Maybe they do get it after all. Bankers are beginning to realise that their greed and insensitivity to public opinion is damaging them where it hurts: in their reputations and their balance sheets. Barclays says it intends to slash earnings and bonuses in its casino-banking investment division, and the chairman of RBS, Sir Philip Hampton, has discovered – rather late in the day it has to be said – that banker pay is too high and needs to be “corrected”.
Stephen Hester, the chief executive of state-owned RBS last week handed back his £1m bonus (though he keeps his £1.2 million salary and annual £420,000 pension contribution). Bob Diamond, head of Barclays investment division has reportedly put his £10m bonus on hold this year. Damned decent of him. When he accepted his £6.5bn bonus in 2011 he said that “the time for banker remorse is over”, but it seems to have come back again. Bankers have finally realised they are on the road to perdition. But why now?
Look no further than the man formerly known as Sir Fred Goodwin, who had his knighthood rescinded last week. Suddenly all the sirs and lords sitting around the boards of British banks have realised that public alienation can have a cost after all. That they can’t just thumb their noses at voter opinion and sneer at politicians indefinitely. It’s time to make nice and show a little restraint.
This is the answer to all those who said getting Her Majesty to repossess Fred the Shred’s knighthood was a waste of time. It is also a rejoinder to those defeatists who say that nothing can be done to rein in the kleptocrats of British banking because they will just leave the country taking their banks with them. In reality, few of our financial elite want to become voluntary exiles from their country of their birth. Even fewer want to join a club of dishonour that includes the Zimbabwean president, Robert Mugabe, and the Romanian dictator, Nicolae Ceausescu.
Knighthoods are the entry ticket to the social elite of British society – receptions, race meetings, royal weddings, Ascot enclosures. Titles confer privileges that hard cash alone cannot. Why do you think so many businessmen were prepared to donate or lend huge sums of money to Tony Blair’s Labour Party in order to secure them? Wealthy people crave recognition and some of them actually value their reputations, even if Fred Goodwin doesn’t. Honours can also have indirect financial value, because having a knighthood puts you in the frame for lucrative non-executive directorships and chairmanships. This is why senior civil servants crave honours – so that when they leave the public sector they can cash their gongs in the boardroom marketplace.
So, our friends in the City watched last week’s developments with mounting alarm. Following Goodwin’s royal defenestration, there was London Mayor Boris Johnston – a possible future Tory leader – describing RBS bonuses as “repugnant” and conceding that the 50p tax band is here to stay. The Labour leader, Ed Miliband, has called for a commons vote this week against the bonus culture. He wants to see what he calls “one nation banking”, which is meant to be an allusion to Disraeli’s “one nation conservatism” but sounds like a branch of Nationwide. Boris and Ed have noticed that there has been a marked shift in public opinion, registered in polls like YouGov last week, which showed that 62% believe taxes should be increased on the rich and 66% would back a mansion tax on property worth more than £2m..
You don’t need a weatherman to know which way the wind blows. Really, Fred Goodwin deserves an honour for services to socialism, conferred by the Occupy Movement. The “world’s worst banker” has managed to provoke a sea change in public attitudes, and brought to an end an era in which bankers thought they stood above society. The Goodwins and Diamonds and Hesters have created a highly potent political myth: that of the greedy plutocrat, who cares nothing for society and has no care even for what people think of them. It’s rather like the image of the banker, Henry Potter, in the 1930s film “It’s a Wonderful Life”, which conditioned public attitudes to financial capitalism, and taxation of wealth, in America for the next forty years.
It is astonishing really that Goodwin allowed himself to become an international pariah, a hate figure, a personification of all that is rotten in capitalist society. Most people would pay a fortune to avoid that kind of adverse publicity. Any competent PR could have told Goodwin that all he needed to do was hand a couple of million to a charity of his choice, and he could have kept his knighthood. Goodwin was already independently wealthy before the crash, with assets estimated at around £20m and his total pension pot is worth £12m.
But he deserves our thanks. I recall reassuring readers of this column over a year ago, that the banking fraternity had finally gone too far – awarding themselves £13bn in bonuses while the country recovered from a recession of their making – and that they would be reined back by society. Bankers have no morality, other than self-enrichment, and now they are beginning to realise that this makes them vulnerable in a democracy. No one – be they banker or trades union baron – can defy public opinion indefinitely. Even Tories have to take action.
The Vickers Report last year marked the beginning of the end for casino banking, which will now be separated from ordinary high street banks, to end investment bankers speculating with other people’s money. Action now needs to be taken on those cosy remuneration committees that set executive pay and seem to regard performance as irrelevant. The RBS share price has collapsed, but that didn’t stop 350 executives receiving a million in bonuses last year. If bonuses were related, as they should be, to asset value, then these people would be paying an equivalent sum back.
The era of low taxation is over too, with the 50p rate. In future we will see both increasing real rates and pressure on those, like non-doms, who avoid tax by keeping their assets abroad. A halt will be called to the bonus culture in the public sector also, where council executives and university principals had begun to get into the remuneration game. The von Prondzynski report on Scottish university governance has shown the way, here, scrapping bonuses insisting on staff representatives on remuneration committees.
They thought it would never happen. But the tide has turned against the bonus culture and the banking kleptocracy now that even the Queen has told them where to go.