The EU’s Internal Market Commissioner, Michel Barnier, last week hit out at banks for ‘excessive’ and ‘unjustifiable’ bonuses paid to executive staff. It follows a new report from the European Banking Authority which shows that bonus rules were “not being implemented consistently across EU Member States”.
The figures are startling but not surprising. The average bonus paid to bank executives across Europe was 122% of their basic salary while in one unnamed EU country the average was 220%. I’ll refrain from speculating on which EU country it could be but I won’t think too hard about it...
The European Parliament now wants bonuses to be capped at 100% of basic pay. Many will argue that this is simply not bold enough. But the fact that some bankers are receiving bonuses 10 times larger than their base salary doesn’t seem to bother George Osborne or David Cameron, who see any intervention from Brussels to propose common sense as a threat to the City of London.
In 2008 Scottish and UK taxpayers gave £1.3 trillion pounds to the financial sector. In return for cleaning up the irresponsible mistakes of bankers the UK Government hit us with higher taxes and cuts. Cuts to public services, cuts to the voluntary sector, cuts to welfare. Over the same period bank bonuses accounted for £13 billion and at the start of last year bankers awarded themselves salary increases of 20-40%.
Prior to the Westminster elections George Osborne pledged to rebalance the UK economy away from investment banking. But his defence of the City of London and his staunch opposition to a financial transactions tax proves where his loyalty truly lies. Surely it’s time to tackle the lucrative banking culture head on and force the banks to make a contribution to society, public finances and to the cost of economic recovery.
The EU only gets involved with tax when it affects the functioning of the Internal Market. Whilst anyone would rightly be sceptical about Brussels encroaching upon the taxation policy of Member States, the European Commission’s bid to establish a Europe-wide and ultimately global financial transactions tax should be supported.
Indeed the SNP has welcomed the proposal to tax financial transactions that take place between financial institutions. But before that can happen the European Commission must convince not only Europe but at the very least the G20, that such a tax, otherwise known as the Tobin Tax, is a good idea. A Tobin Tax will be no use as a Eurozone-only experiment. Europe’s financial centre - the City of London – cannot be exempt from it. And although it is being proposed by the European Commission as a measure for the EU, it must be implemented globally if it is to have any significant impact.
There would be a 0.1% tax on the trading of bonds, shares and derivatives which would create £20 billion per year and help offset cuts to public services. Not only would it help boost recovery – it would discourage risky and unproductive trading. Citizens and businesses would not be taxed; mortgages, bank loans, insurance and other day-to-day financial activities carried out by individuals or small businesses would not be affected.
What is different about the Tobin Tax is that it is largely bottom-up and has the support of NGOs, charities, political parties, economists and trade unions - from Lord Turner, Chairman of the Financial Services Authority, to Oxfam. Over 1,000 economists have so far lobbied the G-20 for the tax to be introduced at a global level. Charities and organisations across Scotland have done the same and Oxfam recently commissioned a poll showing that 62% of Scots want the Tobin Tax to be introduced immediately.
The financial crisis exposed the dangers of unregulated finance and any link that existed between the financial sector and wider society has been broken. Any responsible Government would be working to restore confidence and bridge the gap. The Commission’s proposals, if implemented correctly, have the potential to create a new social contract with the financial sector. But the Tories in London are yet again demonstrating to be out of touch and continue to promote the interests of the few. Scotland’s economy can no longer afford to be held to ransom by policies designed to benefit the South East of England and the City of London.
The figures are startling but not surprising. The average bonus paid to bank executives across Europe was 122% of their basic salary while in one unnamed EU country the average was 220%. I’ll refrain from speculating on which EU country it could be but I won’t think too hard about it...
The European Parliament now wants bonuses to be capped at 100% of basic pay. Many will argue that this is simply not bold enough. But the fact that some bankers are receiving bonuses 10 times larger than their base salary doesn’t seem to bother George Osborne or David Cameron, who see any intervention from Brussels to propose common sense as a threat to the City of London.
In 2008 Scottish and UK taxpayers gave £1.3 trillion pounds to the financial sector. In return for cleaning up the irresponsible mistakes of bankers the UK Government hit us with higher taxes and cuts. Cuts to public services, cuts to the voluntary sector, cuts to welfare. Over the same period bank bonuses accounted for £13 billion and at the start of last year bankers awarded themselves salary increases of 20-40%.
Prior to the Westminster elections George Osborne pledged to rebalance the UK economy away from investment banking. But his defence of the City of London and his staunch opposition to a financial transactions tax proves where his loyalty truly lies. Surely it’s time to tackle the lucrative banking culture head on and force the banks to make a contribution to society, public finances and to the cost of economic recovery.
The EU only gets involved with tax when it affects the functioning of the Internal Market. Whilst anyone would rightly be sceptical about Brussels encroaching upon the taxation policy of Member States, the European Commission’s bid to establish a Europe-wide and ultimately global financial transactions tax should be supported.
Indeed the SNP has welcomed the proposal to tax financial transactions that take place between financial institutions. But before that can happen the European Commission must convince not only Europe but at the very least the G20, that such a tax, otherwise known as the Tobin Tax, is a good idea. A Tobin Tax will be no use as a Eurozone-only experiment. Europe’s financial centre - the City of London – cannot be exempt from it. And although it is being proposed by the European Commission as a measure for the EU, it must be implemented globally if it is to have any significant impact.
There would be a 0.1% tax on the trading of bonds, shares and derivatives which would create £20 billion per year and help offset cuts to public services. Not only would it help boost recovery – it would discourage risky and unproductive trading. Citizens and businesses would not be taxed; mortgages, bank loans, insurance and other day-to-day financial activities carried out by individuals or small businesses would not be affected.
What is different about the Tobin Tax is that it is largely bottom-up and has the support of NGOs, charities, political parties, economists and trade unions - from Lord Turner, Chairman of the Financial Services Authority, to Oxfam. Over 1,000 economists have so far lobbied the G-20 for the tax to be introduced at a global level. Charities and organisations across Scotland have done the same and Oxfam recently commissioned a poll showing that 62% of Scots want the Tobin Tax to be introduced immediately.
The financial crisis exposed the dangers of unregulated finance and any link that existed between the financial sector and wider society has been broken. Any responsible Government would be working to restore confidence and bridge the gap. The Commission’s proposals, if implemented correctly, have the potential to create a new social contract with the financial sector. But the Tories in London are yet again demonstrating to be out of touch and continue to promote the interests of the few. Scotland’s economy can no longer afford to be held to ransom by policies designed to benefit the South East of England and the City of London.
PUBLISHED IN THE SCOTS INDEPENDENT, MAY 2012
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