February 13, 2012 7:49 pm

Bonus truce but the war goes on

It is too soon to tell if restraint is taking place

David Cameron may have declared a truce over bank bonuses, but the war over executive pay looks far from ending. Who is winning?

There is certainly heightened public sensitivity – a witchhunt, say some business leaders. A number of people are claiming credit for pushing it up the agenda, including Ed Miliband, Labour leader, and Compass, the leftwing group that set up the High Pay Commission.

The coalition claims credit too. The Treasury says bank bonuses are coming down and that the days of huge cash bonuses for taking immeasurable risks are over. Vince Cable, business secretary, is proposing to improve the transparency of executive pay and strengthen shareholders’ powers.

A few individuals have waived bonuses, including António Horta-Osório at Lloyds Banking Group, Stephen Hester at Royal Bank of Scotland and Sir David Higgins at Network Rail. These organisations all depend on the taxpayer, and the latter two cases were the result of severe political pressure. But there is some pressure in the private sector too. Cairn Energy dropped plans to give Sir Bill Gammell, founder and chairman, an extra £2.5m in bonus payments after the sale of a stake in Indian oil assets. Tom Albanese, head of Rio Tinto, waived his bonus after the mining company took a $8.8bn hit on its aluminium deal.

Barclays cut the bonus pool paid to its investment bankers by a third, but still found itself criticised by the Association of British Insurers, which said this merely reflected a 32 per cent drop in pre-tax profit at the investment bank.

At least these examples cannot be said to be “anti-business”: it is an argument about whether profits are being fairly shared between executives and shareholders. It is too soon, though, to know whether real restraint is taking place. Things may calm down after the bank bonus season and if surveys in the coming months show more modest average increases. But as long as most people’s incomes are squeezed, the issue is unlikely to go away.

Democracy deficit

It seems odd, to say the least, that Liverpool is to have an elected mayor without a referendum to decide whether people want one. This is happening because city Labour leaders took advantage of rules that allow a mayoral election to go ahead without a referendum if two-thirds of councillors support it.

The 14 English towns and cities that currently have elected mayors, including London, almost all acquired them after referendums (Leicester being an exception). Salford has also just voted to have one. The coalition plans referendums in 10 more large cities in May, potentially followed by elections in November. What justifies Liverpool’s people having no say over this?

Joe Anderson, Labour leader and mayoral contender, said the move clinched a £130m package of funding from Whitehall. Critics say this could have been achieved by other means. The coalition has offered “city deals” giving greater control over housing, skills and economic development to eight English core cities as long as they provide “strong and accountable leadership” – and it said elected mayors were the best, but not only, means of providing leadership.

Mr Anderson says Liverpool cannot afford to wait because it needs jobs, businesses, homes and schools now. But how serious would a delay be? It all looks less than democratic.

Battle for Glasgow

Just when you thought things could get no worse for Labour in Scotland, along comes a crisis that threatens its long-standing control of Glasgow city council. Last week the party pushed its budget through by just two votes after a rash of defections and accusations of bullying. Now six deselected councillors plan to launch a rival party. The Scottish National party, riding high in the polls, hopes to take Glasgow in May’s council elections. It took seven of Glasgow’s 15 Holyrood seats in last year’s Scottish Parliament vote. Labour could yet survive because municipal elections are now by proportional representation, but a victory would boost Alex Salmond’s hopes of leading Scotland to independence.

Presses roll

Bristol is to get its own currency, the Bristol pound, launched by a credit union, following other places such as Totnes in Devon and Stroud in Gloucestershire. Is this a form of local quantitative easing?


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