Bonuses? For this lot? You have to be joking. It is mind-blowing. It is outrageous. It is sick. Since I have now been officially designated by the BBC as the last politician willing to say anything in favour of the financial services industry and its practitioners, I hope my friends in the City will not mind if I say that it is unbelievable – totally and utterly unbelievable – that banks in receipt of billions of pounds of taxpayers’ money should be using some of that money to “reward” their star performers.
By their greed and folly they have helped to bring their ancient institutions to their knees. They have helped to trigger a bankogenic recession that is now rippling out with appalling consequences through the wider economy. They have come so close to causing a complete financial meltdown that it was necessary to bail them out with £37 billion of cash from the hard-pressed taxpayer. And these bankers now have the cheek, the epic and obscene cheek, to say that at least some of that money – that taxpayers’ money! – should be used to “incentivise” the former masters of the universe. Incentivise them to do what? Reward them for what? You might as well give Lord Cardigan a bonus for the Charge of the Light Brigade.
If these people have an ounce of sense or decency they should either forgo the dosh or give it to charity. This money is not meant to go on more monogrammed shirts or Range Rover Vogues; it is not intended to stimulate the economy by allowing bankers to buy more grouse moors. It is there to help the banks to get credit flowing again to the hundreds of firms that are either going bust or on the verge of going bust through lack of liquidity.
If the Royal Bank of Scotland – now 68 per cent owned by the Government – does not understand that its position is irrevocably changed, and if its senior team continues to think that it is OK to claim great spooling-zeroed bonuses, then they risk provoking a revolt by the taxpayer, and quite right, too.
Please don’t get me wrong. It’s not the paypackets themselves that I object to. I don’t mind if ace bankers haul down sackfuls of loot, any more than I resent the earnings of ace footballers. What sticks in the craw is the fact that this is taxpayers’ money – and the bankers are by no means alone in arousing resentment.
As the recession deepens, so does the divide between those who are paid by private companies, and those who are paid by the state, and nowhere is the division starker than in the matter of pensions. A decade or so ago, before Gordon Brown began his reshaping of the economy, people went to work in the public sector on the understanding that they would probably be paid less than their counterparts in the private sector. But they were fortified by the knowledge that they were serving their country or their community, and that their jobs and pensions were more secure.
After 10 years of Labour, those assumptions, and that essential symmetry, have been abolished. Not only has the public sector been so massively swollen that some parts of the North East are run on more or less Soviet lines, with well over 60 per cent of the workforce employed by the state. There has been a complete transformation in the relationship between private and public sector reward.
The Prime Minister’s great pensions raid made it all but impossible for private sector companies to keep up their final salary pension schemes, so that most private sector employees are finding their retirement looking ever leaner, while the state sector has been miraculously insulated.
It is incredible but true that the average public sector wage is now higher than the average private sector wage; and public sector pensioners can still generally expect a final salary pension scheme – and these can be very generous indeed. In local government, for instance, you can expect to be awarded one sixtieth of your final salary for every year of service. So if you are a chief executive or other senior official, on a salary of more than £200,000, and you have worked for 30 years – well, you do the maths.
It is a very generous deal, and speaking as a former MP and current Mayor, I hesitate to knock it, and I only do so because it is unsustainable. With firms now laying off staff in their thousands, with unemployment apparently set to hit three million for the first time since the 1980s, it is simply too much to expect council-tax payers to scrimp and save to pay for the pensions of local government’s colossal clerisy, when those pensions are so much more comfortable than anything they could afford themselves.
And the second, and more serious, reason for believing the position to be unsustainable is that these public sector pensions are now, frankly, unaffordable.
It is not just that the markets have fallen, and the funds devalued. Human longevity – and the crackdown on smoking – are demolishing the actuarial calculations on which our pensions are based. Our species, Homo sapiens britannicus, is now living an extra two years every decade, or an extra 12 minutes every hour. That’s why the public pension funds have their great yawning deficits, and we can either cover those deficits with massive tax increases, or else we can reform.
It is time for a grown-up national conversation about the way out of this mess, and I suggest we begin by looking at the way we treat older workers. It is mad and vindictive to tell 65 year olds that they are suddenly surplus to national requirements, that they have no more to contribute. We all know talented men and women who have been pensioned off, protesting bitterly, when their continued employment – perhaps part-time – could have been good for them and for the economy.
We need to think much more flexibly about older workers, and their vast and growing productive power; we need to junk the idea that your career comes to a juddering halt at 65; and we need to recognise that age discrimination is not only insane – it is also unaffordable.
[First published in the Daily Telegraph 10 February 2009 under the heading: “Civil servants are sitting pretty, at your considerable expense.” ]