The truth, as they say, is out: it doesn’t look as though the coalition will be doing
much about bankers’ bonuses after all. According to this morning’s Times (£), it’s a case of the
Tories getting one over the Lib Dems – and particularly Vince Cable – by not pushing down with more taxes on the City. But that, I suspect, is only half the story. The other half is
that the coalition never had much in their armoury, but harsh rhetoric, in the first place. If they want the banks to start lending to business again, then their most substantial hope has always
been a trade-off over bonuses.
Which – as Benedict Brogan suggests in an insightful
post over at the Telegraph – is hardly an ideal situation for the coalition. They face a poll this morning that puts the Tories 8 points behind Labour, and
the Lib Dems a further 22 points behind that. News that they aren’t hunting down the banking bête noire, and impaling it against higher taxes, is unlikely to improve those numbers.
There are, though, some consolatory factors for Cameron & Co. By far the most important is that, even as it stands, all those bonus payouts will accrue money at a considerable rate for the Exchequer – so, the bigger the bonus pot, the bigger the
Treasury’s windfall. And we should also remember the words of Alistair Darling, who admitted that Labour’s bonus tax had failed to change bankers’
behaviour. Tax or no tax, bonuses will be paid out in one way or another. Tax or no tax, the government will probably get scorched by the fallout. As one No.10 source tells the Telegraph, "Whatever the bonuses are – if
they are £7 billion of £3 billion – they will be too big. We are going to get flak and we accept that."