Under Sir David’s original recommendation, rather than publishing details of each individual, bankers’ pay would be put into bands. At the moment, the problem is that banks aren’t held to account over what they pay those under director level, even though many of them tend to be the best-paid. But rather than jeopardise bankers’ privacy by detailing the exact amount they earn, Sir David suggested a compromise: only publishing ‘bands’ showing the pay and bonuses of employees who earn more than £1m, keeping individuals’ names anonymous. Seems reasonable enough.
But now he’s admitted that indulging in any sort of banded disclosure might not be such a great idea if our friends aren’t doing the same. Writing in the FT this morning, he said it could be ‘commercially sensitive vis a vis their non-disclosing competitors’ and could also ‘stimulate higher executive turnover’. Aka a mass exodus of UK bankers to Switzerland. And while the general public might be only too happy to suggest that the last one closes the door on their way out, it might leave a big dent in the country’s finances. Of course, banks are always threatening to up sticks when anyone mentions reforming the system. The question is, do we have the nerve to find out whether they really mean it?
George Osborne is apparently keen to postpone the plans to give him more time to persuade other governments to join him – although there are whispers that it could put Vince Cable in a very uncomfortable position. The business secretary has vociferously warned the banks several times that they need to do something about their excessive bonus spending. Any backtracking now might be seen as yet another Lib Dem prostrating themselves as the Tories trample over them. Less Coalition, more acquisition.
Still, there’s always the chance that the banks could sort all this out without any Government intervention at all. Last week, it turned out that several banks were trying to score some serious brownie points by engaging in ‘secret’ talks to reduce the size of their bonus pool, estimated to be about £7bn this year. No word yet on how well those talks are going (it was all kept very hush-hush) but there were rumours that the pot could be reduced by as much as £3bn – not exactly small change.
It’s a tough one for the Government, especially during straitened times. It’s hard to argue that we shouldn’t impose some sort of limit on bank bonuses, some of which reach several million pounds. But let’s not forget that financial services is one of the few industries that the UK is doing well in, despite the recession. And it pays a lot of tax, particularly on those bonuses.