Michael Spencer: Britain needs these big payouts

High pay is good for Britain. In fact it is more than good, it is vital. The simple fact is that the top 1 per cent of earners take home 13 per cent of all the salaries, but pay 28 per cent of all the income tax.

For every £1m bonus paid in the City, the taxman benefits to the tune of £658,000 through national insurance and income tax payments – almost two thirds of it. That makes billions available to pay for schools, hospitals, policemen, the armed forces and welfare. The City of London is the nation's highest export earner, and contributes £63bn in taxes. The most vulnerable in society depend on the continuing success of the better off – as it should be.

As a result, the current witch hunt against banks and compensation threatens to do tremendous damage to our country. Many of the highest paid in the City were not born here but have chosen to live and work here and pay UK tax. Even those who are British tend to be highly mobile, with skills that would make them welcome in any major capital market centre in the world. Already dozens, if not hundreds of senior bankers and investment professionals have left the City and relocated to Geneva, Hong Kong, New York, Dubai or many other aspiring cities.

Bob Diamond is a widely respected CEO in international banking circles, an American citizen who is leading Barclays effectively. His annual remuneration, detailed yesterday in Barclays' annual report, is heavily performance-driven and has been fixed after enormous process by Barclays' remuneration committee and in consultation with its shareholders, the banks owners.

If, for any reason of politically-motivated pressure or public hysteria, he was bullied out of his earned and contracted compensation it would be a damaging day indeed for the City and Britain as a whole. What signal would it send to financial experts around the world about doing business here?

The debate over executive compensation started with concerns about so-called "payments for failure". Like any businessman and investor I agree wholeheartedly with that. Businessmen and bankers who fail to deliver, lose money or watch while their organisation's profits dwindle should pay with their jobs. Bonuses should only be given to people who genuinely create value.

If we allow the politics of envy to determine pay in the private sector, it will not only drive people away from our shores but it will also dampen ambition and the will to work amongst those who remain. Why go that extra mile if you are not going to be rewarded for it? Why succeed when all you will earn is loathing?

In simple terms, do we really want to push international banks and financial services companies out of London? Do we want to kill the golden goose?

The writer is chief executive of ICAP, the interdealer broker