If you walk through the centre of Liverpool you will walk through an area which has been made a World Heritage site. On a quiet day have a look at the buildings there and you will see the commercial history of our country written in brick and stone. The centre was built when Liverpool was the second port of the greatest empire in the world. Commerce poured through its docks and countless legions of clerks and dockers filled and emptied the unceasing flotillas of ships which came and left every day.
Written in the stones are the names of the companies that built them. Based in Liverpool, with money raised in Liverpool and spending their profits in Liverpool. They were predominantly shipping companies, insurance companies and banks.
This serves to me as a constant reminder that our world would not be possible without insurance and banks and that they can and should play a major role in our commercial life. In the early days one cargo in four was lost. Yes the other three made excellent profits but no-one would take the risk of losing two cargos at the same time which would have bankrupted them. That’s why insurance started. How could you shift enough gold around to pay for the loads at either end and to pay the start up costs of every new voyage? That’s how the banks were started.
So when we talk about banks and bankers bonuses we need to separate the necessary from the unnecessary. The part that creates profits and opportunities for all of us and the part that creates profits and opportunities just for a few. I don’t begrudge some bankers getting bonuses. I would not take money from the men and women in the branches who provide a good service or even the investment bankers who use real entrepreneurial skills to generate profit for their organisation and taxes for the rest of us.
But it seems to me that there are three areas where we need to get a grip if we are to make sense of banking and of bonuses:
- Many of the bonuses arise because for the last 30+ years we have developed fiscal, taxation and industrial policies which have favoured the Banks at the expense of manufacturing and other parts of the economy. A key sign of Labour’ failure in this is the fact that the proportion of GDP earned through manufacturing declined from 20% in 1997 to 13% in 2010. I can well remember the pleas of manufacturers made in the 80s for a level playing field on interest rates and exchange rates which were already being ignored by the might of the City. This itself has been a major cause in the imbalance between London and the South East and the rest of the Country as central government discriminated against the industrial bases of the North.
- Bonuses must be reasonable in the eyes of society not just bankers. Fat cats must realise that what they do affects everyone’s aspirations. It is not just a question of whether or not some bankers will go to other countries if their bonus was reduced. The comparison must not be just with other bankers but with other people doing real jobs. We must all decide the relative worth to society of a banker as compared to a teacher, a broker as compared to a nurse. This might mean that some bankers might leave us. So what. The simple fact is that little of the wealth they create trickles down to the rest of us. By the time they have hidden it, exiled it or magicked it away they basically find ways to keep it to themselves and their families.
- Bonuses must be made by investing or risking their own or their company’s money. At present bonuses are being made by manipulating the monetary systems which have been put in place by governments to repair the economy made weak by those who are now making the bonuses! Too big to fail means that they continue to make a one way bet with the tax payer acting as the bookie who will always pay out.
I watched an episode of Dad’s Army last week. Do you remember Private Walker? He was the one who had the fag in his mouth, a suitcase full of goods round the corner and always knew how to get you a smuggled pair of nylons. Don’t some of the bankers realise that’s how they are viewed by much of society? A bunch of seedy Second World War spivs – barrow boys on the make – with no concern for anything except their narrow self interest? Perhaps they do and have no concern for what little people like us think.
So the Kemp remedies:
- Impose a tax on bonuses at a high enough level to make the eyes water and to cause some of them to bugger off!
- Tighten tax planning laws to differentiate between reasonable financial management for the future for individuals and companies and wholesale removal of assets such as we have seen by Philip Green and his missus.
- Use the money gained as an enterprise fund to back new high quality starts in manufacturing, new ideas and new technologies emanating from our universities. Too much of the research that we pay for ends up creating jobs in both research and manufacturing in other parts of the world.
Sounds easy doesn’t it! Well I know it’s not easy but it is a starting point. As a nation we need to aspire to a different way of doing things. We need to set out our belief that high value manufacturing, research and development are at least as important to our economy as banking and financial manipulation. Unless we do make such things a starting point then we will never have the end point of a balanced economy in which banking plays its part but no more in creating the wealth of the nation.
So if the Private Walkers out there see this and don’t like it all I can say to them is ‘GOODBYE AND GOOD RIDDANCE!”