We reported yesterday that David Cameron had joined Nick Clegg in warning of new action against banks which did not show bonus restraint.
David Cameron warned banks on Friday that they faced higher taxes if they continued to pay “unjustified” bonuses, adding to a growing political and regulatory pressure on the City before the industry’s bonus season early next year.The prime minister, speaking after a European Union summit in Brussels, said that the public found such payments “galling”, adding: “Every decision the banks make like that makes it more difficult to keep a tax regime that they might favour.” Read more
This may come as a surprise to those who read Nick Clegg’s comments today about the need to crack down on bankers’ bonuses. (And David Cameron’s veiled threats today of a higher tax on banks that don’t comply).
Yet last week coalition MEPs were sent a document on how Britain has been seeking to water down a EU rule intended to restrict bonuses in the future.
The EU last Friday laid out its new rules meaning that no senior banker should get more than 20 per cent of their bonus in cash upfront.
The EU wants bankers to defer half of their bonus, of which at least 60 per cent will have to be paid in shares or other financial instruments.
The British (via FSA policy set out in the summer) had argued that banks should be allowed to give all of the cash element upfront while mostly deferring the shares element. That would have meant bankers getting 40 per cent of their bonus in cash upfront – double what the EU wanted.
The document argued that Britain “led the way” in implementing G20 principles and that the EU should not go any further.
It was an entirely valid point of view to take; but there is a distinct irony in the idea of the British government proposing weaker restrictions than the rest of the EU while posing as banker-bashers.
The document is a bit long but here you go:
CEBS Guidance on Remuneration Provisions in the Capital Requirements Directive
- There are two issues at play in the various press reports covering the CEBS guidance on the CRD3 remuneration provisions: (i) the current interpretation of the upfront cash limit provisions and the tax implications of retention conditions; and (ii) the exaggeration of provisions that relate to state assisted banks and fixed/variable pay ratios.
Upfront Cash and Retention Conditions
- The provisions in CRD3 imply a cap on the maximum proportion of a bonus that can be paid in cash upfront.
- These provisions are open to interpretation and throughout the negotiation and implementation of the Directive, we have supported an interpretation that limits upfront cash to 40% of a total bonus. This interpretation is consistent with the G20 agreed FSB Standards.
- The European Parliament has taken a different view and interpret the provisions as imposing a 20% cap. This will go beyond the globally agreed position and will have a significant impact on the European financial services sector’s international competitiveness.
My colleague Fiona Harvey revealed in October that plans for a green investment bank could be watered down under pressure from the Treasury.
A commission set up by George Osborne to look at the issue – led by Bob Wigley, the former European head of Merrill Lynch – had called for the bank to have powers to raise finance from the private sector, for instance by issuing bonds, green Isas, raising loans and other measures. But this was opposed by Treasury officials, according to Fiona:
They would prefer the bank to operate as a simpler fund, dispensing grants and loans in conjunction with the private sector but without the powers to generate its own self-sustaining financing mechanisms.
And in today’s Guardian Chris Huhne confirms that the bank will start life in the more limited form.
It was a relief to Ed Miliband that his defeated elder brother took a step back from frontline politics after losing the Labour leadership race in September. But David Miliband has remained, like Banquo at the feast, a visible presence on the backbenches from where he could – at some theoretical later date – still return to wreak revenge.
A survey in yesterday’s Sunday Times makes troubling reading for Ed. It suggests that 12 per cent of the public think Ed would be the better Labour leader, far below the 37 per cent for David. That is a very similar finding to surveys published during the summer.
Meanwhile pollsters found that 40 per cent of the public do not rate Ed Miliband’s leadership skills, compared to 27 per cent who do.
Back then Ed’s allies shrugged off those polls. Within a few months, they argued, people would have seen Ed in action and would have warmed to him. (David’s position as foreign secretary had given him a higher profile).
That shift in public opinion does not seem to have happened, however, although Labour as a party is now consistently ahead in the polls. The unknown unknown is where Labour would be polling if it had a more charismatic and decisive leader.
David is keeping his powder dry in terms of any remaining Labour ambitions. This morning he was quoted in his local newspaper saying:
“I’ve got to admit I wish the leadership campaign had gone differently, but who knows what will happen in the future?…I think Ed’s done well. It’s a very difficult job being the leader of the
The Liberal Democrat position on student fees has been bungled in countless ways. But there must be one error of judgement that is more important than the rest — call it the original sin. Here are my top three contenders:
1. Nick Clegg ducking the chance to reform the policy in 2009
Most senior Lib Dems knew they had a policy to scrap tuition fees that was unrealistic and unaffordable. Secret work was done to come up with an alternative that maintained a critical stance but cost a lot less. The result was a more progressive form of tuition fees — something like the proposals today. When this was put to the Lib Dem MPs and the federal policy group, it went down terribly. Some MPs thought it was futile to attempt to scrap a vote-winning policy when any change would be blocked by the Lib Dem conference. Apparently one of the most persuasive arguments was that the Lib Dems were not going to win the election, so why do the responsible thing? Clegg eventually ducked the confrontation with his party at the 2009 annual conference. How he must be regretting it now. Read more
Margaret Thatcher always had a soft spot for David Young, the businessman who brought some “can do” spirit to the old Department of Trade and Industry.
Baroness Thatcher said of Lord Young: “Other people brought me problems. David brought me solutions.” Read more
I am trying to take my eyes off the Mail’s scoop on Tony Blair giving a £50,000 lecture to toilet roll and disinfectant manufacturers – and instead concentrate on the big issue of the day. That is, Iain Duncan Smith’s plan to make the workless do manual labour in return for their dole money.
It throws up plenty of questions. Namely: Read more
Phil Woolas has just lost an historic court case in which he was accused of making false claims before the general election. There will now be a re-election for his seat, which he won in May with a majority of just 103 votes.
The case was the first of its kind for a century.
As the FT reported last month:
Phil Woolas was re-elected by a slim majority in Oldham east and Saddleworth, beating the Liberal Democrat candidate Elwyn Watkins. Mr Watkins claims Mr Woolas made false statements about him in an attempt to influence the result.
The court heard that Mr Woolas’s campaign team aimed to “galvanise the white Sun vote” against Mr Watkins, claiming Mr Watkins had tried to “woo” and “pander” to Muslim fanatics and militants, the court was told.
Now the Labour MP has lost the case it will set a curious precedent for British elections, where mud-slinging is widespread and many candidates are thrifty with the actualité.
Without wanting to trivialise a no doubt serious case, where does Woolas’s defeat leave Britain’s political parties in future elections? Will their leaders have to muzzle all candidates for fear of twisting the truth?
Take this general election, where the Lib Dems made a fervent promise to protect tuition fees and prevent them from rising higher. It was a promise worth its weight in hot air. Should some of their MPs face fresh elections? Read more
The letter published today by the Treasury – from BAE Systems to David Cameron – is a bombshell that explains in stark outline why ministers pressed ahead with an order for two aircraft carriers despite fiscal constraints.
Alex revealed a month ago that the contract was written in such a way that cancelling one of the ships would still leave taxpayers with a similar bill to proceeding with both. Read more
In opposition one of Vince Cable’s favourite pastimes was taunting Barclays and Bob Diamond, their investment banking chief. Read more
The axe is hovering over the £2.7bn winter fuel payments. But cutting this bung to the over-60s is harder than it seems. Even if Osborne decided, say, to pay out £600m less than Gordon Brown, it would make no contribution at all to cutting the deficit.
How so? The Labour wheeze was to top-off the winter fuel payment with a one-off bonus each year, which was presented as a Gordon’s munificent Christmas gift. Last year it amounted to £600m. The Budget books doesn’t expect this bonus to be repeated, so the future winter fuel payments are only scored as £2.1bn in 2010, not the £2.7bn actually spent in 2009.
The dilemma for Osborne is:
– Find an extra £600m from savings or increasing debt to pay out as much as Brown in 2009, or
– Take the political hit from withdrawing £50 off all pensioners (and £100 off all those over 80), without any upside in terms of deficit reduction.