“The domination of the City of London over our economic life has led to collapsing investment, low productivity, stagnating wages & profound divisions in life chances for millions.”
By Jon Trickett MP
A fortnight ago, I challenged the Prime Minister to adopt a new economic model in place of the failing and stale orthodoxy which has done so much damage to the country in recent decades. It was no surprise to me that he failed to respond to my question.
Take the government’s handling of the banking industry. They have sought to deregulate banking and reject the idea that there ought to be caps on bankers’ bonuses.
The Chancellor, Rachel Reeves, has said she has “no intention” of bringing the cap on bankers bonus cap back. The consequence has been that the Banks have let bonuses rip. Meanwhile the Prime Minister said his government will ‘kick down the barriers … clear out the regulatory weeds and allow a new era of British growth to bloom.’
The whole approach ignores recent history, is reckless, and arguably constitutes a moral failure. It ignores the peculiar and disastrous forms which British capitalism has taken in recent times.
Massive inequality combined with the cuts to public services, and the cost of living bearing down on the living standards of millions all require a new economic and social settlement before it is too late. Deregulation of the banks and letting bonuses soar is precisely what led to the 2008 crash and the ongoing crisis which continues to this day.
Greed
We should not forget that it was the Tories who lifted the cap on bonuses. Since then bankers have let rip. The Labour government has chosen not to reverse the direction of travel. The consequences are now clear to see.
The average bonus in the UK financial services rose to £114,000 last year. This was equivalent to an increase of a quarter in a single year (Remember this is on top of already elevated salaries).
Meanwhile at the major banks, the more senior bankers whose behaviour directly impacts on the banks’ exposure to problematic risk profiles gave themselves increased bonuses. But it was precisely the bonus culture which increased risky behaviour by the banks and led to the crash in 2008.
The Commons’ Inquiry into the Banking Crisis noted that there was reckless behavior and flawed oversight of the finance sector in relation to bonuses.The “bonus-driven remuneration structures encouraged reckless and excessive risk-taking and that the design of bonus schemes was not aligned with the interests of shareholders and the long-term sustainability of the banks.”
At the very top of the banking hierarchy cases of greed are even more extraordinary. For example in HSBC, was paid between €19 million-€20 million in 2024, while at Barclays the top payout reached €17-18 million.
Talk about breaking the glass ceiling! These bonuses can be compared to the limits before the ending of the bonus cap when bonuses could not be more than double the salary.
The bankers appear oblivious to the fact that the country in which they profit treats working class people very differently.
Real wages – after inflation – and taking into account bonuses are barely rising. Poverty affects millions and of course we have seen an explosion of food bank usage in recent years.
These developments, not simply tolerated, but encouraged by the Government carry several risks.
The first is risk is the impact of material greed by key banking decision makers on the behaviour of the banks themselves. If the captains of the banking industry see a way of increasing their bonuses then won’t they act in this way even if their action creates operations which pose difficulties to the economy?
Bankers’ Bubble Burst eventually
And the truth is that this is what happened with the crisis in 2008. It is also why the Tories introduced a banker bonus cap. Greed had led to dangerous financial transactions which caused a bubble that eventually burst.
The second risk which is posed by the growing bonus culture is that inequality comes so great that it is socially unacceptable. Normally, you would expect democratic politics to function by forcing governments to step in and prevent malfunctioning markets.
But both the Tories and Labour have been the creators of this inequality. In the vacuum which has been left, we see the rise of right wing extremists who seek to blame people with different coloured skin for the problems which people face.
It has been argued that the wealthy bankers are geographically mobile and can easily transfer to other banking sectors elsewhere in the world and that therefore we as a country must reward them. But the dangers are real. And when a banking bubble arises and then bursts, it is the state which picks up the pieces at considerable cost. The 2008 bailout for example has been estimated to cost the uk taxpayer up to £140 billion at the time. This was money which then led directly to the Tory austerity years; cuts to public services, collapse in investment, and pay stagnation.
What is to be Done?
It is quite clear that the drive to let bankers’ bonuses rip and to remove the regulatory restrictions on big companies is a dangerous economic path to tread. British capitalism has an unusual shape which already distorts our society.
The domination of the City of London over our economic life has led to collapsing investment, low productivity, stagnating wages and profound divisions in life chances for millions of people especially in the regions and nations.
It is time that the Left as a whole turns to focus its attention on developing a new alternative economic strategy which can contain capitalism and then transform the country. We are living through dangerous times. Failure to address material working class concerns on housing, the cost of living crisis, failing public services etc will leave a space which only the far Right will fill.
- Jon Trickett is the Member of Parliament for Hemsworth: you can follow him on Facebook, Twitter/X, Instagram and TikTok.
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These comments are important and are made by people who have been proven over the years to understand the needs of greater society. It seems incomprehensible to me that the slickly presented Zionist self-seeking “leaders” do not understand the basic principles of Labour, and have simply silently redrawn them. Unless they can put society above their interests, and those of their rich buddies, we may soon be sunk as a society. There are some excellent people in the Labour party – but why did McDonnell lose the whip and Mandelson keep it? I think that says everything about the “leadership” of dictatators that anybody needs to know.