This week we’ve seen two major banks announce their results, and their response to recent pressure to limit their bonuses has been all-too predictable. Firstly HSBC – following on from recent EU legislation limiting bankers’ bonuses to an amount no greater than their basic salary – have now announced they will be paying their top staff an additional ‘fixed pay allowance’, in order to circumvent the rule. So this year Chief Exec Stuart Gulliver will be giving himself an extra £1.7m on top of his £1.2m salary, to make up for any cuts to his bonus (this allowance will not be performance related), while a further 1,000 top employees will be given similar payouts. This follows on from last year’s figures which show that top employees at the bank were paid on average £900,000 each per year, with Mr Gulliver himself receiving a total package of £8.03m.*
And now taxpayer-owned Royal Bank of Scotland, despite astronomical losses last year of £8.2bn, has announced it will nonetheless still be paying out £576m in bonuses to its top staff. This despite requests from many senior government figures to show restraint.
In both the above cases the banks justified their action with the argument that in a market economy they have to pay ‘market rates’ in order to get the best people. Never mind that ‘market rates’ don’t seem to apply to the rest of the workforce who are still being asked to undergo Austerity, and no care at all for the 13 million people in this country living in poverty, half a million of whom were forced to visit foodbanks last year. Any economic system which can create such vast inequalities between rich and poor is a broken system, which any decent person would try to change, not justify or defend.
For more on how our free-market system inevitably leads to constantly increasing executive pay, and an ever-widening gulf between rich and poor, click here.
Today the flagrant profiteering by Britain’s privatised utility companies was laid bare when Centrica, the owner of British Gas, announced its results, along with a threat to consumers that there would be blackouts if they weren’t allowed to make enough profits. Despite making £2.7bn last year, Centrica’s Chairman, Rick Haythornthwaite said that if attacks on their business practices continued, they may decide to cut investment in power supplies which could lead to blackouts within 2 years*.
Blackmail? Surely not. The principle of privatisation was sold to us on the basis that competition, and the greater efficiencies of private industry, would lead to better services and reduced prices – not that we would all be held to ransom by fat-cat bosses. Apparently British Gas don’t even like the idea of competition now, and have complained about politicians encouraging consumers to switch supplier in the pursuit of cheaper prices. And to add insult to injury, Centrica Chief-Exec Sam Laidlaw said that criticism of the industry would justify pay-increases for him and his buddies – to make up for their jobs now being less pleasant! (He’s already due to get a £4.6m share bonus this year, and last year the top 5 earners at Centrica took home £16.4m between them.)
Privatisation of public services has been one big con, with the bosses simply using it as a cash-cow for themselves, while we all pay the price.
For more on everything that’s wrong with privatisation click here.
Yesterday Barclays Bank published its results and unashamedly demonstrated that the City bonus culture is back in full swing. Never mind the fact that profits have fallen by 32%, never mind the fact that over 10,000 people are going to be laid off because of commercial problems – no less than £2.4bn (a 10% increase) is still going to be paid out in bonuses to their top bankers. When questioned about this their chief exec, Antony Jenkins, resorted to the old free-market capitalist mantra of ‘market rates’. It’s a shame market rates only ever seem to go up for top earners , while for broader society wages stagnate and living standards go down.
These big corporates really are just money-making machines for their top staff, which the rest of us have to finance.
Many people believe that the owners – the shareholders – are also coining it in, but in reality they are getting fleeced too. The £2.4bn that is being paid in bonuses to staff is almost triple the £859m that is being paid in dividends to shareholders. To put this rip-off culture into even starker contrast, in 2009* (the latest year for which complete figures are available), of the £11.6bn profit made by Barclays, it paid a mere £113m in tax (a rate of just 1%); £734 in dividends to its shareholders (a lot of whom are pension funds); but a thumping £2.5bn in bonuses to its own staff. It’s daylight robbery and we’re all getting mugged. Question is: how much longer can it go on for?