Bankers must show restraint on bonuses

The prospect of Britain's bankers awarding themselves £7 billion worth of bonuses may look less inflammatory than it would have seemed two years ago but bonuses remain an explosive political issue.

The Prime Minister, David Cameron, warned yesterday that the largely state-owned RBS should be at the back, not the front of the queue when it came to awarding bonuses, though he also said that bankers should not be scapegoats for the entire economic crisis. Nick Clegg said today that financiers lining up for record bonuses inhabit a parallel universe.

This may be so; the question is whether ministers could or should do anything about it. As matters stand, financial services are a global industry.

The pay structure of the sector is based on bonuses: refuse to pay them here or refuse them to banks in state control, and there is the possibility that the ablest individuals would move elsewhere.

Undeniably, finance pays disproportionately more than any other sector, which distorts the labour market, but it is hard to find a way to address this without driving good players to other financial centres.

The brutal reality is that it is in the interests of the taxpayer that RBS and partly-state-owned banks should do well so that our stake in them can be sold off at a profit. We need them to be well run, though this is not to say that their bonuses should be among the biggest in the market.

What we can expect is that bonuses should be structured in such a way that they discourage damaging risk-taking. That is already happening: Credit Suisse, for instance, is deferring bonus payments for four years, with far fewer employees getting cash bonuses. We can also hope that executives in largely state-owned banks will remember that the taxpayers who bailed out the industry are going through very hard times, and curb their awards accordingly. A little self-restraint is not too much to ask.

The Justice Secretary, Kenneth Clarke is, as we report today, no stranger to corporate hospitality.

Yet as a result of the ill-conceived Bribery Act 2010, which the last government passed before the election and is due to come into force this April, even sending a Christmas hamper to the home address of a client could result in a company facing prosecution.

The truth is that no one quite knows how the Act will work in practice, which is one reason why compliance lawyers are now so busy. Abroad, a company could face prosecution even for bribes administered by an employee without its knowledge.

This is an Act which is motivated by the best intentions — to remedy an evil in the developing world — but which seems all too likely to impose administrative burdens on British business. Of course bribing officials abroad to expedite deals is abhorrent but if most of our competitors allow these payments, including states with tough anti-bribery laws such as the US, it seems unfair that Britain alone should prohibit them. Corruption is a scourge but it is not one that the UK can tackle alone. This Act will damage business: it should be quietly dropped.

Say what you will about the Tube unions, they don't court cheap popularity. After alienating holidaymakers by striking on Boxing Day, Aslef is now inviting public outrage with a strike on Prince William's wedding day.

Workers, tourists, monarchists: is there no group that Aslef is not prepared to alienate in its pursuit of better public holiday pay?