9 Feb 2011

Bankers: morally bankrupt?

The British Bankers Association spends £83,000 a week, every week, to protect the interests of the big banks. Positive Money show how well they are doing - in their 20 page submission to the government's Independent Commission on Banking they make it sound like the banks did us a favour by causing the worst financial crisis in decades: " ...while the scale of taxpayer support has been very substantial...support for the banking industry is expected to result in a small profit for the taxpayer".

Positive money write: "Of course, that "small profit" that we'll get from selling our shares in the bailed-out banks isn't quite enough to cover some of the other costs that the financial crisis has left us, such as: • The extra £404 billion extra that we'll have added to the national debt by the end of this year (that's an extra £9,000 per UK adult, which will cost you an extra £270 a year in interest costs) • The millions of lost jobs and failed businesses both in the UK and around the world • The 500,000 jobs that will be lost from public services over the next 5 years • The rise in VAT, which will cost you an extra £183 a year, if you're on an average salary (according to Deloitte, one of the UK's biggest accountants)."

So should ordinary people prop up a toxic banking system and subsidise corporations that pay out £7billion in bonuses immediately after throwing millions of people out of work?

Positive Money is launching a campaign this month - OneGoodCut - to show how insane it is for the government to ask people to pay more for less (by raising taxes and cutting public services) whilst banks are being subsidised by us by up to £130bn a year. Instead of cutting vital public services like schools, hospitals and the police, we can just cut benefits to bankers.

There are plenty of campaigns against the cuts, but this is a wonderful positive real alternative ie to take away the banks' subsidies, make sure that they can fail when they screw up, and leave them to sink or swim, just as any real business has to. Positive Money writes: "With a few simple reforms, we can ensure that banks suffer the consequences of their actions and aren't able to offload the risks and the costs onto ordinary taxpayers. We can also ensure that instead of them creating hundreds of billions in digital money to pump into dodgy derivatives, any newly-created money can be used for public benefit, to cut taxes, cover vital public services or reduce the national debt. We can remove the £130bn of subsidies that they receive every year at our expenses."

Government U-turn

We've heard alot about U-turns from this Government and bankers bonuses is sadly another example (mentioned in Stroud Against the Cuts film). In February 2009, David Cameron said: "Where the taxpayer owns a large stake in a bank, we are saying that no employee should be paid a bonus of over £2,000." Yet Stephen Hester, the chief executive of RBS – 84% owned by the taxpayer – is now said to be lining up a bonus of around £2.5m!!

In October 2009, George Osborne announced that he was calling on the Treasury to stop retail banks "paying out profits in significant cash bonuses. Full stop." Bob Diamond, the chief executive of Barclays, is due to make around £8m this year, half of which is likely to be cash.

In April 2010, a Tory policy paper observed: "News that bank bonuses this year are expected to total £7bn shows that Gordon Brown's claim to have ended the era of the big bonus was ridiculous." Bank bonuses in 2011 are expected to total £7bn.

Downing Street now admit that the government would, after all, make no attempt to limit the size of bonuses - but worse still the Government is lobbying to ensure EU law doesn't curtail bonuses. See Liz Hilary letter from the Green party to the local papers:

It’s particularly galling that, whilst taxpayers in Gloucestershire and the rest of the UK face millions being cut from libraries, youth services and public transport, bankers are paying themselves the same bonuses as they received in 2010 – a figure of around £7bn.

Cameron promised before the Conservatives came into power that they would curb bankers’ bonuses and even criticised the then Labour government for how little they had done on the issue. However, now they are in power, they have actually tried to scupper the European Directive to ensure that bankers could only take 20% of their bonuses in upfront cash payments.

Nationally, the government should keep the banks we currently own in public ownership and run them in the public interest: investing in areas such as public transport infrastructure and renewable energy, rather than short-term consumer spending and projects that make risky, short-term profits at the expense of people or the environment. Banks should be regulated so that credit is made available for the benefit of all and to ensure sustainability rather than growth.

What people can do personally is: switch their bank account to a co-operative or mutual, e.g. the Nationwide or the Co-operative Bank; build up community resilience by using local, independent shops, the farmers market and Stroudco and joining the local community farm, Stroud Community Agriculture and our local re-use scheme Stroud Freegle; invest in local community assets, e.g. through Stroud Common Wealth or Stroud Valleys Credit Union; support our local currency, the Stroud Pound.

Most feel they are at the mercy of the money markets but there are things we can do with our money to make it safer from the excessive risks taken by the financial markets.

Yours truly, Liz Hillary


Philip Booth said...

"Enormous" bank bonuses expected to be announced in the next few weeks are "offensive", Business Secretary Vince Cable has said. He told the BBC that most people would find the bumper payouts, tipped to surpass £6bn, difficult to understand.

Philip Booth said...

Hidden subsidies worth £32 million to banks