Edward Tsang, Personal Opinions

Money in Perspective

Edward Tsang; updated 2011.02.11, 2013.09.11

The Government says it is time to move on from "retribution to recovery". They are just trying to fool the public. It was the tax payers' money that brought about the banks' recovery, so should the tax player get their bonuses first? Who does the government represent? Those who fund their elections, or those who elect them.

"Project Merlin":

Under the "Project Merlin", the largest UK banks pledged to lend £190bn to businesses this year, including £76bn to small firms (BBC News, 2011.02.09).

The Government says it is time to move on from "retribution to recovery". The society should focus on increasing lending from banks (to boost the economy) rather than issues over bonuses.

Fooling the public:

This is to pull a woollen hat over the public's eyes. Banks may pledge to lend, but it is not their fault if nobody wants to borrow. They haven't pledged to lend cheap! The banks can charge high interests should they want to deter borrowing, or exploit the situation in order to gain profit. Besides, lending is part of a bank's normal business. (If banks don't lend out, they'll fail!) Now they make it sound like they are doing the society a favour by providing credit!

Back to bonuses:

Besides, by focusing on recovery, not bonuses, bankers can resume bonuses. The Royal Bank of Scotland (RBS) is giving bonuses of £950m to its staff. This includes a bonus of £2m by its chief executive, Stephen Hester.

Bank bonuses are acceptable, provided that the banks make profit with their own capitals. In fact, bonus is a good way to reward staff: everybody gets something extra if the organization is in profit; the more successful it is, the higher the bonus. The trouble is, RBS received a guarantee of £62bn from the Government last year. That means should RBS fail, the tax payers will pay the bill. The tax payers shouldered the risks, so shouldn't they get some return before the bankers get their bonuses?

Who speaks for the tax payers?

My problem with the situation is that nobody speaks for the tax payers. The Government represents the interest of its backers, many of whom are bankers. This is democracy: those who have money vote in their representatives.

The banks will provide £200m of capital for David Cameron's "Big Society Bank", which is supposed to finance community projects. This is a pitiful amount. £200m to be shared by the many people involved in the community projects is nothing, compared to the £950m shared by the bankers.

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