising I have found all this coverage. Well, here’s why:

That an IMF visit warrants this much coverage confuses me. Don’t get me wrong – as someone well aware of the IMF’s less-than-polished record I am glad they’re being given the kind of scrutiny they should get every day of the year.  What confuses me is that so many news outlets have decided they should all cover the story at once.

A stuffy, Washington based institution that has usually only ever had real clout in developing countries pops in for a look around and it’s in almost every paper. Looking around perhaps it isn’t so confusing. The economic disaster that was Greece planted the IMF in the public consciousness for better or worse. Austerity has put the economy at the heart of the news cycle and everyone has an opinion. It will probably even decide the next general election.

In the meantime the economic debate is still open and despite everything else this at least is something we can be pleased about.

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