Why we struggle over bonuses

Newspaper commentators and opinion-formers are largely united in their astonishment that massive bank bonuses in the state-owned banks, for state-owned employees, are likely to go ahead.  Maybe there will be some kind of eleventh hour agreemenr, but it seems unlikely.

So it is worth spelling out the reason the government seems prepared to take such enormous flak over this.  It is that the Treasury is determined to sell their holding in the banks as soon as possible, and their ability to retain top staff depends on bonuses.  So any shift in the government's position needs to tackle that point head on.

Of course, to that extent: the Treasury is right.  But it would be really staggering if they were to sell off the nations stakes in these banks, and consider it a good job done if everything was exactly the same as before.

This isn't about risk and regulation, which is being dealt with separately.  It is about whether they are meeting the coalition agreement promise to create a diverse banking system.  We have to wait another year before Vince Cable's commission reports on splitting up the banks.  It would be absolutely extraordinary if we got back our money, but were still left with a dysfunctional and monpolistic banking system that doesn't do its job of supporting local enterprise.

So it is time we asked the Treasury what banks are for.  Would we as a nation really be relieved to get our money back but to find everything just as dysfunctional as before?

Set a maximum percentage of property loans by the banks

It isn’t ever quite clear, just from the newspapers, just where the delicate negotiations between the government and the banks have reached on bonuses. It looks as though there is some kind of deal emerging that would nod through outrageous bonuses in return for an agreement to lend more and better to small businesses.


Nick Clegg hinted at a distinction between the private banks, which will qualify for this deal, and the failed banks in public ownership – where bonuses will be quashed, though even that seems to be in doubt at the moment.

I agree that RBS and Lloyds are cases where the outrage is particularly intense, and rightly so, but I think we urgently need to ask the following questions – and to do so before we embrace any deal between the banks and a Lib Dem administration:

1. Will the coalition veto the £2.5m bonus which is pencilled in for Stephen Hester, boss of loss-making RBS?

2. Should we really accept an agreement with the big banks to improve their ability to lend locally, when all the evidence is that they no longer have the local infrastructure capable of doing so? Should we really agree when any blip in local lending would be just that, a blip brought on by intense and temporary political pressure?

3. In what other profession, certainly any other state-run service, will it be acceptable for people to earn inflationary six or seven figure bonuses just for doing the job they are supposed to be doing – lending to local enterprise?

The coalition agreement promises to sort out bank bonuses. Any failure to do so, just when other public employees doing more useful and important work are getting the push, will be a huge and damaging problem for us.

And it should be. Why should we tolerate, as a society, this spectacular failure by the banks to play a useful role in the enterprise economy – when 70 per cent of what passes for local lending, and has done for the past four years, is actually lending on property, fuelling the next asset bubble.

What I suggest is that any agreement with the banks on lending – if such an agreement is to mean anything – must also specify a minimum percentage of those loans which are not on property deals.  To lend more on property, they will then have to lend more to conventional small business.

Civilised values and the Yeates invesitigation

I was hauled over by the police about 18 months ago under anti-terrorism legislation, largely because I was looking a little unusual. I was wearing shorts with a briefcase, one of the privileges for those of us who are self-employed on a hot day.

It only took 20 minutes or so and they were perfectly nice about it, but it reminded me of the vulnerability of people who can be portrayed as being very slightly peculiar, or even mildly different – especially when things get serious, as they did in the Joanna Yeates investigation in Bristol over the New Year.

I thought back to that incident when the landlord, Christopher Jefferies, was arrested. As the days went by and the police time limit was continuously extended – while he was vilified day by day by the tabloid press – I began to obsess about it, constantly tuning in to hear whether he had been released, as he was inevitably going to be.

You may not know somebody well by sitting in their classroom for two years, but you learn some things about them. It seemed extraordinarily unlikely that he could have been involved in anything like that.

We haven’t even spoken for nearly three decades, but the truth is that I owe a huge debt to him, and not just him but to the whole English department at Clifton College, which in the 1970s became a kind of Rolls-Royce operation of huge ambition, civilisation and generosity, and from which I learned a very great deal.

As the days wore on, and he remained in custody, and the column inches grew, I came believe that those civilised values were under attack, maybe not so much by the police – I don’t know what was going on in their investigation – but by the rest of society, and by my own profession,

Yet only a handful of what must have been hundreds, if not thousands, of pupils spoke to the press. The rest must have been aware, as I was, that almost anything we said in his defence could fuel the flames. I am hugely relieved that he was released, if only because the investigation could then continue in a more fruitful direction.

But just for a moment, I felt I glimpsed a miserably intolerant and illiberal aspect of the nation – which I had naively ignored before.  It makes me realise a little more clearly that, because I see the world differently from the prevailing culture, those parts of it constructed by a monopolistic media, then perhaps I am also at risk.  More than just being questioned occasionally because I'm dressed unconventionally.

I was prompted to write this by the report in the Daily Mirror today that Mr Jefferies has been told by police that it isn’t safe for him to be seen in public. Every generation has its abuses which it seems to be blind to – we seem to accept, with merely a quibble, that loss-making banks should paid inflationary bonuses while corroding the economy.

We also, apparently, accept that some of the most civilised people in society will have to hide themselves away because of a police and tabloid cock-up, and from fear of the mob.  I find that frightening.