Follow the Irish – ban bankers’ bonuses

Osborne is right : we should follow the Irish example. Admittedly he’s rather less keen nowadays to proffer his advice that the right path to success is to pursue the Celtic Tiger’s route of massively cutting Corporation Tax, subsidising a colossal building boom, and letting the markets run riot and inequalities balloon. But perhaps he should look again. The Irish have now done something that no other government in the western hemisphere has dared to do. It has ended the payment of bankers’ bonuses.  So if them, why not us?

True, the Irish Finance Minister, Brian Lenihan, only took the decision when faced with inordinate greed in defiance of catastrophic collapse. A trader won a court case that he be paid a bonus awarded in 2008 (incidentally exposing the fact that such bonuses are paid irrespective of performance), and the cost of paying out the other 2,400 banking staff in Allied Irish Banks (AIB) would have been £40m.   Faced with the humiliation of having to bow to an £85bn IMF-EU bailout, including £9bn to prop up AIB, Lenihan decided to slap a 90% tax on these bonuses. He then went one stage further and made the bailout monies conditional on a pledge from the bank that no bonuses would be paid at all.

So if the Irish Government can make bailout dependent on no bonuses being paid at all, why can’t the UK Government do the same at least with RBS and Lloyds-HBOS, as well as with Barclays whose liquidity position was substantially aided by the Labour Government;s Special Liquidity Scheme?  This is hardly an act of retribution, more just pure commonsense.   After all, why should a banker requiring a bailout be entitled to a bonus? Even if they weren’t too ashamed to make such a claim, surely a bonus system that allowed such a perverse result must be irrevocably broken.

Of course the counter-argument now being voiced by the banks is that if the regulations tighten, they’ll move abroad (a ploy which, if the trade unions tried it in another context, would be howled down as holding the country to ransom).   Actually for very good reasons it’s highly unlikely that any of the big banks will do this.   HSBC has always been mainly based in Hong Kong, but if it moved there the bank’s ultimate sponsor would be China, which would damage its relations with America and India.   Barclays won’t uproot and settle in Wall Street where US regulators and politicians won’t take the view that it’s too-big-to-fail if it gets into trouble.   What price a Chancellor who refuses to succumb to bluff?