Why the ETUC is against bonuses
European workers did not create the crisis. But the response of European governments has been harsh austerity, penalizing them twice: as workers and as citizens.
Meanwhile the banks, which bear the greatest responsibility for the crisis and were saved by huge bailouts in the middle of the storm, are now doing their best to try to preserve their appearance vis-à-vis public opinion.
The banks are perfectly aware that the outrageous bonuses being awarded despite the vast amount of taxpayers’ money that prevented their collapse, and despite the joblessness and economic difficulties that people are suffering daily, will clearly cause anger.
That is why they are working hard to try to develop on the one hand a series of arguments aimed at justifying the bonuses and their size, and on the other hand tricks to get around regulations and caps.
The European Trade Union Confederation denounces the unfairness of such practices, and considers unacceptable and scandalous the policy of giving huge bonuses to a few individuals while the majority of the European population is struggling with incomes that do not enable them to make ends meet. That is why the ETUC has been calling upon the international, European and national policy-makers to adopt measures to stop these injustices.
And that is why the ETUC intends to take on the main “arguments” which the banking lobby are using to defend and preserve bonuses, and to expose their perverse logic.
I. Banks and big companies say: this year the amount of bonuses will be lower and that is fine
Even though the British Banking Association (BBA) is having an internal discussion about setting a possible cap of £4bn (€4.7bn) for year-end bonuses, surveys among bankers clearly show that the majority of them expect to receive a bigger bonus than last year.
Meanwhile, directors of FTSE 100 companies (the 100 most highly capitalised UK companies listed on the London Stock Exchange) saw their earnings soar by an average of 55% during the past year (across the FTSE 350 the rise was 45%).
In any case, despite the controversial expectations about their size, banks and companies are insisting that the bonuses will be lower, more controlled and more “human”, by which they mean that they are playing their part in reducing excesses and that they understand the public’s anger.
The truth is that the bonuses remain outrageous and far too high, regardless of the possible caps. When normal people are struggling to satisfy basic needs and pay their mortgages while a few already very rich individuals can buy a house with a single bonus, there clearly is money available for redistribution.
II. Banks say: it is only a UK problem
A spokesperson for the British Banking Association stated “outside the UK, the concern on bonuses is limited or doesn’t exist at all”, implying that it would be wrong to find solutions at the international and European level that, in the end, would penalize only or mainly UK operators.
This is an attempt to divert the attention of policy-makers and public opinion from the core of the issue. European workers, who are paying directly in their daily life for the negative consequences of the crisis and austerity measures, are not indifferent to what is happening on directors’ pay rolls. They see very clearly the difference in treatment between themselves and those who were responsible for the crisis and are also profiting from it.
Obviously this concern is shared by European workers as a whole and the scandalous bonuses issue is definitely not just a UK problem. Working people know that an inequality remains an inequality even if it takes place in a neighbouring country, and that stricter rules at international and European level are needed to stop those excesses.
III. Banks say: caps and tax on bonuses will boost relocation
European banks say that if the European rules on bonuses are stricter than elsewhere in the world, then there will be a distortion of competition between Europe and the United States and Asia.
According to them, talented bankers will rush away from Europe to work in banks elsewhere that can continue to guarantee them the enormous bonuses they have become accustomed to receiving. That would inevitably lead to relocation of the big groups outside of Europe, and the continent would eventually lose its international role in the financial capital market.
The reality is that Europe is still a huge market, in terms of population and of financial capital, and it is not in the interest of banks to abandon such a gold mine. Indeed, in spite of the crisis, banks and big groups are running very profitable businesses.
A set of rules which could deal with the absence of any concrete limit to senseless bonuses would do no harm to the good business that banks are doing in Europe.
The real problem is social injustice: bankers’ pay, even capped or taxed, eclipses the incomes of millions of European workers.
IV. Banks say: lower bonuses means less tax income for the State
Defenders of the banks say that it is not in the interest of the State to adopt rules that will decrease the bonuses, because “the fattest of fat cats” (as they call the State!) would get less money from tax.
The real point is that the State has the full right and duty to tax revenues, especially sky-high ones, in order to ensure redistribution. The fact that these bonuses exist is unacceptable in itself. It shows that inequalities are a big and real problem in today’s society: one of the roles of the State is indeed to act in order to decrease these disparities.
V. Banks say: in 2010 the State is getting more than bankers from the bonus
British banks find scandalous the possibility that, with the additional rate of income tax on bonuses, the taxman would get a bigger slice than City bankers actually take home. They stress that public coffers would gain more from City bonuses than City bankers themselves.
There is nothing to feel embarrassed about, and the reason is very simple: if that money goes into the pockets of a banker, he would probably buy a luxury apartment for himself, but if it goes into the State budget, it could be used to finance something like the National Health Service, for the benefit of every citizen. And there is a big difference between the two cases.
It is absolutely right and fair to levy high taxes on high revenues; if the State fails to do that, social injustices will increase even more.
Was this article interesting and relevant for you? Do you have any comments?
You can post a reply to this article here.