Connected Research

Union policy research in the 21st century

MPs call for banking bonuses to be taxed at 90%

with 2 comments

An Early Day Motion in the House of Commons posted by Liberal Democrat MP Richard Younger-Ross, noting the ‘generally excessive’ bonuses which continue to be paid to bankers, calls on the government to ‘limit bonus payments to bankers by applying a 90 per cent tax on all bonus payments in excess of 15 per cent of salary.’

Early Day Motions are formal motions submitted for debate in the House of Commons, although very few actually make it to the floor of the Commons. Their use tends to be focused instead on publicising the views of sponsoring and supporting MPs, or on drawing attention to specific issues.

EDM1847, posted originally last Thursday, has so far been signed by 22 MPs. It has been given greater credence this week by the news that Goldman Sachs, the US bank which has received loans in the US government’s Troubled Asset Relief Programme, reported a net profit of $3.44bn for the April-June quarter on net revenues of $13.8bn (a 47% increase on the previous quarter). It has paid off £10bn in loans received under the TARP. It paid its 29,400 employees some $6.65bn in pay and bonuses in the quarter – an average of $226,000 each. Robert Peston’s rather under-stated reaction on his blog (inspired perhaps by him being evidently gobsmacked by the recorded figures) was simply to query ‘whether taxpayers shouldn’t have demanded a bit more for their succour’.

Despite an instinctive sympathy with the perhaps rather populist aims of EDM1847 – which at least aims to focus anger on the culture of bonuses in the financial world – the long-term aims behind it (even (or, it would seem, especially) in a period of state ownership of financial assets) would seem to be better served by greater shareholder activism and the sorts of initiatives being espoused by PIRC. Generating support for shareholder activism and convincing shareholders that they need to use their votes to express public discontent over bonuses, for example, is increasingly key if companies are to govern with consent in the post-financial crash era. Convincing people to support such a programme, and overcoming the twin malaises of inertia and inaction in the face of the apparent immediate restoration of the ‘greed is good’ culture and the evident cynicism presented by the presence of old school tie networks in and around the executive remuneration arena, are essential, and essentially difficult, first steps.

Capitalism will, otherwise, eat itself. But what price that for our pensions?

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Written by Calvin

15/07/2009 at 5:58 pm

2 Responses

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  1. Leave it to the politicians to solve a problem of institutionalization with more institutionalization. http://econometrician.wordpress.com/2010/01/23/there-are-too-few-greedy-fat-cats-among-corporate-shareholders/

    econometrician

    23/01/2010 at 5:45 pm

    • Not sure that institutionalisation is the intention here – a small-ish fund could indeed be set up with the outcome of such a tax (and, by the way, the UK government has subsequently moved to tax at 50% all bonuses in the sector of more than £25,000, not on an individual basis but on an institution-by-institution basis). I could think of some worthwhile use for such a fund, too.

      It is, quite simply, a way to reflect public unease that easy profits made as a result of the situation in the world economies over the past year should not accrue to those who caused such problems in the first place. An entirely rational response, I think.

      Calvin

      28/01/2010 at 10:41 am


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