Williams de Broe defends 1980s revival of big banking bonuses
The return of a reformed Spandau Ballet heralded another bout of 1980s nostalgia at the O2 Arena this week.
But it’s not just Spandau who are poking their bouffant bonces above the parapet for the first time since 1989. Trickle-down economics – which most thought had gone the way of the Rubik’s Cube and the Flock Of Seagulls haircut – is back too.
That’s according to financial services group Williams de Broe at least.
Huge banking bonuses have attracted criticism from pretty much all sides. Earlier this week City minister Lord Myners said it might be necessary to impose a windfall tax on bonuses, and announced his intention to block bonuses at all the banks with stakes owned by the government.
But Williams de Broe described big bonuses as “just what the economy needs”, adding it believed the effect of bonus-heavy banks was is the country’s best interests. And it added the combination of the banking bonuses and inflation in the property markets – the two things most commonly held up as sources of the recession – were exactly what was likely to bring the UK out of it.
The statement said: “For better or for worse, the world needs profitable banks; it is just that during the last cycle they became just a little too profitable.
“Unfortunately, the recovery is certainly unsustainable without the banks returning to profit; and to be making profits they need to have motivated and rewarded staff. Which means bonuses.”
The £13.5 billion bonus pot at Goldman Sachs is likely to put as much as £2.5 billion in tax into public coffers. But bonuses are still causing controversy throughout the country.
The issue has even united opposing political parties. Last week, shadow business secretary Kenneth Clarke said he wanted banks to be “sensible” about bonuses, accepting that they were causing outrage among the public. But even he admitted the government had no chance of controlling bonuses given out by the banks.
Williams de Broe said it knew its views were unlikely to be popular, but said the effect of banking high rollers on the property market was what was most likely to bring the economy back into a recession.
It added: “This may be a very non-PC view in these new caring-sharing days of late 2009, but big bonuses are actually just what the economy needs.
“First, whether we like it or not, City paydays influence prices at the top end of the south-eastern housing market, which in turn dictates the direction for the rest of the country.
“We all may have the attitude that the price of every house in the country other than our own ought to go down, but rising house prices are a prerequisite for recovery. It may feel very wrong to see top end London prices soaring again, but ultimately it works to the benefit of the economy as a whole.”
