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Bankers get away with it – and Clegg says the coalition is working too well

Posted on 12 January 2011 | 8:01am

Nick Clegg talked the other day of how the bankers are living in a ‘parallel universe’ if they think they can get away with massive bonuses.

Now, as the bankers prepare to get away with massive bonuses, it is Mr Clegg who appears to be living in a parallel universe when he says ‘Don’t forget the dog that no longer barks is the accusation that coalition government doesn’t work. If anything the accusation is that we are working too effectively.’

Too effectively! There’s modest … but how that relates to their handling of the bonuses issue is not entirely clear. But let us put the raising of the white flag to the bankers as anoher issue on which much political gain was made when it had to be, and now nothing is being done. Promise made. Promise broken.

And how revealing was it when Bob Diamond of Barclays revealed to the Treasury select committee yesterday the number of times David Cameron and George Osborne had asked him to show pay restraint … a big fat zero. So for all the tough public talk by Osborne in particular, it was all sweetness and light behind closed doors, a signal the bankers have clearly taken with relish.

Now Clegg says he has to show more distance from the Tories. This looks to me like a tactic in search of a strategy. And when it comes to the issue of control orders, and the unseemly way Cameron is allowing the issue to be carved up to find something poor Nick can boast of as a concession, it is a tactic in search of a strategy which plays fast and loose with national security.

A word finally on Eric Illsley, who would appear to be following former colleague David Chaytor to jail having admitted expenses fraud.

They have been humiliated. Their reputations have been shredded. As we saw with Mr Illsley yesterday, they are being shunned by colleagues. Their lives, through their own actions, are in ruins. That is a big punishment to take already.

They both did wrong and deserve to be punished. But at a time Kenneth Clarke is rightly trying to keep fewer people in prison, and see more sentences served in the community, is jail really the answer?

  • Watoop

    And speaking of jail – 32 months for a first offence, idiotic heat of the moment act with a fire extinguisher. Stupid and dangerous but 32 months?

    • Chris lancashire

      I’m sorry, I disagree – if luck hadn’t played its part this stupid man could be looking at life for murder or at least manslaughter. This type of behaviour has to be seen in that context.

  • Chris lancashire

    With regard to Eric Illsley, jail is not the answer; a long period of community service would suffice – as you say his life will never cover from the petty theft he perpetrated. Mind you, it would be rather nice if he showed some humility and regret rather than clinging onto his seat. I suppose those two qualities are rather lacking in the political class in general.

  • Watoop

    And as for the Coalition being “too effective”. Erm:
    School building programme mess
    Rushed defence review
    Child benefit removal
    Quango cull “botched” (Bernard Jenkin)
    RDA abolition “Maoist” and “Chaotic” (Vince Cable)
    LEP fiasco
    Omission of any meaningful green initiatives
    Flip-flopping on tuition fees
    Bookstart u-turn
    Abolition of Audit Commission on ministerial whim
    Asbence of any economic growth plan
    Unwanted NHS reforms (specifically ruled out pre-election)
    Banker bonus climbdown

    All very “effective” and all in less than 9 months.The most inept Government in my lifetime – and that’s not even criticising their ideology.

  • Sarah Dodds

    My poor youngest brother is Lib Dem in despair, (which I admit to taking a loving and sisterly delight in!!!) He said to me the other day, during one of my many attmpts to ease his conversion to Labour, “I am still a Liberal Democrat. And if my party aren’t going to be any more, then I have a big problem.”
    The barking dogs that Clegg should most worry about are the ones he is meant to master of. I don’t think they will easily forgive betrayel.

    • Sarah-dodds

      ****betrayal – sodding teachers who can’t spell.

  • alienfromzog

    Banking bonuses is a surprisingly complex issue. Firstly, there is no way that anyone, in any job is worth the kind of remuneration packages that a small minority of people in the banking sector receives. Secondly, one has to consider how appropriate it is for a government to interfere in private companies. Thirdly, it really is a world-wide market and the banking sector in responsible for around 20% of the UK’s tax take. So whilst I don’t think it healthy for the government to pander to any industry, the government cannot afford to drive them away. (How likely that is, is an interesting question). Fourthly, RBS and Lloyds are owned to a large extent by the government. At current share prices the government is sitting on a significant profit (ten billion or so) but if their value goes up even further (as it should, in time) then the return to the exchequer could be into the hundreds of billions. Whilst bank bonuses are clearly distasteful, the feeling that it is costing the tax-payer coz we bailed the banks out, if ultimately allowing the banks to function and generate profit and ultimately make a big enough share-price to make for a big return, then arguably it’s better to not interfere.

    However, all of this is slightly off the point.
    Osborne made a massive fanfare about how he was going to make the banks behave. And then does nothing.
    Osborne opposed Alistair Darling’s tax on bonuses (which was at source and therefore in addition to income tax) yet it brought in £2 billion pounds. It didn’t change behaviour as hoped but it did bring in significant revenue.
    Osborne has introduced a banking levy. However this is more than offset by reduction in corporation tax.

    If the government stood up and made a case for a ‘gentle’ approach to the banks – I wouldn’t agree with them – but I could at least respect them.

    No, what they do is in public and at the time of the election claim that they will be so unbelievably hard on the banks and then they do nothing.

    The really shocking thing is that this isn’t government spin. It’s government lies.


  • Olli Issakainen

    Government should intervene on the bonuses.
    It is said that high bonuses are essential in keeping talent in an industry crucial for Britain. But this TALENT caused the financial crisis of 2008 and recession costing a fortune to taxpayers.
    RBS was bailed-out in 2008. It is now hoping to pay £1bn including cash payments. The taxpayers are controlling RBS and should be able to dictate pay.
    Shareholder sovereignty is the basic rule of capitalism.
    And in reality, only few bankers actually relocate.
    According to Ed Miliband government should extend banker bonus tax. The bank levy is a joke as the cut in corporation tax more than outweighs it.
    There is now public resentment over the Tory-led government´s politically-driven cuts. It is not good politics to let the bankers off the hook while innocent citizens like Sarah here pay the price for bankers´ greed.
    Nick Clegg in his preface to the Lib Dem manifesto wanted to restrain bankers. David Cameron called two years ago for a £2,000 bonus cap while taxpayers retained banking shares.
    But now the Square Mile is doing what it pleases. At a smallest hint of regulation, new tax or separation of investment arms from deposit-taking operations, the fat cats threaten to leave to Switzerland or Hong Kong.
    In a rare admisson of truth David Cameron said on the Andrew Marr show that banks, regulators and the Tories were also to blame for the “mess”.
    Well, after IFS and C4 have confirmed the Labour´s version of the events, it is a bit difficult for him to go on blaming Labour.
    25% of Tory MPs have made their careers and cash in the City. I have started to use the term Tory-led government too.
    The real coalition governing Britain is the coalition of the bankers and the Tories!

  • Nicky

    ‘If anything the accusation is that we are working too effectively.’ Whaaat???? Is Clegg totally deluded? (Good summing up of their record by Watoop, BTW.)

    It’s as if he subscribes to some kind of magical thinking philosophy, whereby just stating something (even if it bares no relation to reality) somehow makes it true. (This isn’t a facetious comment – if was this kind of bullish and deluded thinking that led to the bankers ignoring reality and plunging us all into crisis – see Barbara Ehrenreich’s excellent book Smile or Die.)

    Despite all his bluster, he looks increasingly like a frightened child rather than a middle-aged man in a high powered job. I would feel sorry for him, although his outrageous lies about Labour’s record make my sympathy rapidly evaporate.

  • Nicky

    Speaking of Clegg – his p*ss-poor new catchphrase ‘Alarm Clock Britain’ is trending on Twitter. It appears to have failed to impress. Sample comment: ‘Tomorrow, when my alarm clock goes off, I will think of Nick Clegg. And I will heroically vomit. For Britain.’ (RopesToInfinity)

  • Jacquie R

    On the subject of imprisonment for Illsley and Chaytor, I entirely agree that there makes no sense in locking up them or thousands of other offenders. There are far more appropriate and less costly alternatives to prison and Kenneth Clarke is absolutely right.

    The other issue is something Nick Robinson raised yesterday. He said:

    “Most [MPs] believed they had a system of allowances NOT expenses. They were encouraged by their whips and Commons officials to claim as much as they could to top up a salary held down by governments wary of public disapproval. Some found it easy to assemble receipts for many thousands of pounds – to cover large mortgages or the cleaning of moats. Some found it harder – and claimed for everything from the sink plug to a flat-screened TV. A few simply invented their claims. …one of those who was found out is facing up to the prospect of a spell in prison. No one will ever know how many Eric Illsleys there really were.”

    While not for one moment defending the expenses claims (or Nick Robinson!), I think it’s true that many others were equally morally culpable, but were in a position to get away with it!

  • CarolineH

    Today two mothers see their sons beginning terms in prison.
    One is the mother of Edward Woolard, who confessed to throwing an empty fire extinguisher off Conservative party headquarters during recent protests. His mother made him go to the police and he admitted he had done this .He received 32 months,
    The other is the mother of Mathew Binley, who was convicted of driving a car whilst being twice over the legal limit. He attempted to evade arrest by hiding in a bush. On being arrested his mother lied and said that she had been driving the car. He was jailed for four months, she given a suspended sentence.
    You could say in both cases that if luck had not intervened, the young person in question could be facing a sentence for murder or manslaughter.
    Compare also the case of 2 MPs – one, a Labour MP facing a custodial sentence for illegally claiming £14,500 (approximately) of parliamentary expenses in respect of maintenance, telephone and council tax. The other, the father of Mathew Binley is a Conservative MP, He came under fire in 2009 after it emerged he illegally claimed £57,000 in expenses by renting a £1,500 a month flat from his own company. However, despite the Committee on Standards and Privileges finding he had breached parliament rules he was ordered to pay back just £1,500 in January last year. .
    On that basis – seems unlikely David Laws will face any kind of sanction and will soon return to government.

  • Dave Simons

    I don’t know about you, Olli, but I’m still naive enough to be stuck with Adam Smith and Karl Marx in thinking that the wealth creators in society are those people who regularly get out of bed and spend a lot of their waking lives sweating, swearing and humping gross matter from Point A to Point B. And to prove it, when these people go on strike the whole house of cards collapses and people like Bob Diamond scream blue murder. OK the Labour Theory of Value is flawed – if a Van Gogh painting sells for 25 grand it doesn’t mean that Van Gogh worked that much harder to create it, and the value of pearls is not the same as what it costs for someone to dive for them. Other factors like scarcity and demand come into play.

    But this constant elevation of bankers, especially by the Tories, as ‘THE wealth creators’ is surely topsy-turvy? According to the bankers’ mantra, if they aren’t paid to an extent that is globally competitive they will all up sticks and relocate elsewhere, leaving the Square Mile derelict and the UK the poorer. True they make mega bucks, but they pay mega bucks in tax, and by doing so they create jobs for us ungrateful peasants who depend on them for our livelihoods.

    Bankers don’t create wealth – they just play games with the wealth other people have created.
    Oh but we mustn’t criticise them! Angela Knight, the bankers’ shop steward, says so! Jo Stiglitz mentions in his book, ‘Freefall’, that bankers even object to expressions like ‘bail-out’! It’s a bankers’ world!

  • Janete

    Predictably, I suppose, the media (and perhaps Commons officials) also used the expenses scandal selectively to damage Labour MPs disproportionately. Well known Labour second home flippers lost their seats or are no longer considered suited to the Shadow Cabinet. Several Lib Dem and Conservative flippers are prominent members of the Government, as apparently the media doesn’t feel inclined to remind voters of their expense history. How long before David Laws returns to the Cabinet despite his £40,000 dubious expense claims?

  • Alex

    The fact that “others got away with it” doesn’t change the culpability of a criminal. I don’t remember any socialists talking in similar terms when Aitken or Archer were jailed.

  • Janete

    The grilling of Bob Diamond at the Treasury Select Committee yesterday was quite interesting but despite plenty of interest in bank bonuses, the mainstream media focussed mainly on the entertaining bits rather than the detail.

    Chuka Umunna pointed out that Barclays has more than 300 subsidiaries registered in offshore tax havens. Diamond defended his bank by quoting their £2bn tax bill last year (banks’ behaviour is often justified by their large tax contribution) but he couldn’t say how much of the £2bn was attributable to employee payroll tax.

    Another MP pointed out that banks could only raise money at low rates because Governments are underwriting their potential losses to protect depositors, and as this amounts to the whole sector effectively being subsidised by the taxpayer, it is not unreasonable to expect something in return.

    Coalition appeals for lower bonuses are completely inadequate; persuasion is always useless against profit and greed. Perhaps in the long term the only way to control damaging behaviour by the banking sector is to protect only those banks that invest responsibly, do not engage in tax avoidance practices and limit or eliminate bonuses.

    International agreements will be necessary to achieve this but given the intrinsic connection between the Conservative Party and banking wealth I don’t think they’d be up for it, whatever they say to the electorate in public.

  • Jacquie R

    Not quite sure what you mean, Alex, as I hadn’t stated that there was no culpability. As to Aitken and Archer, whatever I may feel about them or their crimes, I would much rather have seen them pay their debt to society through other means than imprisonment at the taxpayer’s expense.

  • Sarah Dodds

    Off the subject, but so worth a listen :o)
    ( Sorry if link not worked)

  • John

    The issue of bankers bonuses is not being exploited by Ed Milliband forcefully enough.
    At PMQs today Cameron said that Labour bailed the banks out and got nothing in return. Thats not true. UKFM adminsters a 70% shareholding in RBS and a 41% stake in Lloyds, at some point these shares can be sold or swapped for debt and the taxpayer make a profit from a situation which would have been the end of the world as we knew it – ie the cashpoints failing to pay out money or our debit cards being rejected at Tesco’s

  • Janete

    Thanks for this Sarah – it shows up Gove’s narrow minded view of education.

    I’ve always thought that valuing only academic ‘grammar school’ achievement is another way powerful people belittle the working classes. I think educational snobbery has to some extent replaced old fashioned class prejudice and is one of the reasons we don’t invest in the manual and technical skills the country needs.