The juxtaposition of news items on last Friday's radio and TV bulletins could hardly have been starker. First, a report on the row over the extent to which the Government should control bonuses at taxpayer-owned Royal Bank of Scotland. And then a story on 1,700 job losses at the Corus steel works in Teesside, complete with some heart-rending interviews of people who had put 30 years' service into the plant only to find out they faced the axe a few weeks before Christmas.
In such a world, not even the most articulate and reasoned explanation of why bankers deserve even modest payouts – let alone the £1m-plus bonuses Lord Myners claims 5,000 bankers stand to trouser – is going to play well with the court of public opinion (in which the Labour Party deputy leader Harriet Harman once said the bankers should be judged).
Nor should it. The argument that banks are special and must be saved at all costs, while steel works, say, can be allowed to collapse (they're not of systemic importance, you see) was always an affront to natural justice. That affront became a full-scale assault with the idea that having saved these banks, the taxpayer also had to countenance them paying big bonuses in order to stay competitive.
For the record, there are some reasonable arguments against a tax on bankers' bonuses. The best is the sheer impracticality of such a levy: the rules will be difficult to frame if they are not to be easily avoided, monitoring compliance will be time-consuming and expensive, and the Treasury won't even raise much cash, at least not in the context of a public spending deficit likely to come in at close to £200bn this year.
In addition, the City insists such a tax would cement the perception that London is no longer an attractive place to do business, damaging a sector of the economy that generates 10 per cent or more of the UK's GDP. Many higher-rate taxpayers already face a big tax hike next April, and for some this levy will be the final straw.
Still, while a few more bankers will indeed pack their bags, particularly as many will be working side-by-side with non-dom colleagues to whom the tax may not apply, this trend has already begun at the margins. The idea that a one-off tax applicable for a single year only will turn a trickle into a flood looks fanciful. The windfall tax on energy companies in 1997, for example, didn't seem to put off all those foreign companies who subsequently bought up our gas and electricity suppliers.
Leaving aside natural justice for a moment, the counter-argument that bankers find difficult to answer is they have only earned the big profits on which they are now claiming bonuses this year because of the extraordinary support pumped into the financial system by the state. Several hundred billion pounds, paid for directly and indirectly by taxpayers, has left the banks operating in a supernormal market, so a supertax is a justifiable response.
Add back in the interests of justice and the case for a new tax becomes overwhelming. Populism is one of those words often thrown at politicians as an insult, but accepting that many people want to feel that the banks are sharing the pain of a recession they are perceived to have caused is not pandering to low prejudices. Why should steel workers in Teesside not expect bankers to put something back into an economy that has let them down so badly?
All that said, a tax on bankers' bonuses is not the best way to raise money or even to address public outrage. It will focus on too narrow a group of individuals, leaving the banks' shareholders free to enjoy the fruits of the abnormal market in which they have been operating. While a windfall tax on bank profits might not be wise in an environment in which we are trying to encourage stronger capital reserves, a small levy on all banking transactions would raise far more than a focus on bonuses without being an impediment to balance sheet bolstering.
The so-called "Tobin tax" is, of course, what the Prime Minister had been hoping to secure international agreement on at the last G20 summit – he fears a move to impose such a tax unilaterally would be far more damaging to London than a nimble attack on bonuses.
Unfortunately, persuading other countries to sign up for the tax proved too big an ask for the man who saved the banks. So now he is seeking payback in a much more modest fashion (though the electoral rewards are potentially greater).
Ofgem sends out mixed messages
Conflicting signals from the folk at Ofgem yesterday, but then the energy regulator has never quite seemed to know where it stands on the question of whether customers are getting a fair deal.
Yes and no, the watchdog seems to be saying. On the one hand, the big six energy companies ought to cut their prices in the new year because margins have widened as the cost of wholesale gas has fallen. On the other hand, the suppliers will be allowed to raise electricity prices by more than Ofgem had previously suggested in order to pay for investment programmes.
The conflicting messages suggest that Ofgem hasn't quite got its head round its consumer protection duties. Last year, it reluctantly began an investigation into energy prices after ministers ordered it to do so, and then ordered the big six to disclose their business plans in public submissions – which gave the industry a golden opportunity to study each other's strategies and work out how small a price cut they could get away with. Indeed, you would call it a cartel had the situation been of the companies' own making.
What's particularly unfortunate about Ofgem's failure to coherently hold the industry to account is that even leaving aside the question of whether wholesale price cuts are being passed on or not, it is clear that at some companies, customers are paying the price for inefficiency and poor management.
The industry's own report on profit margins yesterday rebuffed calls for price cuts with claims that currently, some suppliers are barely breaking even. But if these businesses can't make money in the current benign trading environment, there is no hope for them, or the households they supply.