What it amounts to is someone saying in public what most of us have privately suspected to be the case for some time. But it could be hugely embarrassing for the government nevertheless - point number three in the coalition agreement was a call for ‘robust action’ to tackle ‘unacceptable’ bank bonuses. The fact that, as we enter bonus season, banks are expected to pay out around £7bn in bonuses makes it look like their calls for restraint are simply being ignored.
Particularly hard to explain away at a time when VAT is up to 20% and public spending plummeting will be the £1bn bonus pot at RBS – the bank which, you will recall, was such a basketcase it had to rescued by us hard-pressed British taxpayers not so very long ago and is still 80% state-owned.
At the level of the individual employee, the news is hardly very surprising. Bankers are known neither for selfnessness nor an inclination towards deferred gratification when it comes to dosh, after all. And how many of us, if contractually entitled to trouser a six-figure sum at the end of the year, would forego it voluntarily because David Cameron asked us to?
And if the senior management of individual banks tried to impose some kind of formal restraint on payouts, they would land themselves with all kinds of headaches, including a potential exodus of key employees and a raft of lawsuits. The spirit is willing, they might say, but the practical hurdles are just too grim to contemplate.
All of which is really only telling us something else that we already know – or ought to. That self-regulation in the financial industry doesn’t work very well. There is always some pressing reason why the status quo must be maintained. Hence the recent announcement by the FSA of a major overhaul in the way it will permit banks to pay bonuses in future. Arguably this is where the potential for real reform lies, and the government might have been better off saving its breath – and credibility – for regulatory battles. Asking for self-restraint was never likely to get them very far.
Of course, the industry likes the prospect of more regulation even less than it likes being ticked off by the powers that be. And to some extent they are right - there will indeed likely be negative consequences of an even-more-tightly-regulated industry. Some banks which might have set up shop in London would choose to go elsewhere. Some which are here already might leave, or cut back on their operations. There is also undoubtedly a toxic whiff of jealousy and small-mindedness about much of the banker bashing, which policymakers must do their best to ignore.
But at the socio-economic level, much of the fuss over bonuses looks like a shoal of particularly juicy red herrings. The real question is whether we as a society think we would be better or worse off if the UK economy was less dependent on financial services than it is now. No amount of bonus ballyhoo will help figure that out…