Margareta Pagano: Condemn the politicians for RBS's bonuses

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The Independent Online

If you haven't bumped into any bankers at dinner parties recently it's not because they daren't go out but because they have invented new jobs. Some call themselves analysts, others whisper they are in financial research.

The news that RBS is to pay £1.6bn in bonuses to staff even though the bank lost £3.6bn should make more of them disguise what they do, or flee to Geneva for good. They would be sensible to do so as RBS's decision is sparking another explosion of public revulsion against the banking fraternity. But this time the outrage is also being directed against the politicians who have allowed this travesty.

The Government, which owns 84 per cent of RBS through UKFI, has made the most terrible error in permitting the board to pay any bonuses at all. It's a short-sighted move which will only hasten the public's declining respect for the entire political class. RBS would not exist today if it hadn't received £45bn of taxpayers' money and thus, all staff – including those who received the bonuses in investment banking – owe their jobs to the largesse of the public.

RBS's chief executive, Stephen Hester, admitted he walked a tightrope in trying to balance paying enough money to keep his top bankers from leaving and the pressure of external forces. Translated, that means howls from the public. Well, Mr Hester, I'm sorry to say you fell off the tightrope.

By arguing that RBS has to pay top dollar, Mr Hester has avoided the real issue which is that no one should receive an extra penny in bonus until the bank is profitable again and public money paid back. Sweetening public opinion by paying out some of the bonuses in shares, which can be sold within three years, is not good enough. His counter-argument, and that of all bankers, is twofold. One, the bank can be best returned to profit if his clever investment bankers are allowed to make more money. They did last year, making a profit of £5.7bn. If RBS hadn't lost so many bankers to rivals, he claims, it could have made another £1bn or so – a silly statement that's impossible to prove or disprove.

Two, he claims those bankers have to be paid top dollar or even more will walk away to rivals – "assets with feet" as one merchant banker once put it to me. But will they? It's the $64bn question no one can answer. I say let them go: there are hundreds of out-of-work bankers who would jump at the chance of earning just the basic RBS investment banker's salary of £80,000.

If the Government had been smart, it would have called RBS's bluff and used this opportunity to stop such absurd pay awards, which, ironically, the rest of the industry would happily follow once someone takes the lead. It could also take this chance to say that it wants an investigation into the complex oligopolistic structure which allows investment bankers to make so much money. And if RBS, and its rivals, were really clever they would use the public opprobrium as an excuse to tell staff they can't pay out big bonuses. That would keep costs down, improve competitiveness and stop the ridiculous merry-go-round of staff blackmailing them with rival offers. Once again it fell to Mervyn King, th eGovernor of the Bank of England, to give us the real story when he repeated his warning at the Future of Banking Commission that unless we restructure the industry radically, we are heading for an even bigger crisis. It's only when the structure is sorted out that bankers might be happy to call themselves bankers again.

That which does not destroy Google, should make it stronger

China now has more internet users than there are in the US, yet that number is still less than a fifth of the population. New figures show that more than 250 million Chinese go online compared to 220 million or so in the US. Some 3.8 billion people live in Asia, of which just 738 million are surfers while in Latin America 179 million people browse the web out of a population of 586 million. And in Europe, more than half of the 803 million people are regularly wired up.

I use these numbers to show you just how enormous the internet market already is; and how much bigger it will become once many of the world's less developed countries start catching up. Maintaining dominance in such a volatile and exploding market is going to be tough even for Google. It also means that conventional measures of monopoly positions don't apply. Don't forget that every time you click on Google you make a free choice.

The sheer scale of the market is worth taking on board when considering the latest move by the EU to investigate the claims by three internet companies that Google is acting unfairly in the way they are positioned in its search rankings. Google has been polite about the claims and says that it will respond to the EU within a few weeks. But more quietly it points out that all three complainants are rivals with their own search engines. Others who would go further, arguing that Microsoft, which owns Bing and is desperate to eat away at Google's turf, is behind the complaints.

Over the next few decades, China is most likely to have the world's top universities and Google will want to be their favourite search engine. It should turn this challenge on its head, using the complaints to help it become as sensitive as it can be to all local cultures. As one top Harvard professor once said, a complaint is a gift and should be welcomed.

Super cool: Fashion newcomer set to make market splash

When David Beckham, Jude Law or Kate Moss are caught wearing your clothes, it's always a boost to your sales and image. Having the stars parade your gear helps, but even so, Superdry's climb to the top of the fashion heap has been extraordinarily swift having only started six years ago. But founder Julian Dunkerton has been building SuperGroup ever since his first market-stall in 1985, followed by the Cult shops.

He now has 40 shops and 54 concessions in House of Fraser stores and is set to make around £25m profit this year. Not bad considering how tough it is out there. After two weeks on the road wooing investors, Dunkerton is close to getting his £125m stock market listing on 15 March. Word is that the offer is already over-subscribed and that the book-building process, due this week, will be done by lunchtime tomorrow. If the stock is not priced too aggressively, the shares could prove as popular as Superdry's beatnik shorts, this summer's must-have.

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