Dear David Cameron and Nick Clegg...

[WilheminaAteHer]

Since you've caved in to the banking lobbyists like snivelling little worms and given them their bonuses anyway... I want my Child Benefit back. .

Um, the government doesn't pay the bank bonuses. The banks do.

They haven't "given them their bonus's back" the Government don't pay them.

For all their tough talking to the banks, they achieved NOTHING.

The banks have shown them who is boss - the big but understated problem with 'growth' is the manifestation of massive organisations who have more power than the government - clearly demonstrated here.

They have effectively had a tax break because this year they haven't had the extra tax on their bonuses that Labour levied last year.

Depressing stuff

The Government can't stop banks paying bonuses as most of them are privately owned. They could block the bonuses paid by the nationalised banks but I'm not sure this would be sensible.

On the nationalised banks, it is of a particular curiosity that people go insane at the thought of the controlling shareholders asking for reasonable pay restraints for their employees?

This is what outside of the square mile is known as BUSINESS.

If you chose to leave (oh talented one), adios and close the door on your way out.

This is funny. Johnson was just on the PM programme..... Admitted that pre-election Labour signed a deal with RBS promising to let them have a free hand with bonuses so that they could stay competitive within the market. He said something like how it wouldn't be fair if all the private banks could pay big bucks but the nationalised ones couldn't. He's just upset that the government have dropped the extra windfall tax and aren't going ahead with the transparency agreement. In a nutshell, Labour couldn't do anything about bonuses either.

I agree - the next tactic should be to somehow reduce their size and power ( no idea how). The true threat to us is all is over reliance on such enormous global organisations who can veto governmental power - and also bring us all down in one foul swoop.

BlaBlah, you are absolutely right.

Apparently investment banks in the Far East are clamouring to offer positions to other international bankers, which is why the government had to renege on their previous pledges. How sickening that, as you say, any commercial organisation should have so much power.

To the posters who didn't understand my OP, hopefully if you've caught up with today's news it makes more sense to you now! In a nutshell I was saying that the govt has allowed the banks to have their bonuses. Of course I don't think the govt pays bonuses to the bankers!

Oh what a shame it would be if a bunch of over-paid and woefully under-talented investment bankers were to fuck off out of the country. Maybe they'd be replaced by people who would actually, y'know, find out what dross it was they were investing in before it all turned to shite rather than after they almost bankrupted the country.

Ah, it would be such justice of the mass exodus of such folks had no bearing on our economic stability. Sigh.

OP- I had read the news but by saying the government has allowed the banks to pay bonuses you imply that the government has the legal power to stop it, which in the vast majority of cases it doesn't. What do you expect them to actually do?

As controlling shareholder of RBS and Lloyds, you can argue that the government could limit bonuses if it wanted to. However, it can do nothing to prevent banks such as Barclays, HSBC and Standard Chartered (the other 3 within the top 5 British banks) paying bonuses, never mind the banks which are not British, which most investment banks operating within the city aren't. HSBC and Standard Chartered are only notionally British anyway- yes, they're London listed but they're primarily Asian banks.

No, I don't think that implication was in what I wrote. Especially as the widely-held expectation was that the govt would be pushing for restraint on bonuses.

The £400bn that we lent to the banks is money that can now not be made available to thousands of publicly owned institutions whose budgets have been slashed, not to mention people whose benefits have been chopped (such as the bizarre mishandling of CB, as I referred to in my OP).

AFAIK there is no requirement for the rescued banks to pay back the public purse at a high rate of interest, or have I missed something? Also I believe I'm right in thinking that some of these banks, if not most or all of them, are now profitable, thanks to our intervention. So under these circumstances, to see that the banks which we rescued are free to pay whatever they like in bonuses does piss me off.

Wilhemina- ok- the issue is the difference between a loan and an equity investment.

£400bn was not lent to the banks (although this is often cited as fact by the media so it's a common misconception).

£400bn was injected into the banks as an equity investment- i.e. exchanged for shares in the bank, so that the government/ nation is the majority shareholder (ie owns most of) RBS and Lloyds/HBOS/ whatever they're called now.

Therefore there is no interest payable (because that's not how shares work), but the government owns the shares which are publicly listed and have gone up in value since they were bought. Have to admit I've lost track but my understanding is they are now almost back up to break even- i.e. the country has it's £400bn back. However, obviously the issue is that the government doesnt have the cash because they'd have to sell the shares to get that. Again, my understanding is that at some stage they plan to do a de-nationalisation and sell them off to institutional and retail investors.

Now the government has a problem. They could say "RBS and Lloyds arent paying bonuses for the reason that we had to bail them out etc etc" which would be completely legitimate. However, they cant stop all the other banks from paying bonuses, other than urging restraint. That would create a problem of competitiveness whereby good bankers wouldn't want to work for RBS and Lloyds, so those banks would become worse instead of better, jeopardising the tax payers shares in those banks.

To look on the bright side, if these bonuses are paid, 50% goes straight back to the coffers as income tax. If the banks keep the money, it's only subject to corporation tax at 30%, so the tax haul is actually higher if the bonuses get paid.

So personally, I think they made the right choice, although I accept that it's wrong on a number of levels.

Bagged and Tagged - you're wildly wrong - far from making back all our original investment, we lost £12.8 bn in 2010 over what we bought them for - somewhat the opposite to a rise!

www.guardian.co.uk/business/2010/dec/31/taxpayers-loss-on-bailed-out-banks

The reality is that we could easily reduce bonuses to nationalised banks if we had theballs/inclination - think Ireland.

Clearly, Camern/Osborne have no interest in doing so - after all, their mates are all bankers (no rhyming sland intended), and I'm sure they'll get well-paid directorships in the City when they leave the Commons.

Or we could simply tax the bonuses - no legal difficulties there, and can apply to all bankers - let us not forget that without the financial back-up of the state, all the other banks would have gone down like dominoes after Lehman's. None of them are truly 'independent'.

On all these threads about the deficit, I find it amazing that there are such vastly differing figures available.

I am coming to the conclusion that no one truly knows the full picture of our economy, deficit, bailout, effects of qe, etc.

Bagged - thanks for such a detailed precis of what happened to our money! Time has addled my memory, as you can see. One thing I do strongly disagree with you on is where you said that 50% of the bonuses would go straight back to us through income tax. I know lots of people who use creative accountants to make sure that's exactly what won't happen to 'their' money.

granted - thanks for the link, I'll read that.

LadyBlaBlah, I think you're absolutely right.