The debate over bankers' bonuses keeps rumbling on. A fortnight ago, the news was dominated by the RBS chief executive Stephen Hester's eventual decision to decline almost £1 million in shares after a huge public outcry. RBS, which is 82 per cent state-owned, is expected to hit the headlines again later this month. Chancellor George Osborne has allowed a £500 million bonus pool for the bank, as he moots a plan to cap bonuses at taxpayer-subsidised organisations such as the BBC and Royal Mail.
The conversation isn't limited to state-owned companies, though. Last week, Barclays announced a 16 per cent drop in profits - with its investment banking division, Barclays Capital, seeing a third slashed from its profit and loss account. Chief executive Bob Diamond has had to reevaluate his pledge to deliver 13 per cent return on equity before 2013 - a bitter pill to swallow for a man who prides himself on hitting targets. Reflecting the performance, Barclays' bonus pool is 25 per cent less than last year, but still sits at £2.15 billion, with £1.5 billion of that to be awarded to Barclays Capital staff. To put this figure in perspective, the bank's annual net profit was £3 billion for 2011. Speculation has been rife as to how much Diamond's personal bonus will be, with figures of £3-10 million being quoted in various locations. He has refused to disclose the amount, but has been criticised for continuing to "reward failure".
Organisations from the Association of British Insurers, a trade association which represents some of the largest investors in the UK, to the Trade Union Congress and the Labour Party, have weighed in with criticism. Labour leader Ed Miliband, who has scored a series of points over the Conservatives over recent weeks, has said he wants to see a tax on bankers' bonuses, with the proceeds used to provide jobs for young people. Former Mayor of London Ken Livingston last week compared bankers' bonuses to "penis extensions". Open season has been declared on the City, but is it just a witch hunt?
Instead of pursuing genuine reform, the government's primary action has been the populist step of stripping former RBS chief executive Fred "the Shred" Goodwin of his knighthood. And some banks can be commended in some respects. Barclays, while having a poor year profits-wise, has met Project Merlin targets for lending to small businesses. It isn't state-owned (although, Bob Diamond has admitted Barclays benefitted hugely from Labour's 2008 intervention in the banking sector, which stabilised the finance industry in general), so should they be subjected to the same pressures as RBS and Lloyds? We asked three students for their views on the bankers' bonuses saga.