Tuesday, 8 February 2011

The Big Bonus Society

Can't help thinking that the raised banking levy is the sort of political gesture that seems smart only if you're thinking primarily about your opponent's position & likely response (I believe Labour supporters may have been here before on Budget day...)

First up, I don't think it is likely to get anywhere near reducing the public's anger towards the banks, because we all know that bonus awards are imminent. Choosing to raise money via a levy on banks rather than taxing bonuses I suspect will be seen as a cop out, and no doubt will be spun that way too. So a day of coalition 'bank-bashing' will likely be overwritten shortly with bonus announcements. (PS I assume the figures floated for Bob Diamond etc are deliberately inflated in order that they can ultimately be undercut to look like restraint is being exercised - see Goldmans last year for a great example of 'bonus management').

Secondly, there is the not unimportant (to Gideon) banker constituency to consider is all this. They can't be pleased with him pulling this out of the hat at the last minute, especially as it means the existing levy needs to be recalculated, so quite a rise in the next quarter's tax bill. Though I have no sympathy with their position, if I were a banker now I'd be wondering why I should bother playing ball over Project Merlin.

The counterpoint to all this is that Osborne gets to deflect attacks from Ed Balls for a bit. I'm not sure that the short-term benefits are sufficient to outweigh likely long-term effects.

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