On bank bonuses George Osborne has been all talk and no action

Labour’s shadow chancellor Ed Balls said:

“George Osborne boasted he was the man to curb excessive bank bonuses but nine months into office it is clear he has been all talk and no action.

“As George Osborne is discovering on the economic recovery and now with the banks too, sound and fury signify nothing. What matters for Chancellors is whether they deliver on their promises and get results.

“This is typical of a Conservative Party and a Chancellor who have simply not been on the case with the banks since they took office and who vocally opposed tougher regulation throughout the last decade before the global financial crisis hit.

“The Tory-led government should put their words into action and deliver on Labour’s plan to require banks to reveal who gets million pound bonuses.

“They should re-think their plan to give the banks a tax cut this year and adopt Labour’s plan to repeat last year’s £3.5 billion bank bonus tax and use the money to boost growth and help create the jobs we badly need this year.”

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Posted February 6th, 2011 by Ed's team

One Response to “On bank bonuses George Osborne has been all talk and no action”

  1. Peter Senker says:

    Mervyn King has presented you with a wonderful opportunity for attacking the Government’s cowardly attitude to taxing the grossly excessive pay senior bankers still award themselves. In an interview with Charles Moore, reported in The Daily Telegraph today, Mervyn King says that “manufacturing and service industries all over the country pay far lower rewards than financial services “.It is generally believed that the senior bankers who nearly succeeded in collapsing the world’s financial system are worth the enormous pay they still award themselves. They have successfully scared the Government into refraining from taxing their pay and bonuses heavily, out of fear that bankers would emigrate and deprive Britain of the very valuable services which they provide. As you well know, underlying this fear is the conventional economic theory that supply and demand are the main factors affecting pay levels. It is generally believed that the wages, salaries and bonuses paid to different sorts of worker , like the prices of different sorts of goods, are determined by the interaction of demand and supply. Pay gravitates to the level at which the demand for a particular skill is equal to the supply: the theory assumes that people are paid roughly in accordance with what they contribute to a firm’s operations.

    But this theory is almost complete nonsense and was disproved by extensive empirical evidence more than thirty years ago. (1) But most politicians, economists and the general public still believe it. In fact, pay is determined mainly by a complex mix of social status and power. People are paid broadly in accordance with what society as a whole thinks they are worth, and by the power they have to grab resources. Senior British bankers claim that should their pay be taxed substantially, they would emigrate to better paid jobs abroad. That is almost complete nonsense. Very few overseas banks would want any of them – salaries are more than adequate to enable overseas banks to find sufficient good people at home.
    . (1) Guy Routh., Occupation and Pay in Great Britain, 1906-1979, London, Macmillan, 1980, pages 181 -220

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