Polly Toynbee Should Realise That It’s Just Great When Bankers Get Bonuses
THE reason being that when bankers get bonuses then we get most of it flowing right back into the Treasury in the form of taxes. Which makes this complaint of hers really quite remarkably stupid:
Barclays, HSBC, RBS and Lloyds are paying themselves £5.5bn in bonuses this year. How much is that? About a penny and a half off the income tax, or the cost of the BBC plus the Department of Culture, Media and Sport, and museums. Look how strenuously the bankers are avoiding the EU’s new rules limiting bonuses to a stingy 100% of salary, or 200% with shareholder approval. Astonishingly, George Osborne is taking legal action against the EU to try to get this lifted. The Bank of England’s plan announced yesterday – a six-year period in which bonuses can be clawed back in the case of serious wrongdoing – would be hard to effect, says the High Pay Centre. Instead, slithering round the law, the banks re-badge bonuses as “monthly allowances”, while the regulator turns a blind eye: ignoring the spirit of the law is regulatory capture – and we know where that led last time.
Of course, Barclay’s and the other banks are not paying themselves anything at all: they’re paying the staff their wages. And we can make all sorts of complaints about how much they get, for sure, but to complain about tax is simply ludicrous. For here’s what happens when the banks pay those bonuses. First, out of the total amount of the bonus, the government gets 13.8% of the cash in employers’ national insurance. Then, out of what’s left, it gets 45% in income tax and 2 % in employee’s national insurance. Let’s call that 55% or so in total, just to do a bit of rounding.
But what happens if those amounts are not paid out in wages or bonuses? They become part of the profits of the bank: which are taxed at 26%. Which is, you’ll note, rather less than the 55% the Treasury gets on the bonuses. Those profits might just stay in the bank to expand it, they might end up being paid in dividends. And there might be a bit more income tax to come on those dividends, true. But there’s no national insurance on them: so the tax take will be less than if the money was spent in bonuses.
And that’s what makes Polly’s diatribe so amusingly foolish. She is comparing the amount being paid out to a reduction in taxation possible from the same amount. But exactly the way that the cash is paid out if what provides the highest tax take, and thus the lowest tax bills for the rest of us, possible. She’s mad to be complaining about this.