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Much has been written of late about the ‘obscene’ city bonuses paid out at the end of last year. It has been claimed that over 4000 city workers took home more than £1 million each in bonuses. Along with that have come the increased pay packets of ‘top bosses’, which according to some sources, have grown by over 40% in the last 12 months. Peter Hain, Northern Ireland Secretary, and more importantly, candidate for the Deputy Leadership of the Labour Party, tapped into the ‘Left’s’ disgust at the size of these financial rewards by calling for the recipients to give two-thirds of their windfalls to charities that help the poor.
Ignoring the blatant attempt to woo the left of his party, Mr Hain’s call should strike fear into the hearts of city folk. He implied that a future Labour administration could increase tax and regulation on the City if those who have have received a bumper Christmas bonus were not charitable enough. In saying this, Mr Hain revealed his Old Labour heart.
I recognise that the City of London, and its enlightened regulatory structure, are of great importance to the British economy. The high-bonus earners in the City that Mr Hain so despises are wealth creators – for example, making vast sums of money for pension funds. They also generate the wealth that would be taxed so heavily by the likes of Hain, Johnson and Cruddas to pay for their proposed increase in the size of the state. My fear would be that an increase in the burden of that taxation would lead to the capital, offices and jobs moving abroad. We could easily see London’s pre-eminence as a financial centre disappear should private equity and other such financial organisations be singled out for more punitive taxation. Private equity funds increase their financial returns by increasing companies’ profitability. They achieve this by increasing efficiency and improving output, beyond the plans of the established management team. This, in turn, increases capital, thereby benefitting the whole British economy.
However, I also recognise that the image of a successful few, spending their money ostentatiously, can lead to social imbalance, and the politics of envy. The recipients of these bonuses should be encouraged to earn more, but in doing so, be also encouraged to spend their hard-earned wealth with more social responsibility. That is why I think Boris Johnson has a point in yesterday’s Telegraph. The successful few have benefitted greatly from our capital city’s historic location near the centre of the global economy. That position will only be strengthened and maintained by proper investment in the talent of the future. What better way to spend a proportion of a city bonus than on investing in university education. Not only do I think it would be more worthy of each individual, it would also have a better long-term reward for their families than a new yacht. Philanthropy is commonplace in America. It should become so here.
