Bonuses mean rich get richer in system obsessed by greed
BOB Diamond certainly doesn't need the money. But at the end of last week, the big-jawed American boss of Barclays Bank took his share of a £1.5bn bonus pool. Estimates put his own cut at somewhere above £3 million.
Even after the de-knighting of "Sir" Fred Goodwin, the decision by Royal Bank of Scotland chief executive Stephen Hester to forgo his £1 million bonus, and the eventual show of pay restraint by the Network Rail board, we are still living with a monstrously imbalanced economy.
For as the Champagne flowed in the City of London, new figures revealed that Hanley was in the top ten towns for boarded-up shops. Something has to change – and it needs to begin with our banks.
Of course, the bonuses are grotesque. They reveal a contempt for the British people, even as they struggle with ever-more stretched living standards.
And we all know this language of needing to attract top talent is guff: are London's top bankers really going to pull their kids out of school, their wives out of Harrods, and pack up their golf clubs for the boredom of Dubai or Singapore?
But more important than Diamond, Goodwin and the bonuses is the structure of banking in the UK. Having dealt with any number of small businesses in Stoke-on-Trent who can't get credit from their banks, the question is simple: how do we reform banking so that it supports sustainable growth in the "real" economy outside London and the South-East?
And this is the issue which the Trades Union Congress has just addressed with a new report entitled Banking After Vickers.
The Vickers Commission was set up by the Government in the aftermath of the crash to work out how to prevent the likes of RBS and HBOS failing again so spectacularly.
Because it was us, the taxpayers, who had to bail them out when their reckless gambling – sorry, considered financial investments – went south. The Vickers solution was to separate off retail banking (our everyday savings accounts and mortgages) from the risky, casino-style investment banking.
But Vickers only focused on how to prevent another banking crash, not on how to change a banking system which so obviously fails to develop our economic potential.
The TUC report is much more damning: the banks are simply not supporting the real economy. Shockingly, business loans to firms involved in neither real estate nor finance account for only one per cent of total UK bank loans.
Other failings it points to are relatively low levels of business investment, a lack of finance to enable green growth, and significant sectoral imbalances (which means a lack of industry) within the economy.
Hopefully, the forthcoming Green Investment Bank – which the Potteries MPs are lobbying hard to be located in Stoke-on-Trent – might go some way to rectifying these weaknesses. But the overwhelming evidence is that these problems are fundamental to our current finance system and will not be overcome by just returning to growth as normal.
It is the issue of rebalancing that is most revealing. The report illustrates that, in recent decades, London and the South East have taken a steadily increasing proportion of UK growth. This is intimately connected with bank lending. The Government does not publish regional lending figures but a 2010 report by the Department for Business, Innovation and Skills concluded that "surveys of established businesses also have found regional disparities in both the provision of unsecured lending and refusal rates". Which is no good for North Staffordshire.
In Stoke-on-Trent, we know we have the firms, the capacity and the innovation to make a significant contribution towards boosting manufacturing. But we need the right support.
So I think the solution has to lie with some new form of devolved banking system – perhaps regional investment banks, guaranteed by the State.
There currently exists a crazy array of tiny regional funding streams available for financing growth in the regions.
The answer has to be to roll these all up into a larger investment vehicle, which would offer longer terms than the commercial market and could even issue "municipal bonds" for regional growth.
The Germans have a similar approach and they know a thing or two about building strong regional manufacturing. We need bank boards that understand industry, bank managers who know their local economies, and Government ministers genuinely committed to rebalancing the British economy. And if we had all that, with finance supporting investment in our engineering, ceramics and retail businesses, then I would not mind a few bonuses.
At least they would have earned them.