Margereta Pagano: Should they stay or should they go?

Chancellor Alistair Darling's punitive PBR has provoked a fightback by the Square Mile and could even lead to a new brain drain

One of the most popular karaoke numbers at City Christmas parties this year is a particularly shouty version of The Clash's "Should I Stay or Should I Go?". It's good to know our bankers and traders have got their humour back. Only a year ago they were all heads-down, clinging to their jobs and defending their reputations. But a profession that had taken social standing as much for granted as its annual bonus bonanza has grown impatient with its pariah status. Alistair Darling and Gordon Brown know this, so that's all the more reason to be disappointed with their cack-handed approach to bonuses.

What would have been hailed as courageous and righteous a year ago stinks of simple opportunism and electioneering now. The result? No one wins. Everyone loses. Nobody learns anything. And the arguments about whether we'd be better off with or without the bankers, or certainly a reformed banking system, will join the cold turkey and new socks as part of this year's Christmas celebrations.

You can almost forgive the bankers for fighting back, particularly the foreign banks that have not been bailed out by the UK taxpayer and which are also now being taxed. They are all frantically working out how they can avoid paying this new 50 per cent bonus levy, or "payroll" tax, as it's being dubbed. It's good business, too, for the lawyers who are now out in force advising that the bonus tax is as "leaky as a sieve" and can be either avoided or mitigated by deferring payments over £25,000 until next year, as well as there being other options.

There is another, more prosaic, point. What is a banker? Apparently the Treasury is now scrambling around to find a definition that fits the 20,000 or so bankers that it needs to tax to get its £550m, while the banks are scrambling round looking to reclassify their staff. For the truth is that most of the City's top earners are not what most people know as bankers at all, but traders, analysts, fund managers etc. The irony is that most of the old-fashioned retail bankers responsible for the mess we are in – those at Northern Rock, HBOS, Bradford & Bingley and RBS – have since left, taking their comfortable pensions with them.

It's right that the financial industry should be made to pay for some of the mess; and money is the only pain the bankers understand. But it's important to remember this one-off bonus levy is a populist measure designed by Brown to give the public a taste of blood rather than an attempt to restructure or reform the financial system so we don't have asset bubbles starting all over again. Neither the one-off levy, nor Brown's latest campaign for a "Tobin tax", gets to the heart of the matter. And that is to question why those working in finance earn so much money in the first place, and to look at ways of making sure such excessive risk is never taken again.

The reality is that politicians and regulators don't want to face up to this conundrum. They are too cowardly to take on the big structural changes needed to break the oligopoly so tightly controlled by the world's largest banks, whether retail or investment banking, over the fees charged to customers. Breaking that cartel is what is required and what is being avoided.

Until the world's regulators get to grips with this market imbalance, bankers will go on earning vast sums and bonuses will rear their head again next year and the next. More to the point, the bankers will follow the money. Hong Kong and Singapore seem to be today's favourite hot tax spots. But it's not just the lower tax the bankers are following. There is a much bigger, structural shift going on in the world's financial capital markets, which means the serious flows of money are moving to countries such as Brazil, India and China.

So some of the UK's bankers will leave not only because of our punitive taxes, but because the markets will eventually move further east. Many big foreign banks based in London, will also be reconsidering moving on. I wouldn't be surprised if Barclays isn't thinking about a new home too.

What is even more worrying for the UK is that all the latest National Insurance and income tax increases may well prompt a new brain drain of some of our brightest young scientists and entrepreneurs, similar to the exodus of talent seen under the Labour government of the 1970s. Former Labour leader John Smith and Mo Mowlam, who spearheaded the "prawn cocktail offensive" to persuade everyone, especially those in the City, that they were no longer against wealth creation, must be spinning in their graves.

Suggested Topics
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
world cup 2014
Popes current and former won't be watching the football together
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
Mick Jagger performing at Glastonbury
ebookA unique anthology of reporting and analysis of a crucial period of history
Germany's Andre Greipel crosses the finish line to win the sixth stage of the Tour de France cycling race over 194 kilometers (120.5 miles) with start in Arras and finish in Reims, France
tour de franceGerman champion achieves sixth Tour stage win in Reims
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Chocolat author Joanne Harris has spoken about the financial struggles most authors face
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

Grindr founder Joel Simkhai: 'I've found love on my dating app'

Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

Is it time to ditch autocorrect?

Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
10 best girls' summer dresses

Frock chick: 10 best girls' summer dresses

Get them ready for the holidays with these cool and pretty options 
Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

Westminster’s dark secret

Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

A History of the First World War in 100 Moments

Dulce et decorum est: a life cut short for a poet whose work achieved immortality
Google tells popular music website to censor album cover art in 'sexually explicit content' ban

Naked censorship?

The strange case of Google, the music website and the nudity take-down requests
Howzat! 8 best cricket bats

Howzat! 8 best cricket bats

As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

David Luiz falls from leader figure to symbol of national humiliation

Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil