TOP BANKERS are expected to meet today with British chancellor of the exchequer George Osborne and Liberal Democrat business secretary Vince Cable over the size of City bonuses.
The Liberal Democrats are demanding that higher taxes could be imposed on them unless bankers voluntarily cut the size of the payments.
Mr Cable yesterday demanded “real restraint” from them, saying: “We will be meeting them and we will be discussing the bonus issue, as well as the lending issue, as well as [pay] disclosure . . . They do understand that something has to happen. We can’t go through the winter season of bonuses without real restraint and social responsibility.” However, there are clear divisions between the Conservatives and the Liberal Democrats on the issue, with the Conservatives concerned about a flight of senior bankers to other international financial centres if the British government acts unilaterally, while the Liberal Democrats – bruised in the wake of the tuition fees controversy – insist on cuts.
The City bonuses, which topped £7 billion this year, are expected to be lower in any event because of lower profits, though bankers, who had been trying to reach an agreement with the government before the latest declarations by the junior coalition partners, complain that they have been no indication yet on an acceptable level of payments.
The British government has already introduced a £2.5 billion bank levy, but senior ministers have repeatedly hinted that tougher action could be taken.
On Friday, prime minister David Cameron said the public found City bonuses ‘galling’ given the size of the public support most of the banks have needed in recent years.
Pressed on the degree of unity existing within the coalition on the issue, Mr Cable said he, the chancellor and the prime minister are “very much working together on this”, though Mr Cameron is privately understood to be more accepting of the need for the Liberal Democrats to be able to claim credit for a City clampdown.
“There is a recognition that we have to deal with this, there is a coalition agreement. It is absolutely clear and explicit that we have to take robust action on unacceptable bonuses. The whole coalition are fully signed up to that,” Mr Cable declared, following up on tough rhetoric delivered last week by the Liberal Democrat leader and deputy prime minister, Mr Nick Clegg.
On Friday, the UK Financial Services Authority (FSA) ruled that 50 per cent of the bonuses should be in shares, rather than cash, while the handover of half of the shares should be deferred for three years. In addition, the bonuses would be reclaimable later if it is found out that they had been earned through the taking of unacceptable risks.
The FSA ruling means that many bankers could pay more in tax than they receive in cash because tax would be levied on the current value of the full payout. Hundreds of senior bankers, annoyed by the 50 per cent top tax rate and bonus curbs, have already quit London, with some industry figures warning that London’s place as an international financial centre is being put at risk.
