The City cannot cry wolf again
The Guardian reports today:
City sources believe that the biggest employers will absorb the cost of the tax rather than cut the size of the bonus pools they amass throughout the year. This will mean that while proceeds from the tax could top £2bn – more than four times the £550m estimated by the chancellor in the pre-budget report.
Earlier in the week we also learned that city rents are set to soar because of demand for office space from the finance sector.
Yet at the time of the pre-budget report we were continually told that the Chancellor’s modest tax on bonuses would drive finance away from the UK. Indeed we have been subject to this lecture every time the tiniest tax increase or increase in regulation is proposed.
But their bluff has now been called. They cannot cry wolf again.
The ease with which the costs of the bonus tax as been absorbed show that we could do more to tax finance so that it makes a proper contribution to closing the deficit.
This bonus tax has been imitated elsewhere. If the Chancellor was brave enough to introduce a domestic transaction tax in the budget, then this could also be the start of something much bigger.
We should ask exactly where the money for paying bonuses and this extra tax is coming from. The answer is almost certainly the shareholders – many of whom are ordinary savers in pensions and other savings products.
But top bank managements ignore their owners. Nor have investors not done enough to act as responsible owners.
Perhaps this will change now. The Association of British Insurers is talking tough on remuneration today:
Britain’s 350 biggest companies are being urged by influential City investors to avoid implementing pay schemes that help their top executives avoid tax and to stop offering special pay deals to retain bosses.
I hope this makes a difference, but boardroom pay is now well beyond rational.