Darling: Bonus tax 'a failure'

Thursday, 2 September 2010 5:40 PM

by Peter Wozniak

The attitude of banks towards big bonus payouts to staff has not changed as a result of the previous government's 'bonus tax', according to Alistair Darling.

The former chancellor said: "I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and... will find all sorts of imaginative ways of avoiding it in the future," according to media reports.

Bankers' bonuses became a political issue at the height of the financial crisis with many institutions continuing to pay out huge sums to staff, often in spite of the fact that they had been effectively 'bailed out' by the government.

Mr Darling enacted the 'bonus tax' of fifty per cent on such payments last year, in an effort to stem the culture surrounding the payouts, which continues to arouse public anger, especially as government spending begins to be seriously squeezed.

The shadow chancellor appears to have admitted that, although the tax garnered the Treasury £2 billion, it has not changed the general attitude of banks.

He seems to have suggested that they have been entirely capable of avoiding the tax, by issuing bonuses outside the normal periods.

Credit Suisse gave out a series of surprise bonuses to staff on Wednesday, ostensibly to prevent their defecting to other banks.

Opposition to tighter regulation of bankers' pay has centered around the argument that such a move will lead to a mass exodus of financial 'talent' and cost the City of London its status as a financial capital.

The coalition government is currently undertaking a review into the way the banking sector is regulated, to be chaired by the chancellor George Osborne.

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• banking crisis
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• economy
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• economy and finance