Don't tell me again! I have heard it copious times, almost to a point of being bored to distraction. Yes I know: we are about to enter a period of extreme economic austerity. Possibly as many as 300,000 jobs will be lost in the public sector in the next four years, as the Government is hell-bent in its quest to cut waste in the public sector as well as slashing the budget deficit. This has also necessitated the implementation of a wage freeze in the public sector, causing hardship to families, who must also face the threat of food inflation, an increase in VAT to 20 per cent, further tax hikes later in the year, and conceivably higher rates of interest.
Yet despite the hardship likely to be felt by most decent working people, investment bankers have the effrontery to benefit from another monster bonus payout (even though it is likely to be down by 30 per cent) without the slightest bit of remorse or contrition. You can hear the cry in every home, coffee shop, pub, union meeting: Outrageous! Heartless! Disgusting! Parasites!
Life is not fair. It is hard to argue against the outrage. But the fact that the world's economy was brought to its knees was not just down to the irresponsible behaviour of a few reckless bankers. Banks were easy prey for the politicians to blame and they remain so. The previous government was profligate and negligent in its running of the economy – Labour simply did not understand the workings of banks. These financial bastions were allowed to build up their balance sheets by gargantuan and idiotic proportions, without proper controls. Remember: the banks contributed £80bn to the revenue during the decade prior to 2008. And, contrary to public opinion, the "bad guys" have gone. The fresh and existing management have said sorry with rather more contrition than Gordon Brown. The bonus structure has changed to one-third cash, two-thirds share incentive schemes, with claw-back if targets are not met.
If the Government hammers the bankers on emotive views on bonuses and penal taxation, they won't leave in their droves, but the business will be focused elsewhere. It is cheap to move capital and a few hundred people. I would like to see the taxpayer repaid as soon as possible. For that to happen, banks need several income streams. I would also like the dole queue to be cut. If the price to achieve that goal is a few billion pounds, so be it. Folks, get over it! Let's move on!
David Buik is a market analyst with BGC PartnersReuse content