Cap to bankers salary Post Reply

[nvmof3]

@schoolgatesmum "so where is this tax that bankers contributed?" - who do you think pays for the nhs. The top 1% of earners in this country (prob mostly bankers as entrepreneurs usually can get around taxes) pay 27.7% of our taxes. More than enough to cover the nhs cost.

[wasateacher]

nvmof3: the argument about what proportion of taxes is contributed by the wealthy is double edged. If they contribute that high a proportion, how on earth much are they being paid - we only know about some. Equally it could be argued that, by lowering their income and raising the salaries of the millions at the lower end, you can achieve the same tax benefit for the country, whilst at the same time having a more equal society - some countries have found this to be extremely beneficial to the happiness of all, including the richer elements.

At a time when people at the median or below are under increasing pressure to accept lower salaries and some elements of the public sector are having their salaries effectively reduced, we are not "all in it together".

[Mrs Contractor Mum]

Where are they all going to go? Where is this wonderful alternative location that bankers are suddenly going to pack up and head for? Where are one million bankers suddenly going to up sticks and head elsewhere and take their mega bonuses with them? Europe including Switzerland is instigating this so that's out, the Middle East, Russia, China -I can just imagine the mass exodus of bankers families agreeing to that! The US, NZ, Australia and Canada all have their own tax regimes and regulations that bankers will have to abide by.

Plus, the UK won't ratify the EU decision so people can stop panicking!

Also, its not a cap to bankers salary, its a cap on their bonuses which is better for the tax authorities as instead of lump sums of tax payable from bonuses which can't be predicted being paid in to the revenue coffers once a year, salaries most likely will go up which means a regular monthly and predictable stream of tax revenue in to the government coffers which will allow government to determine its spending plans better (one hopes!)

[nvmof3]

@wasateacher: I totally agree that in a utopian society we would lower top end salaries and increase lower end salaries. But this is the real world. The investment banks are not going to pay bonuses or salaries to millions of people abroad who don't work for them. So who would pay for your proposed scheme? The tax payer? But how will the tax payer afford it if the top end people aren't propping up the tax income for the country?

[nvmof3]

@Mrs Contractor Mum: I personally know people who have moved to Switzerland, Dubai, Monaco, Singapore and South Africa in the last 12 months as their effective tax rate in the UK was over 60%

[nvmof3]

@schoolgatesmum - just saw your earlier post that said if the banks didn't pay bonuses, they would pay corporation tax on their profits instead. Firstly corporation tax is much lower than income tax (24% vs 50%) and all businesses "manage" their P&L statements so as to offset liabilities against their profits so that they don't post as much profit and thereby reduce their tax liability. Furthermore, these are mainly foreign banks so they book the profits in the place with the lowest corporation tax (not UK). If they pay their profits out in bonuses 50% goes straight to the inland revenue as bankers working in the UK are taxed on bonuses and salaries at source through PAYE.

[Mrs Contractor Mum]

But personally knowing 10, 20 even 100 people as opposed to one million people and the full UK banking sector (as the centre of the financial sector for Europe) are completely different.

I know people who have moved to Canada, Australia, NZ, Oman, Dubai and the US in a variety of high earning sectors, not just bankers (I don't actually know many bankers). I too have been offered fantastic jobs in Switzerland, France, Germany, Canada and Dubai.

I also know people who have moved here for high earning, bonus busting jobs from Australia, NZ, China, India, the States, France etc.

That is the joy of migration that people with specialist skill sets will be in demand globally, but I haven't seen the evidence of wholesale removal of the banking sector from London in the same way for instance the whole sale removal of the telephone services industry from the UK when that was outsourced. Am I wrong or has their been some macro shift of the financial/ banking industry that nobody mentioned?

Has Monaco, Luxembourg or Switzerland even got the capacity to welcome one million bankers plus their families in to their infrastructure?

[schoolgatesmum]

So here's an article about how excessive pay is not a good thing. Would be interested in people's thoughts.

http://www.blog.rippedoffbritons.com/20 ... s.html?m=1

[wasateacher]

On Radio 4 this morning the chief executive of Standard Life say that "we need to get back to a savings culture". So, finally, one of these people paid so much money has realised that the debt culture they have been encouraging is the wrong one. Aren't these the same people who were sending me letters offering me big loans without knowing my circumstances?

I didn't get paid even 1/20th of their salaries (let alone bonuses) and I have been saying for the last 20 years that lending had got out of hand - can I have my bonus, please? I'd even like a bit of interest paid on my bank balance.

[Scottov]

So here's an article about how excessive pay is not a good thing. Would be interested in people's thoughts.

http://www.blog.rippedoffbritons.com/20 ... s.html?m=1

to be fair, not sure a "ranty polemic" actually counts as an article.

[dinosaur]

schoolgatesmum, the "article" you are referring to is obviously satirical.

Whilst I can understand that it is desperately unfair to think of bankers getting paid bonuses at all while the rest of us are losing our jobs and struggling following the financial crisis - I do find it worrying that some of the parents on this particular chat are prepared to make such venomous comments about anyone who works in the banking sector as a whole.

As a parent, this thread at times makes for uncomfortable reading. We all want our children to be free of prejudice and exposed to other children of a variety of social backgrounds.

Also, however unfair we might feel that this situation is, we can't ignore the facts:
(1) The banks were bailed out, not as a favour, but because if they hadn't been bailed out the consequences for our economy would have been unthinkable.
(2) The banks have since repaid the money that was borrowed, and I believe that the government may have made a profit on the stock purchase part of the bailout, as now the share prices have recovered. Please correct if this is not true.
(3) If overseas banks do not pay British staff in bonuses, then the UK will not have the associated tax revenue (50%) of the bonus.
(4) High earners in any industry do contribute to the economy, not only in taxes, but in their spending. Some do have off-shore savings to avoid putting money back into the UK economy - and those are the people that the government should be trying to reign in.

So while it does seem desperately unfair that some are getting nosebleed pay packets at this time of austerity, and the media would like us to believe that is because the government is taking care of "buddies" in the industry. The truth is, that it boils down to numbers. Like it or not, we need the tax revenues from these pay checks, otherwise the situation could get worse.

[nvmof3]

Well put dinosaur

[Mrs Contractor Mum]

I personally don't have an issue with bankers bonuses etc and I don't believe anywhere in my comments I have said that. As I stated, a bankers driver is to make money and as such, that is the way to reward them.
I believe people's concerns are as follows:
Should bonuses (for any company) be paid out when a company is reporting a loss I.e Lloyds TSB?
Why should the UK economy need to feel blackmailed by one sector threatening to abandon these shores and the loss of perceived revenue? It's exactly what the unions threatened the country in the 70's and after a period of downturn, the economy recovered and continued. It's a remarkable adaptability of this country to recover its economic storms.
People feel particularly agrieved at 'bankers' as a whole when there are other businesses trying to make a success, employ staff and contribute to the economy that are unable to get even small investment amounts from their banks.
Many people question whether the decision was right to bail out failing banks - in a truly capitalist model we should have let them fail and let the industry correct itself accordingly. After all, we never saw the government step in to bail out many of the massive high street stores that have disappeared.
People cannot see where they have got their return on investment for that bailout. All they see is luxury brands doing well which they don't purchase, house prices anywhere in the M25 going up, comodities going up as basic goods are traded for profit, their high streets being decimated and services that were once available to all being removed.
Now, this is not all the bankers fault and yes we are all grateful for the taxpayers out there but the financial crash of 2008 by these global financial centres is still being felt in the pockets of many today who had no control over that crisis hence the feeling of unfairness to bankers.
I'm sure you do a great job for your bank and plough lots of money back into the economy.

[AbbevilleMummy]

The reason the high street stores were not bailed out is because everyone didn't have their life-savings invested in them.

If 75% of the banks in this country would have been left to fold, it would not simply have been a case of the banking industry 'correcting itself'.

People would have lost their savings. Pension funds would have been wiped out. Loans (including mortgages) would have been called up.

You, I, everyone, would have had to suffer far greater financial consequences.

[dinosaur]

Mrs Contractor Mum, you make a very good point, that high earners are most likely to spend their disposable income on driving up property prices, or buying luxury goods which is no good for small business.

I think what the government needs to organise is some kind of public service announcement to encourage everyone (especially those with more money to spend) to support small businesses more. We also need to mobilise against companies which offer tax shelters for high earners. Whilst many of these structures are legal, they are certainly not ethical, especially not now when the UK needs every tax pound it can get. The government is trying to address the loopholes, but it sounds like it is very complicated and may take a long time to sort out. If there were campaigns against these unethical practices (much like the Starbucks situation was highlighted), perhaps that would get more money into the coffers.

Reading through this thread, many are talking about bonus payments as if they are coming out of your own pocket. These are private companies with shareholders who can vote how profits are distributed. As they are multinational companies, they can choose to pay employees elsewhere if they can't pay the higher bonuses in the UK. We shouldn't think of it as being "blackmailed" by the financial industry. They are not threatening to leave - they are answerable to their shareholders, and so if they are not able to pay what they believe they have to in order to retain expertise (and I think it is a whole other debate as to whether they indeed do have to pay these figures to keep the right people), they will have to restructure their operations to run the business and that may mean less money coming to the UK govt. in the form of income tax.

I actually don't work for a bank, but I studied Economics and have worked with various banks soliciting funding for public projects including providing mentor programs and apprenticeship schemes for Inner City teenagers from low-income families. Aside from the taxes paid, the financial services industry actually contributes a lot to the community in this way, as well as donating to charities, funding public projects (e.g the Olympics). They are not all bad or unethical - honestly!