Patrick Foster
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Alistair Darling has criticised the huge bonuses being awarded to City
executives during a period of economic uncertainty.
The Chancellor said that boards should apply the “next-door neighbour test” to
judge whether payouts would be regarded as excessive by the average man in
the street.
“People get fed up if they see others getting great big bonuses and they can’t
actually see what they did. It can be extremely frustrating.
“Boards need to ask themselves ‘Are we behaving reasonably?’ If you’re leaning
over the fence talking to your next-door neighbour, can you justify what
you’ve done?” Mr Darling said in an interview with The Daily
Telegraph.
More than a third of City staff received higher bonus payments this year than
last year, according to a survey of financial services employees published
this month. About £7 billion will be paid out in bonuses in the first
quarter of the year.
The study, by Morgan McKinley, the firm of headhunters, said that prospects
for recruitment in the City had deteriorated as a result of the credit
crunch, but this had not affected bonuses.
The survey, of people paid between £18,000 and £150,000, found that 70 per
cent admitted that their payouts this year had either matched or exceeded
their expectations.
The average City salary rose by 5 per cent to £53,246 in the 12 months to
January.
Meanwhile, fears that plans proposed by Mr Darling to levy a £30,000 annual
tax on foreigners not domiciled in Britain would lead to an exodus of talent
appeared to be supported yesterday by research that said 42 per cent of
South Asian high-earners were preparing to leave Britain.
Grant Thornton, the financial advisory firm, found that “nondoms” from the
Asian subcontinent, the largest group in the UK, had reacted furiously to
the prospect of the new laws.
Under the Government’s plans, nondoms who have been resident for seven years
would have to pay the new charge, pay British income tax or leave.
The report, based on interviews with 50 high-net-value South Asian nondoms,
found that 84 per cent thought that the fee was not being set at a fair
level. A third of those surveyed said that they planned to pay the tax.
Seventy-eight per cent said that they would not have enough time to get
their affairs in order to comply with the new laws, which will come into
force on April 6.
The Treasury’s climbdown on Tuesday, when it retracted some proposals,
including a requirement to disclose offshore assets, will make little
difference, according to Anuj Chande, partner and head of Grant Thornton’s
South Asia Group.
“While the majority of the survey was carried out before the Treasury’s
changes, about 10 per cent were asked after and there was not much
difference between reactions,” Mr Chande said. “The scrapping of the
retrospective element is seen as fair but not seen as a big enough change.”
The Treasury insisted that the figures did not marry with its research. Its
figures showed that of the 20,000 nondoms affected, only 3,000 would leave
the UK. About 4,000 would pay the charge and the remainder would opt to
start paying tax. Susan Thompson, Patrick Foster
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people get fed up also when they see Labour MP that infringe the law and take taxpayers' money for they 10 minutes travel expenses!
riccardo, brussels,
I find Darling out of touch with reality and to be socialistic in his views. The UK has come a long way over the last 10-15 years and today London can call itself the centre of the financial markets usurping NY. For many years the difference between the US and the UK could be articulated in this story. In the UK 2 chaps saw a new Ferrari driving past and then parking. The one looks at the other and said lets go and scratch the paint work (as a sign of jealousy, and not having self belief that he could own one). In the USA a similar story except when the Ferrari parked the one chap said to the other in 3 years time I'm going to have at least one of those. Mr Darling your negativity and thoughtless remarks will only lead to complacency and people not wanting to strive for improvement or more for themselves or their families. If Mr Daring doesn't realise it these people earning higher bonuses help contribute to job creation as well as paying higher amounts of direct and indirect tax.
AMR, London, UK
Does he include Tony Blair and his $1,000.000 to advise his American advisers on the "City"
john laybourne, luton, uk
Will GB please fire this guy. Every time he is reprted to open his mouth he comes out with an anti business remark (or at least allows himself to be so reported). He is bad for the economy and bad for the country. Fire him before he does more damage.
MJR, London,
Are these bonuses all a fiddle, when the stock market and banks are not doing well? - these people seem to get bonuses when our pensions investments they manage are being wasted.
Marty, London, England
David A, Newbury, Berks, time to move into the 21st century. The economy has moved on since the industrial revolution. Can I get you a pint of bitter and twisted?
Joe Smith, Malaga, Spain
Since when has a next door neighbour been an appropriate aribter of what people should be paid? City bonuses are propoprtional to the money that highly skilled financial professionals can generate for their firm. If they were paid less (or subject to excessive taxation), these top financiers would simply re-locate to other international financial centres and London would lose its world-leading status as the capital of financial markets. Needles to say, the chancellor also receives £400,000 in income tax for every £1m bonus paid so it's not all bad news for the government...
Alex, London,
It's none of his business what people earn.
R Mason, London, UK
I would also suggest to apply the next-door neighbor test to having overseen the first run on a bank since the great depression. CEOs of investment banks are paid for performance and their billions of pounds in taxes paid make our hospitals run and help make London the wonderful city it is. I wish people in government were also paid for performance in the same manner as people in Wall Street.
miguel, london,
No doubt the Chancellor also objects to receiving a not especially modest amount of tax on these excessive bonuses.
Bill, London,
Darling is a loser kow towing to the politics of envy. Anyone who presided over the cack handed NR affair and then announces that the non dom tax disaster was due to minions running amok has no right to talk about what people earn. In a real business anyone as incompetent and useless as Darling would have been axed or kicked into a sinecure a long time ago. The public has worked out that Mr Darling is useless and incompetent, now he is trying to win some left wing kudos to protect himself. Forget it, Alistair, the comrades arent that stupid either!
Ken, Oxford, UK
How about sorting out the tax-free monies paid to MPs before telling others what to do ? Why should MPs have tax breaks denied to the rest of us ?
jasper, chelmsford,
What arrogant remarks from presumably City "workers". Generating money to me means producing something. Apart from financial gambling and lending money to others to generate money what do you guys actually do?
You'll soon be replaced by cleverer Chinese and Indian workers prepared to do a days work for a hell of a lot less than City types.
Bonuses and commission have been the reason for every financial scam and poor practice dreamt up by UK financial workers to extract money from others meagre pay packets.
David A, Newbury, Berks
The public are pretty fed up with paying ministers mortgages as well. Talk about the pot calling the kettle black!
Dave, Worcester, UK
So Mr Darling having lost your fight against non-doms (who apparently are leaving anyway as they don't trust the gov anymore - I work for one),made a mockery of the UK banking sector and run up a nice big deficit you want to take on the city - bring it on, we get paid big bonuses if we make money, if we don't we get sacked - simple as that.
Now politicians get big salaries, allowances, amazing pensions, free "fact finding missions", Olympic tickets and never get sacked unless they are caught doing something truely aweful - might be a bit of fat to trime there??
Ben, London,
Clearly Darling decided that criticising the bonus system was another populist move, and one that would receive general support. It was in effect an easy target for him to regain popularty after his diasterous performance to date. The problem is that neither Darling nor Marxist ideology begin to recognise the concept of a bonus system, much as he does not understand what he is doing in number 11.
Tim, London,
Banks are responsible for the current credit crisis which is causing a dramatic slow down in the world economy and make it more difficult for businesses to fund current and future operations.
They have also lost shareholders a large amount.
It is therefore very galling to see banks pay out these massive bonuses which in normal businesse would be ploughed back into their own business to cover the other losses that they have incurred.
The ordinary guy in the street finds this very difficult to reconcile.
Everybody outside the banking world realises there is something wrong with banking remuneration packages and perhaps bankers should reflect on this and join the real commercial world where the majority of us reside.
It is after all our money that they are gambling with!
W, Paris
west, paris, france
Would Mr Darling please sit down. You may not be able to see what these people have done, but rest assured bonuses are usually payed out on a performance related system. Therefore if you generate X amount of money for someone else you should rightfully be entitled to a percentage of it. If these people have made huge amounts of money for someone else why should they not get a slice of the pie.
It's likely that with your calamitous handling of Northern Rock you would have earned no bonus, but these people are considerably better at business than you!
B, London,
Darling, please keep quiet. This is business, you know?
Edwin, Bucharest,