By the end of this month the world’s biggest investment banks are expected to pay out more than £40 billion in salaries and bonuses, reinforcing the view that it is business as usual for Wall Street and the City barely a year since the taxpayer bailed them out.
But lobbying from the banking industry seems to have paid off with Boris Johnson and his economic adviser Anthony Browne. They appear to have caved so quickly to the City that we could be forgiven for thinking that they had accepted their case most obligingly.
Contrast this with Obama’s stance in America. When the powerful Wall Street lobby threatened to derail his administration’s measures to curb pay-outs, Obama admonished: ‘What I’d say to these executives is this: Instead of setting a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I’d suggest you might want to consider simply meeting your responsibility.’ He said this before adding he wanted ‘every single dime’ back.
Opposition to restrictions on bankers’ bonuses, and the introduction of the one-off 50 per cent tax on bankers’ bonuses over £25,000 by Alistair Darling, has been equally strong here in the UK as on Wall Street.
Led by the British Bankers’ Association, individual banks, investment houses and an army of public affairs lobbyists have all been hard at work sending the message that bankers’ bonuses are vital to our economy and that to restrict them in any way would see a flight of some 9000 personnel and capital from the City and damage the UK economy.
In London there has been a confusing array of mixed messages with Johnson sometimes chastising the City, or calling for ‘voluntary restraint’ (something that clearly didn’t work when the City was booming), but never endorsing the firmer measures advocated by others or taken by the government.
Then all of a sudden a vocal switch in tactics from the mayor. This month – the month of the major City bonuses – Johnson wrote to Alistair Darling to request a meeting to discuss ‘the damage done to perceptions of London as a global financial centre’ by the introduction of a 50p income tax rate for top earners and a temporary 50 per cent levy on banking bonuses over £25,000. He singled out Darling’s tax on bankers’ bonuses as ‘ill-judged’ and ‘a clear and present economic threat’ to London.
Johnson’s comments were echoed by Zac Goldsmith, who told an Evening Standard reporter that the one-off tax on bankers’ bonuses was ‘100% politically motivated.’ ‘It wasn’t about raising revenue,’ he added. ‘We can think of all kinds of ways that bankers can avoid it. One is moving.’
From a London local government perspective, more fool them. It is a short-sighted strategy, which could end up with more significant caps on the City culture than already proposed.
Little do the mayor – or the powerful industry lobby groups – realise that this year’s resistance will turn to much, much louder public anger after the government public sector funding settlement next year, when councils across the capital and the country start making major real-term budget cuts to balance the books.
With council officers privately telling me that cuts of an order of 10% a year to services are being modelled over the next local government cycle in Camden, we are no longer looking at minor ‘salami-slicing’ of services, we’re talking about reducing the number of libraries serving the community, closing youth and after-school clubs, children’s centres or hiking up fees and charges for meals on wheels and other services.
London’s NHS is preparing for several billion pounds’ worth of squeeze in the medium term. This too won’t square with a mayor overly concerned with defending the bonus culture of the boom in a period of public sector austerity.
The mayor’s narrow advocacy of the Square Mile over the interests of millions of Londoners neglects this honest truth – that the City would do well to take its medicine without too much complaint this year, as they will in any case face more hostile questioning when next year’s bonuses clash with hard decisions taken in town halls not just in London but across the country.