KiteBlue

Say no to bank bonuses!

Britain's bankers are planning to reward themselves with billions in bonuses out of their bail-out funds. Should they be allowed to get away with this? Jyoti Banerjee says most emphatically not.

Let me say this as plainly as I can: Britain’s bailed-out bankers should not get a bonus. 

It must be a morally-corrosive atmosphere in Britain’s banks if their senior management are prepared to pay out bonuses in the billions of pounds a few short weeks after these banks have been bailed out by the public purse.  Their argument is two-fold – they need to reward those who did a good job, and they need to hang on to the talent needed to rebuild Britain’s banks.

Their PR message seems to be getting across to some quarters since even Chancellor Alastair Darling, arguably the closest thing we have to an owner of the near-nationalised banks, is parroting the same worn spiel. 

Both arguments are a nonsense. 

Banks have better things to do with their money...

... than to invest in the growth plans of medium organisations. Jyoti Banerjee asks if the investment preferences shown by banks are really the results of market imperfections that need to be dealt with by policy-makers.

A few months ago, I took part in a meeting at HM Treasury organised by M Institute where a few leaders of medium organisations were invited to present their stories: how their companies became medium-sized, and the challenges they had to overcome and still have to deal with. A recurring theme for these business leaders was the way in which problems relating to access to capital impair their growth performance.

Should government be doing something about it? Clearly, the Treasury officials we spoke to did not think so as there is no evidence in their eyes of market failure. Without evidence-based market failure, how can the government generate its favoured route of evidence-based policies? (One wag recently commented that it is not evidence-based policy-making at work here – simply, policy-based evidence-making).