50% levy on bonuses above £25k

[susie100]

Suprised there is not a thread about this already (although I might have missed it)

Great vote winner, however I am really doubtful it will raise any significant revenue for the government as banks will simply raise basic salaries, turn their trading floors into hedge funds and re-employ people as consultants.

Crazy to be attacking the sector that provides 25% of tax revenues in my view (I am not a banker by the way!) but not applying to other financial institutions such as hedge funds or private equity firms or indeed other industries that pay people £££ such as consultancies. They all benefitted from cheap credit as much as the banks.

What does everyone else think?

Last years figures were meant to be around about the £70bn mark, so it is dwarfed by the bail out costs.

However the Government is hoping that it can sell the banks again at a profit, so a lot of that money could be recouped.

However if the bankers head towards better conditions over seas than "our" "investments" will be worth a lot less.

but BA, they'll still be "our investments" whereever they are based as we own the majority shares (in some banks)
I can't see the board/Government approving RBS or Northern Rock to move abroad. (might be better if they did

But if RBS and Northern Rock are restrained by heavy taxation laws then they will not be able to play on the global market in the same way and hence make less money.

Also the good employees of RBS and the other banks will be lured away to other banks that aren't limited on their bonuses.

So not only would RBS be less competitive, and therefore less profitable, due to the rules placed upon it that other banks were not subject to but it would loose some of it's most powerful earners, and their clients.

"yes happysmiley I totally understand that foreign born bankers will move home. I would in their shoes unless I really really liked it here.
But british born ones (who might be the minority?) won't be IMO , they have family friends ties etc."

But if their source of employment goes they will either have to go with that source or face not being able to find another job - esp not one that commands the kind of salary they have been earning.

And while it's easy to say that the banks should all go, the reality is that by going they take away a vast income from the country, and also future employment prospects for an awful lot of people, which in turn pushes up the unemployment figures which in turn pushes up the level of benefits the government need to pay out which in turn pushes up the level of money required to fund it which in turn means tax increases are required..

Past history has proven that companies can and do move all or part of their workforces to countries where it is more economically viable to do so. For example, fifteen years ago 1% of the British workforce was employed in a call centre. Now the vast majority of those call centres have been outsourced to India resulting in huge job losses for a lot of companies. Why would the banks be any different? A bank moving to say, Switzerland would not only bring in a huge amount of revenue, but also jobs which in turn would affect the unemployment figures which in turn affects the economy positively.

molly, How much extra tax would you be prepared to pay? According to Bloomberg today, Financial Services contributes about 62 billion pounds of tax a year to the UK economy. If we lost that revenue, we'd each have to pay an extra thousand pounds a year to maintain the same level of public services.

Average family of four paying an extra 4K a year? Not sure many people really would sign up to that.

Either that or we could go without free education because that's roughly what the UK spends on schools and colleges.

Still keen?

Aligrylls
"If it loses they haven't lost anything except their job and they move to another bank where they try the same thing."

I'm sorry, but that just isn't true. You are only as good as your last trade, and the city (and financial services industry as a whole) is pretty incestuous, so everyone knows what everyone else is doing and who is making money - why do you think banks are so concered about good staff being poached?

Reputations in the city are hard won, and someone whos attitude to work is to 'put one big bet on' and do nothing else isn't going to get rehired. If nothing else, no boss wants to have a lose cannon like that potentially losing the money and thus losing the bonus for the entire team.

I'm sure you have met traders who claim to just put one big bet on and that is how they make their money, but I would put my big bet on that being either bravado, or them not wanting to explain the hugely complicated details of their job and using that as a simple explanation of what they do.

I don't think anyone is saying it isn't a mess (because it is) and it has been predominantly caused by banks/bankers.

But it is a complicated mess that needs complicated and well thought out and implemented solutions. NOT blatant vote buying at the expense of long term solutions.

sparechange "You are only as good as your last trade"

God yes, not limited to traders either. It is cut-throat, even in the IT side where DH mostly works, you fuck something serious up? Or even something not so serious at a bad time and it is goodbye and no-one will touch you.

well said, Morloth

May I also add that making demons of an entire profession because a few of their number cocked up is also not helpful.

It might help the government to palm the blame off onto someone else, and let them become the public's whipping boy instead, but those left are actually helping to sort out the mess and shouldn't be punished for the sins of a few.

but we wouldn't lose all of that tax take would we, yes a proportion of it.

I personally would be prepared to pay a bit more on income tax ( I don't know the exact figures but I guess a percentage or two more). I am a basic rate taxpayer. Plus I would be prepared to lose my CTC to keep services up for our more vulnerable citizens.

I accept that may not be anywhere nearly enough

anyway, I must go now - to a budget planning meeting!

Riven - as it has been said before, pretty much all the individuals who made stupid decisions/were reckless, have been fired/moved on. The people who have managed to retain their jobs are the ones who have stayed behind and cleaned up the mess. For the bank I work at, the team that set-up a sub-prime mortgage division left 3 years ago. It is not in a bank's interest to keep on a team that loses it money and takes undue risks. Banks have become much more risk averse in the last few years, and yes, they have seriously cut down on spending.

For the banks that have received bail outs, Goldman Sachs has paid everything back, BoA and Citi have made allocations to repay what they received under TARP ASAP. It's only the British banks that are not doing so, but they are now being taxed at higher rates, losing good workers left right and centre and facing public censure every single day.

As I said above, financial services is the major industry in the UK. The reasons for that include excellent legal system (so you have surety of contracts), time zone, and (previously) preferential tax treatments. It's not because the UK is particularly lovely or has wonderful weather. But, if banks are singled out and penalised, face higher tax bills and so on, they will up and go. Leaving the UK with no major industry. And huge gaps in tax revenues

Another thing - banks contribute in other ways, apart from tax.

They sponsor sporting events, museums, art galleries, theatres etc. I'm sure if you asked anyone working for say, the Royal Opera House, how they've been doing in the last few years, they would say suffering, as so much funding has been cut as banks can't afford to sponsor anymore. Also, the banks do assist the government (and do things the government can't afford) in tackling financial and other crime (such as terrorist financing, illegal arms trading, money laundering, organised crime, fraud etc.)

but serenity opera is horribly elitist, so it probably doesn't matter if they lose funding

molly, A couple of percent on basic and losing your CTC just won't do I'm afraid. Seriously, if you are prepared to lose the tax take from financial services and pay for it, you'd probably be looking at 30% basic tax at least. Bear in mind that not everyone will pay their one thousand pounds. Presumably those on very low incomes, on benefits, pensioners, students, children etc won't be paying their thousand pounds. The burden would have to fall on people like you.

Also, I don't get this "we wouldn't lose all of that tax take would we, yes a proportion of it" thing. Either you want them to fuck off to Switzerland or you want them to stay and maximise their tax contribution surely?

My real concern with yesterday's announcement was why this way? The UK taxpayer is a major shareholder in all of the banks that it bailed out.
(a) Why didn't the UK govt make it a condition of the bailout that large bonuses were not paid to staff until the govt had its money back

(b) in the absence of this foresight - why doesn't the UK govt have the guts to actually go in and exercise it's right to force the board not to pay these bonuses?

This tax is unfair because as some of you mention above, it does penalise those that had absolutely nothing to do with bringing on the credit crunch, and some of which were responsible with helping everything back on track, to the benefit of everyone (again as many have discussed). However, my DH is a banker, and we are entirely comfortable paying this tax, as the way we look at it, he may have lost his job last year, and in many years of his (and my) career in banking, we have had zero bonuses because the bank isn't performing, so at least this time our economy will benefit from the banks profits hopefully.

However - has the chancellor forgotten that it was the hedge funds who were actively selling banking shares, driving down their price and almost forcing bankrupcy on many more banks this time last year? They would have succeeded too, had a ban on selling not been put in place. Yet the hedge funds remain unscathed. It is very much against the ethos of fairness for everyone and I just don't see how the labour government can win the next election after this...

Dinasaur - if banks can't pay large bonuses to people who make large amounts of money, those people will go and work somewhere else and make the money for someone else.

As I said before, if 1 trader is making £50m a year for RBS, the bank can either a) pay him a massive bonus and keep the remaining £49.5m to pay back the government
or b) watch him leave for another bank where he makes another £50m and £49.5m of it goes to French shareholders

Which of those would you like to see happen?
And which of those do you think will ensure the government gets its money back the quickest?

Dinosaur - also, just because a company's share price falls to 1p doesn't mean the company is bankrupt
The share price doesn't impact on the financial security of a business, it reflects it
Hedge funds can short sell all they want and if a company is still viable, it will keep going.

I think it's important to understand where this oft quoted 800 billion figure for the bail out comes from.

It's quoting a National Audit Office report (which is available on its website if anyone is interested).

According to the NAO, the main actual outlay was actually £131 billion that we invested in RBS, Lloyds etc. Presumably we will some day sell these shares, maybe at a profit, maybe at a loss but I doubt we'll lose the whole 131 bn.

The rest of the £700-800 bn we hear quoted is £600bn of loan guarantees. We have not actually paid any money out and we have no idea if we ever will. At the moment it doesn't look like we'd lose very much on these guarantees as the banking sector is slowly recovering.

On top of this we have made £14 bn in fee for these guarantees and loan repayments.

The 800bn number is the absolute worst case scenario; it is very very unlikely to be anything like that amount.

Obviously (as the NAO report says) we don't know how much we will make or lose until the bank shares are sold. But running the banks into the ground with punitive taxation is unlikely to maximise the share price when we sell.

Sparechange,

It is not just that I have met people. DH worked in the city for 21 years as a trader and I believe him when he tells me what goes on. From what he says there are quite a lot of people in the city who have just got lucky with one big trade and then lose a lot. When they go to their next job they can say that their best year was x amount and then not disclose the details of their worst year (which is probably why they are in the interview in the first place).

I just don't believe that these people are so talented (well maybe a few are).

Interesting article here

Going to require a huge cultural shift in the western world for something like that to take off flashharriet.

In general people like capitalism, they like it because we are selfish. It is easy when you have millions to say: "Everyone should share more" not so easy when you are working 16 hour days and not making millions but have enough for your family to be comfortable.

Who knows though, maybe everything will change and this (the recession) is the catalyst, I don't think so though, I don't think things ever really change because I don't think people ever really change.

I disagree, I don't think it would take too much of a shift because we're only a generation away from people who thought like that. When I drive down the most affluent roads in my area, I can tell exactly how old the occupants are by the car(s) in the drive. Our generation is greedy, selfish and materialistic - it wasn't always so .

Totally disagree. This is Germany, no? How selfish was a large portion that particular country oh around, 70 years ago?