Leading article: The official feebleness continues

Share
Related Topics

Sometimes distasteful measures need to be taken for the wider good. The 2008 bailout of the banks was one such measure. It was necessary to rescue the banks in order to avert an economic catastrophe. Ministers were faced with a choice between propping up HBOS and the Royal Bank of Scotland and witnessing a breakdown of the payments system that makes economic life in Britain possible.

But nothing can justify what has happened in the banking sector since then. Bankers took this unprecedented public assistance (along with government guarantees that drove down the cost of their funding) and used it to pay huge bonuses to their employees. In the midst of the worst global downturn since the 1930s, which the banks had played a leading part in bringing about through their recklessness and incompetence, thousands of already wealthy investment bankers enjoyed record payouts.

The blame for this scandal lies with the previous Government. Around £1trillion in public support was channelled to the banking sector without any meaningful reform demanded in return. Few of the executives who led their firms to the brink of bankruptcy were forced to resign. There was no enforced structural overhaul to make our financial system safer. Ministers imposed a 50 per cent tax on bank bonus pots to discourage payouts. But the banks chose to pay the bonuses anyway.

And so far the new coalition Government has been no improvement. The Treasury minister, Mark Hoban, sprayed around hopelessly conflicting messages at the British Bankers Association conference this week. On the one hand, Mr Hoban demanded "restraint" from bankers on their remuneration and talked of a Financial Activities Tax on bank profits and remuneration. But on the other hand, he confirmed that no new taxation will be imposed without international co-ordination. And Mr Hoban is also "consulting" with the banks on how the meagre bank balance sheet levy announced in the emergency Budget will be imposed.

Meanwhile, the question of whether to split up retail and investment banking – the kind of reform essential to begin tackling the problem of banks that are "too-big-to-fail" – has been farmed out by the Government for consideration by a committee which will not report back until next year. No wonder the banks feel free to reassert themselves once more. No wonder the spurious old arguments that new regulation and curbs on pay will drive banking "talent" abroad are beginning to be heard again.

Mr Hoban said of the banks this week that "their fate is in their hands". But if the past two years have taught us anything it is that the banking sector is fundamentally incapable of reforming itself on pay or anything else. Change will have to be imposed from outside. So this is, at heart, a challenge for the Government. In the run-up to the general election the Conservatives and the Liberal Democrats aligned themselves squarely with public anger about the behaviour of the banks. Yet we have seen scant evidence so far of them living up to their promises to reform finance. All Mr Hoban has given us is a continuation of the feebleness of the previous Government.

The political risks of this supine attitude should be plain enough. The Government has chosen a prescription of severe (and economically risky) austerity for this country over the coming years. The social consequences of those choices will soon begin to bite. If bankers feel under siege now over their remuneration practices, they should wait until the mass public sector lay-offs begin. And if the Government expects that it will not be severely punished by the public if it fails to bring these institutions into line, it is making a blunder as profound as any made by the banks at the height of the credit boom.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Bookkeeper / Office Co-ordinator

£9 per hour: Recruitment Genius: This role is based within a small family run ...

Recruitment Genius: Designer - Print & Digital

£28000 - £32000 per annum: Recruitment Genius: This Design and marketing agenc...

Recruitment Genius: Quantity Surveyor

£46000 per annum: Recruitment Genius: This property investment firm are lookin...

Recruitment Genius: Telesales / Telemarketing Executive - OTE £30k / £35k plus

£18000 - £35000 per annum: Recruitment Genius: This company specialises provid...

Day In a Page

Read Next
 

Errors & Omissions: When is a baroness not a baroness? Titles still cause confusion

Guy Keleny
 

CPAC 2015: What I learnt from the US — and what the US could learn from Ukip

Nigel Farage
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower