Barclays: 'Judge us on our pay'

Robert, you said

"some will say stems from a windfall generated by the emergency rescue of the global economy undertaken by governments and central banks, an emergency rescue that was needed in large part because of the havoc wreaked by the excessive risk-taking of banks."

I ask about the word 'some'.

Do you know anyone else who doesn't think this?

Barclays has performed well versus it's peers - and it's leadership have heeded to the pay debate - let's hope that the great british public can avoid bank bashing and support this company. The people who are bank bashing now will be the first to complain if international companies such as Barclays ever decide to move their head offices overseas

And for the shareholders - 2.5p per share for the year. On the current share price (275p), that's a return of 0.9%. There are about 11bn Barclays shares so 11bn x 2.5p= £275m. Seems rather small in comparison with £2.7bn in bonuses.

Oh, and the share price has gone down by 38% in the last 12 months (444p on 19 Feb 2008 to 275p today).

On the basis of their achievements for shareholders, there doesn't seem to be any justification for bonuses.

"Some 22,000 investment banking staff are receiving £191,000 each on average in salary and bonuses"

Wow, and I was wondering why the housing market is so screwed up where I live in South Devon. I think I just found out why. In summer it's the banker belt; in winter an endless series of ghost towns.

I'm an advocate of the free market and I can understand board members/senior staff earning large amounts, but these sums are just absurb. Are there really 22,000 salaried staff in barclays who are worth £200k?

The bonus situation is amusing – state insured private monopolies exploiting a position of protected privilege and discounted public funds (through the central counter) to maximise private profit. This is how the current framework allows capitalism to work so we can’t complain when people organise themselves to exploit it.

Banks have been sticking two fingers up to public opinion time immemorial, but I cannot grasp why public anger has not converted into anything more tangible than minor political difficulties and column acres of ranting. No demonstrations, no civil unrest and most interesting a lethargic policy response of a 50% upper tax rate that is being paid by the banks anyway.

With arguable the biggest re-distribution of wealth and vested interest taking place under our noses I am bonkers to not understand why it’s not a major political/social issue meriting a priority policy response?

Looking at removing the banking business model monopolies might be a good place to begin.

Also agree with point 3 – why aren’t the business owners enjoying this boom of their companie profitability?

your news programmes are stating that barclays has had no money from the taxpayer. this is not true. barclays recieved a loan from the bank of england for £1.6 billion. this was reported in the observer on 2nd september 2007.
I don't know if this is an oversight on your part or not but it is very misleading. the money was, allegedley , to tide the bank over after massive losses in the sub-prime market in the us.
barclays attitude has been that they can do what they like as they've been able to trade normally throughout this period. this is just not the case.

At 8:26 Bank Shareholder wanted to quote share price performance over the past 12 months. In actual fact the shareprice has risen from 97.1p a year ago to 293p this morning - does a tripling of the shareprice satisfy Bank Shareholder or does the witch hunt and blame game continue?

RP: Love your column, but the "some will say stems from a windfall generated by the emergency rescue of the global economy undertaken by governments and central banks...." seems to be a repetitive mantra and is a bit stale now. We probably all get this point as you've been banging on (your colloquialism) about it for ages. Where's your analysis? How do you interpret their results for the longer term? What are they really scared of the government doing? What's the future for Barclay's Middle East rescuers? What about the bit of Lehmans they bought? Come on, you're much better than this!!

Banks create and receive free money and then make vast sums by lending and/or gambling it. Having worked as a trader successfully for a few years now I know how little skill is needed to generate huge rewards.

I understand that I produce no wealth for the economy as a whole and have no functional use in society. But what amazes me most of all is that, even after everything this country has been through in the last 2 and a half years, we are still allowed to continue operating and making vast sums.

We all want things to be different but I can assure you that nothing is going to change by choice. Easy money is easy money.

No 2 Barclays' leadership " have heeded to the pay debate" ? If they did they were heedless of it ,
contemptuous of the views of both shareholders and customers. It has certainly "performed well versus
its peers", screwing the last penny possible from its unfortunate customers.

How much did Barclays contribute to the British economy via taxes paid on their transactions/profits/business?

Good luck to them. What this economy needs IS for banking/financial services to increase business.

I think No.9 summed up the last two years for you there Robert.

Just look at the returns on your pension pots and endowerments and remember where these "Bonuses" come from.

Good to see all the level headed are out in force this morning ;)

Barclays have made a profit - well done to a UK company.
Barclays have paid bonuses to their employees thus exercising their fundamental right to chose how to run their business
Averages do not tell the story - I am sure the cleaner did not get the average
The bonuses paid will filter through to the wider economy

What I do not understand from those who say 'anyone can do this' is why they haven't? Did they buy bank shares at their low and make a profit from this? Perhaps there are so many who know how to make money that we can expect to see a vast increase in the number of financial companies in the next year.

Just a thought

Robert I utterly disagree with you.

A healthy state of affairs, on the surface at least. But that's the point its only skin deep.

So what form did this £35bn lending to domestic and business customers alike really manifest itself as?

Was it Barclaycard, a trading name of Barclays Bank PLC, familiar to all which has increased lending and no doubt with interest rates so high, generated massive profits for Barclays PLC?

What factually has Barclays (High Street) Bank really done anything at all for real businesses?

Maybe you are one of the struggling small businesses reported by the Institute of Directors to have been turned down by the High Street banks and have to resort to - yes, you guessed it Barclaycard!
Great more profit for Barlcays!

The sale of the 'dubious' investments arm of Barclays, BGI, raised a few odd billion, contributing to profits no doubt.

Barclays Casino, sorry Barlcays Capital made profit too, but not by investing in business. Virtually interest free capital makes shed loads when invested as the hedgies do.

Didn't they hedge positions against the Euro recently? More Eurobillions in the coffers maybe?

Accounts need to be more transparent, especially regarding fraud and 'off-balance sheet items'.

I'm not talking High Street customer fraud here, but business related fraud, potential for money laundering and of course, straightforward hacking and outright theft, mostly kept quiet to avoid bad publicity.

I cannot believe the figures are true and accurate. Where oh where did the money come from in the years of massive profits (thin air)? Where oh where did the moeny go to in the years of massive losses? (off shore?)

Healthy profits? Recovery? Dubious accounting practise more like!

Good for Barclays; well done.

A simple question but how do those bank employees who were responsible for the collapse of the banking/financial world by sitting on their asses making huge mistakes now qualify for huge bonuses by sitting on their asses benefiting from making the taxpayers poorer?

This garbage that market rates must be paid or the best employees will leave to join another bank! What best employees? What other bank with vacancies for 'best' employees? Let the beggars go - I bet they don't!

This spin is better than anything Alistair Campbell every fabricated, and less credible!

How much tax did Barclays pay?

If I 'earned' 10 billion I would expect to pay 5 billion in tax - did Barclays?

(Someone look up the detail please.)

#7

After a price drops 50%, it needs to increase 100% (or double its new price to get back to where it was.)

Talking of 'tripling share prices' is not the full story and you know it!

> Not a trivial sum - which some will say stems from a windfall
> generated by the emergency rescue of the global economy
> undertaken by governments and central banks, an emergency
> rescue that was needed in large part because of the havoc
> wreaked by the excessive risk-taking of banks.

Indeed. Politicians are supposed to be breaking these banks up,
to increase competition and remove any potential threat from a
failure amongst the jumbo-banks.

Instead of making them "so small, we don't give a hoot about them",
the bone-heads have set-up an environment where the biggest jumbos
are thriving!

Don't let these dopes forget the lesson of the credit crunch. Break them
up, and no more slacking!

Mr Peston could we have your comments on the ACTUAL detailed performance of Barclays ?

The decline in UK Retail and UK Commercial Profits...the small dividend compared to the bonuses.... Mr Agius' comment about all stakeholders....Barclays hopes for the future !

I am a fan of your column, I read you as often as I am able, even when frequently out of the UK. Selection of facts and tone of presentation is important as to how the news is communicated to the public. Your words on Radio 4 this a.m. and you blog today are a little shallow perhaps.

We do not ask the World of you Sir. But please, better balance and less bashing.

Hmmm... very sceptical about No.9's comments: " [bankers] produce no wealth for the economy ".

As far as I was aware, investment banking contributes to the ecomomy by paying tax on every transaction made.

When the government crows about the extra money they have spent on education and health over the last 13 years, we forget that 30% of that was raised from taxes on the financial services industry. Encouraged by lighter regulation.

Perhaps Robert would confirm this. Current reporting seems to be very one sided.

The the real 'partnership' model which the Conservatives/anarchists have in mind is the Goldman Sachs (Barclays/RBS etc) Partnership!

Robert can you clarify how much of the £35bn of lending was new lending as opposed to refinancing existing debt - very little net new lending I suspect.

what is the truth as to whetehr the BoE or Govt in any form has guaranteed any issues of debt for Barclays since the start of the financial crisis and whether this guaranteed debt is still outstanding. Whilst there hasn't been any equity injection from the govt there has been substantial support for Barclays

some things never change. And they are giving bonuses with righteous on their side as they did not take money off the government.
It is all very distressing as still to try to get money off any bank to start a business, or to expand one is, well you try to do it!

Banks and trust and respect?
why should anyone have any now?

I'm cannot believe that some people on this forum are suggesting that the 'bank bashing' should stop ! Are bankers fighting back by infiltrating your blog-o-sphere ?

The core arguments remain the same as they did several months ago. Until banker's ridiculously self-serving behaviour is reined in, taxpayers are compelled to keep up the pressure for behavioural change. And we're not seeing any change at all.

It was principally bankers - through their greed, ignorance and sociopathic behaviour - that created this mess, and its taxpayers who are still bailing them out. How any bonuses are being paid is completely incomprehensible to me.

I want a stable banking system just like everyone else, but record banking profits in the year the UK economy suffered a near 6% drop in GDP which in turn prompted huge taxpayer-financed intervention to prop up the banking system is just plain crazy. Shareholders interests are not being looked after - clearly the people in charge of pensioners cash are equally culpable and incompetent - bankers are just laying the platform form the next major problem.

Behavioural change is incredibly difficult, but for bankers it'll be nigh on impossible unless taxpayers, regulators and pension funds present a united front. There is still little sign of agreement among these stakeholders either in the UK or globally.

Interestingly, I noticed that the British Bankers Associate has developed a mysterious malfunction on its Contact Us page this morning. Just an example of how the industry becomes cloth-eared on days when profit and bonus announcements are made.

Disgraceful. Just like Angela Knight (the BBA spokesperson who is doing the TV studio rounds this morning urging an end to bank-bashing) who might better be described as disgracefool.

no.22 I didn't say banking produces no wealth, that was your words. I said I am a currency trader and my activities produce no wealth for society. It is not a criticism of what I do, it is an observation.

Banks need to be taxed according to their contribution to rebalancing the UK economy.

So we need how much they are investing (not lending) in high value adding start-ups, spin-outs (commercialising uni R&D) and early stage companies in order to improve our export performance and provide the jobs of the future.

We also need to know more about their overseas activities. In particular we should know whether they are "investing" in places like China and so damaging our own economy.

In short it's time we pressurised these banks into working for us not just for themselves.

TreadingWater - I quoted you directly. You said you "produce no wealth for the economy".

Perhaps as a currency trader you don't, I'm no expert, but I would be very suprised if your deals didn't realise any taxable profits for the economy.

This comment was removed because the moderators found it broke the house rules. Explain.

It is interesting to note the implication of debt to the public purse for being part of a market that benefited from a rescue package. I wonder how many people feel aggreived at the banks while sitting on their interest free sofa in their new house bought with a large, low interest mortgage and watching the news on a flat screen television paid for on a pre-approved credit card. How many of those people make the link between their actions and appetite and the provision of credit in the market over the last few years? How far does the implication of profiting from a system go - is it dependent on unrecognised greed by oneself or envy towards anothers postion. By the way - I don't work in the financial services; but I do believe in a market economy and people taking responsibility for their part in it.

Robert, I have no Barclays-related role or financial interest, but I thought that the interaction between you and Evan Davis was a bit rich and weak on this morning's "Today" programme. His intro stated that Barclays was in receipt of RBS/Lloyds type state funds. It was not. But you, on air, made no attempt to correct that. Then you did not know the breakdown of profit between BarCap and the rest of the bank. I think that is quite crucial, because all of the BBC patois/mud about 'banks not lending to the public after all the money they've had' does not apply to Barclays specifically or investment banking profits, surely? These presentations on BBC radio, including yours, could be just a little less hyped and sensational otherwise it stops being news and starts being something perilously close to presenter-ego-tripping

Some interesting stats from National Statistics - average pay of certain professions (I've added Barclays for comparison) - heres a selection...

PS. So the average Barclays investment banker is worth over 6 times the average journalist. What do you think about that RP? - of course you may not regard yourself as average!!! lol!

see...

https://www.thisismoney.co.uk/work/tips-and-guides/article.html?in_article_id=493808&in_page_id=53960&in_advicepage_id=

for full list

Average wages of professions ONS (Nov 2009)

Barclays investment banker 195,000

Corporate Managers And Senior Officials 85,943

Medical practitioners 78,366

Senior officials in national government 68,283

Brokers 61,117

Health Professionals 60,866

Air traffic controllers 60,548

Police officers (inspectors and above) 53,937

Legal Professionals 47,411

Physicists, geologists and meteorologists 41,388

Personnel, training and industrial relations managers 41,146

Train drivers 40,337

Pharmacists/pharmacologists 39,807

Police officers (sergeant and below) 38,744

Senior officers in fire, ambulance, prison and related services 38,678

Science and technology professionals 37,134

Paramedics 36,780

Civil engineers 36,549

Recycling and refuse disposal managers 36,416

Dancers and choreographers 35,619

Chemists 35,576

Teaching Professionals 35,121

Town planners 34,278

Security managers 33,377

Managers And Proprietors In Other Service Industries 33,103

Further education teaching professionals 32,603

Lines repairers and cable jointers 32,560

Insurance underwriters 32,015

Pipe fitters 31,815

Engineering technicians 31,150

Office managers 31,028

Rail transport operatives 30,787

Probation officers 30,603

Social workers 30,422

Fire service officers (leading fire officer and below) 30,374

Scaffolders, stagers, riggers 30,316

Physiotherapists 30,168

Crane drivers 30,012

Nurses 29,431

Journalists, newspaper and periodical editors 29,384

Electrical/electronics technicians 29,297

Garage managers and proprietors 29,268

Residential and day care managers 28,884

Chiropodists 28,837

Electricians, electrical fitters 28,775

Construction Operatives 27,911

Over the past 2 years Barclays has done well to avoid the bear-traps that caught out RBS and other international banks. By securing medium-term funding from overseas investors (albeit costly) it has managed to shore up its capital ratios thus ensuring that it has a solid platform on which to go forward and particularly to rebuild / expand the commercial and retail business in the UK without the government support that RBS/Lloyds/Northern Rock etc required.

A high proportion of the overall profit announced today is produced from what one might term "bread and butter" business - not casino banking or gambling as some of the bloggers mistakenly call it. It is most unlikely that few of the employees engaged in the commercial and retail parts of the Barclays Group will receive anything more than very modest deferred bonus payments - accompanied by platitudes about keeping focus and meeting next year's targets!

To compare this aspect of general banking with the risk-taking and investment management activities of the Barclays Capital arm is not only naive but reflects a total lack of understanding about how such a large international bank works. Barclays Capital has a broad customer base both here in the UK and in Europe, Asia and the USA. It is not just a massive trading room as Robert and others would have us believe.

On the subject of taxes, Barclays is a huge contributor to UK Gross Domestic Product not only by providing the domestic high-street retail services that are there for all to see but also by exporting financial expertise to places like China. It's about time we started supporting the efforts of Barclays and others like HSBC which are also very significant employers here in the UK. What do you want Mr Peston - a total collapse of the financial system? Get real.

Did Barclays take any public bail out funds from the UK Government? No. Thus, let their shareholders (which did include the Qatari Government) judge them on pay; here in the UK they are a private company contributing vast amounts in taxable sums. Good luck to them.

John Varley recently made an impassioned plea (i.e threatened) that the Financial Services sector accounted for 10% of GDP and 15% of Corporation Tax. But how many people fully appreciate that the total Corporation Tax collected by HMRC is just £49 billion (a tiny amount even compared to Income Tax which is no doubt ably avoided very adeptly by many of those in the Financial Service Sector) and how many see that 15% of 49 billion in the context of the massive bail-outs which the public is actually going to be paying for via Public Service cuts for years to come?

Not enough to matter I fear............

The real inequality/iniquity in life that of intellectual ability, and that's being taken advantage of by these predators on an unprecedented scale!

“…which some will say stems from a windfall generated by the emergency rescue of the global economy undertaken by governments and central banks, an emergency rescue that was needed in large part because of the havoc wreaked by the excessive risk-taking of banks.”

“Banking giant Barclays has seen its full-year profits increase by 92% to £11.6bn ($18.2bn) in 2009. The figure was boosted by the sale of its BGI fund management arm to US firm BlackRock last year. Stripping this out, profits were £5.3bn…”

Let’s look back at prior year profits (note that exceptionals / one-off items seem to have been small in prior years):

2000: £2.5bn
2001: £2.5bn
2002: £2.3bn
2003: £2.7bn
2004: £3.3bn
2005: £3.8bn
2006: £5.2bn
2007: £5.1bn
2008: £5.3bn
2009: £5.3bn

On the basis of these figures it would appear that Barclays made significant profit increases in the period from 2003 to 2006, and then had stable profits in 2007, 2008 and 2009.

I don’t remember much in the way of “emergency rescue of the global economy undertaken by governments and central banks” going on before 2008, do you?

These results almost certainly do include a benefit from the actions taken by governments around the world, but I think you have to apply a bit more analytical skill to back this assertion up than just saying that profits doubled.

As a trader who has worked in both the pits and in an investment bank, I dont think Ive ever read so much neo-Trotskyite claptrap on this subject.

I would question the likes of "Treading Water" who say that "trading is easy...anyone could do it" as utter poppycock.

As ever the main crux of this debate is lost in the emotional "bankers are greedy" mantra of envious Joe Public. Put simply there needs to be clear alignment between performance and reward. If this can be demonstrably shown to the satisfaction of the banks shareholders then what is the issue? This is not a government owned bank and hence should be free to continue its pay practices as it and its shareholders see fit.

Lets stop this envy and actually spend our time focusing on ensuring that the targets of these banks are on SMART principles (Specific, Measurable, Attainable, Relevant and Time Bound), that they are risk adjusted and matched to a short, meadium and long term time horizon and that they continue to adhre to the required solvency ratios and capital requirements of the forthcoming Basel agreements.

That way we can dal with the systemic rather than the individual

29no. TheWalrus999 you quoted me but added [bankers] to the quote.

Currency trading is not currently taxable as it does not occur within taxable boundaries.

22. At 09:39am on 16 Feb 2010, TheWalrus999 wrote:
Hmmm... very sceptical about No.9's comments: " [bankers] produce no wealth for the economy ".

The point is that bankers are middlemen who are taking a cut - they aren't adding value as their judgements about what to invest in have turned out to be flawed in the past few years!


Some examples of them taking a cut...


I want to buy shares in a new company - the bankers underwrite the shares and take a fee of 4%. For every £1 I invest 96p is invested in the new company and 4% goes to the investment bank (plus 0.5% stamp duty goes to govt!)


I invest £30,000 in a bank account paying 2% interest. This is then lent on at a rate of 5%. The bank takes a cut of 3% - i.e. £900 p.a.


I invest 7,200 in a stock and shares ISA. There is a fee of 2% to pay for the expertise of the fund manager even if the value of it plummets?!


writingsonthewall has often posted about this subject (and made a much clearer argument than me) - check out some of his previous posts!

It is very irritating that no one remembers to mention individual customers who are doing personal banking with Barclays. In the summer of 2008 I was receiving about £30 in monthly interest on my small savings account. Since the crisis began, I am lucky if the monthly interest credit breaks a pound. Yet my money and that of millions of other small customers is what's in the pot that Barclays uses to make these massive profits. The public was encouraged to save rather than spend on credit at the height of the crisis: is this what we get in return? Virtually no interest on our truly hard-earned money, while bankers make obscene bonuses. Those commenters who say good on a UK company for doing well should back that up by putting their money in a Barclays savings account. Then they'll sing a different tune.

Great news to see an English bank making such a large profit, nice to see that lending has increased significantly for Britain. Although of course some will complain they lended too much if there is a double dip recession, cant please some people.

Banks now operate within a culture where they can now,never fail.the economy is being propped up by those,foolish enough to have savings
earning derisory interest rates.Yet again borrowers enjoy preferential treatment while savers despair.

It's simply massive greed on an unprecedented scale. With pathetic or no justification. Where's the petition?

38. Mellow Man Ace 'As a trader who has worked in both the pits and in an investment bank, I dont think Ive ever read so much neo-Trotskyite claptrap on this subject.'

Just so you know, Trotskyites are anarchists who work in the long-term interest of those who do well from the free-market, i.e deregulators and anti-statists. One always has to ask what they oppose. Think Russia in 1917.

See also the history of the Neoconservatives, and their bankers - these are wreckers of states, not builders.

Human psychology - it's tricky stuff, especially this stuff. It is short-sighted self-interest. This is child-like in its responsibility.

I may be going against the grain here but I don't think that 191k average is excessive.
Don't forget that they used to take home lottery jackpots!
And don't forget the taxes.
Barclays have avoided complete disaster, and managed to fund their deficits from other sources than the public.
But the idea of "superbankers" is surely a myth.
"Masters of the universe"?....utter garbage.
Do an excellent job and recieve excellent pay...fair enough, but don't rip off the public.
The financial mess is far from over, and may yet turn political.

no.26 It is time for an end to bank bashing as it is completely pointless. Barclay's did not receive any direct support from the taxpayer.

It is true that they have benefited from the wide ranging support to their industry but is that their fault? They are a business, there principle objective is to maximise profits and this they have achieved.

Any other questions about their role in society and the scale of their profits should be answered by those managing our economy.

Unfortunately it just so happens that our economy is being managed by a select crop of incompetent incumbents that are perminantely paralyzed like rabbits in headlights by the past and future events.

37. At 10:11am on 16 Feb 2010, Dr Dave wrote:

"Barclays profits

2000: £2.5bn
2001: £2.5bn
2002: £2.3bn
2003: £2.7bn
2004: £3.3bn
2005: £3.8bn
2006: £5.2bn
2007: £5.1bn
2008: £5.3bn
2009: £5.3bn"



If these are real profits it would look like Barclays is a very stable bank then let me ask:

1. How come Barclays had to borrow from foreign investors at a punitive rate of over 10%?

2. Why have Barclays had to participate in Government Guarantee schemes to help them to borrow more cheaply on the market?

3. Why has their share price fallen so much since 2007?

4. Why is their dividend payment so small?


What if these 'profits' are just paper profits - done through manipulating the accounts through use of derivatives and over optimistic estimates regarding bad loans etc...

The problem is with banking that you will only find out if loans made today are profitable many years down the line - but the massive bonuses are paid now even though the profits are likely to not materialise

Even though Barclay's did not take the government money directly they must have benefited from the massive injection of cash into the banking sector. My guess is that they would not be in profit now if a total meltdown had been allowed.

Not everyone at Barclays is a “top banker”. Some of us work in other areas such as operations and IT where we regularly put in 50 hour weeks and don’t earn either huge salaries or big pensions. It’s the tens of thousands of us who each get a small bonus who have contributed to what seems like an obscene figure for bonuses. Spare a thought for us when bashing the banks.

I am a little confused. The banks are leant £35 Billion then post record profits, so I pose a question - when will the Banks start to use there record profits to pay back the debt? Odd but im my simple world why should we, the humble tax payer, pay twice. Public money to bail the banks out then the inevitable tax increase to pay back the borrowed money. Surely the banks should pay back the debt out of there profits?

Dear Mr Peston,
what exactly have you got to sell your readers?
Isn't everything that you write, the money you make from selling your book, etc. implicitly benefiting from government support too?
Would your opinions be so prominent, were it not for the credit crunch?
The answer is obvious. And what is your pay? How does it compare to that a Barclays Capital average investment banker? And what exactly do you produce? What do you add to society? Can you get back to this post please?

#18. At 09:36am on 16 Feb 2010, John_from_Hendon wrote:

“How much tax did Barclays pay?
If I 'earned' 10 billion I would expect to pay 5 billion in tax - did Barclays?”

Well, their GAAP reported taxes were:

2006: £1.9bn
2007: £2.0bn
2008: £0.8bn
2009: £1.4bn

Sadly, the rules used to work out GAAP profits and taxes bear no close relationship to those used to work out taxable profits and hence taxes due (and that’s the same for all companies, not just Barclays).

In all but the very simplest cases, accounting profits and taxable profits will be different – possibly significantly different (just look at Cadbury – a profitable company that paid no UK tax). It’s also worth remembering that corporation tax is levied at 28%, not 50%, so even if the two profit calculations were the same, you’d expect to pay about £3bn of tax, not £5bn.

#39. At 10:14am on 16 Feb 2010, Treading Water wrote:

"Currency trading is not currently taxable as it does not occur within taxable boundaries."

I’m not sure what you mean by this.

A UK trade of currency trading would either be subject to UK income tax (if you are self employed or in a partnership) or corporation tax (for a company).

If you are “trading” on a small scale in the UK, so the activity does not amount to a “trade” for UK tax purposes then you are subject to UK CGT (if you are self employed or in a partnership) or corporation tax (for a company).

Spread betting is subject to gaming tax rules, and hence seen as “tax free”.

If you mean that offshore trading is not taxable in the UK, that’s not limited to currency trading. A non-UK company (or individual) conducting a trade outside of the UK is generally not subject to UK tax, no matter what the trade is (with some obvious exceptions for UK real property).

Two stories re banking on the Business pages today.

The first is this about Barclays big jump in profits.

The second is about record highs on credit card rates.

https://news.bbc.co.uk/1/hi/business/8517738.stm

The cynics amongst us might believe the two are linked.

The real problem is that Banks, and those that support them, think we live in a capitalist free market. If we did and these people made a profit and took large payments I would have not objection whatsoever. But this is not the case. If it was then all of the banks, I think without exception, would have gone bankrupt. This is why I object to the pay and bonuses structure. I am a capitalist and I think the banks should have been allowed to fail and then all of the bankers would have been out of a job and the banking sector would have had to start again.

I know people will say this would have been bad but it is the only way in a proper capitalist system. We are already seeing the consequences of not running a capitalist system and that is bankers being feather bedded. The problem is that now we see Greece about to fail but it will be stopped. So the Euro may fail what then? All of these problems stem from not running a capitalist system but instead we run a rigged system.

Therefore the inequity will continue and we will lurch from one financial crisis to another. Only if bankers, and politicians, have to really deal with the consequences of their actions will there be discipline in the markets.

This comment was removed because the moderators found it broke the house rules. Explain.

I predict greater things to come for Barclays as they continue to slash their Retail employee's bonuses, make Retail staff redundant and continue with their strategy of off-shoring Retail jobs!

40. At 10:15am on 16 Feb 2010, danj180 wrote

"The point is that bankers are middlemen who are taking a cut - they aren't adding value"

Danj180 - your examples of bankers "taking a cut" have inadvertantly argued exactly why banks do add value.

If banks didn't exist, and you wanted to save £30k, you would have to search the country high and wide to find someone who wanted to borrow £30k. You would then have to assess their creditworthiness to determine if they will pay you back, agree an interest rate, term of the loan and repayment schedule. You would then need to draw up a legally binding contract and monitor the repayments and hold the borrower to account should they default on the loan. All of this will obviously take time and carry significant transaction costs.

You are right, banks do act as the middleman, and in doing so perform a vital role for our economy in channeling funds from those who wish to invest to those who wish to borrow - of course there is no point doing this if you can't take "a cut" for your efforts. Without banks performing this function we would still be living in the dark ages.

Robert, my daughter has worked for Barclays for 40 years, and has been moved from one job to another so that she can fill in when needed in any of the positions required of her.
Last year her bonus was the princeley sum of £800.00,and when I look at the figures posted, quoting averages from £19,000 to £190,000 I begin to wonder where these figures come from.
Any idea Robert?

no.56 Hepdoc I agree with you, I was happy to let the system fail at the time and I would be happy to do so when it happens again.

#48. At 10:37am on 16 Feb 2010, danj180 wrote:

“1. How come Barclays had to borrow from foreign investors at a punitive rate of over 10%?”

Well, Barclays borrows from foreign lenders all the time. If you are referring to the equity issue, then I assume they wanted to bolster their capital base. As to whether or not “over 10%” is “punitive” I don’t really know. Whatever the rate of return they agreed with their investors was presumably felt to be more favourable its shareholders than issuing equity to HMG.


“2. Why have Barclays had to participate in Government Guarantee schemes to help them to borrow more cheaply on the market?”

If you are referring to the HMG Asset Protection Scheme, then to quote from today’s announcement:
‘In March, we decided not to participate in the UK Government’s Asset Protection Scheme, following the application of a detailed stress test by the UK Financial Services Authority to determine our resilience to stressed credit risk, market risk and economic conditions.’

If you are referring to the Bank of England’s programs like the Asset Purchase Facility, then I believe that these are open to most market participants. I am sure that Barclays works quite hard to minimise its funding costs and so if these programs result in lower funding costs then Barclays will use them. It seems a little harsh to blame Barclays for this.


“3. Why has their share price fallen so much since 2007?”

Barclays stock has suffered more than the FTSE100 in the last couple of years, but that is on the back of about 7 years of outperforming the FTSE100. Barclays has outperformed several other bank stocks.


“4. Why is their dividend payment so small?”

I can only guess that they think that the market will bear a dividend of this amount.


“What if these 'profits' are just paper profits - done through manipulating the accounts through use of derivatives and over optimistic estimates regarding bad loans etc...”

I suppose that these profits are as ‘paper’ as any other large organisation. Barclays accounts under GAAP, which is designed to produce accounting results, and that’s all. C12 and Protium took place in the year in question, and some would assert that this restructuring manipulated the accounts.

“The problem is with banking that you will only find out if loans made today are profitable many years down the line - but the massive bonuses are paid now even though the profits are likely to not materialise”

There is indeed a problem in trying to drive longer term shareholder benefits through shorter term profit related pay structures.

47. treading water.
barclays did recieve money from the taxpayer to keep going but it was BEFORE northern rock so hadn't registered on most people's radar. £1.6 bn to be precise. as for paying taxes many banks operate parts of their businesses as trusts to avoid taxes.
I think the 'good honest business practices' that have brought about this surge in profitability need to be more transparent and not shielded from the gaze of the oft, the fsa and any other ineffective body that's supposed to be in control of this pyramid selling.

#59. At 11:22am on 16 Feb 2010, Felix Le Bon wrote:
"The point is that bankers are middlemen who are taking a cut - they aren't adding value…"
“You are right, banks do act as the middleman, and in doing so perform a vital role for our economy in channeling funds from those who wish to invest to those who wish to borrow - of course there is no point doing this if you can't take "a cut" for your efforts. Without banks performing this function we would still be living in the dark ages.”

Of course, this analysis is not limited to banks – what about all the other service providers that we use (grudgingly)? Do estate agents add value?

What about a supermarket – they buy stuff, stack it up, and sell it to us at a higher price – is a potato in a supermarket worth more than a potato on a farm?

The reality is that every time we do anything we have a choice – do it ourselves, or pay someone else to do it for us.

We could grow our own potatoes, but most people would rather pay a significant mark-up on cost to get someone else to organise potatoes for us.

We could organise the marketing and sale of our own houses, yet most of us employ an estate agent to do it for us.

We could try to arrange our own loans and investments, but most of us don’t.

56 Hepdoc

I also agree with you. What we have right now is gambling, funded by taxpayers, where the "top of the tree" always wins, even when they lose.

> 22. At 09:39am on 16 Feb 2010, TheWalrus999 wrote:

As far as I was aware, investment banking contributes to the ecomomy by paying tax on every transaction made.

Nope!
Not a penny.
That's why the Robin Hood Tax has been proposed, which the Bankers are objecting to of course. See the video (on youtube etc) for further details.


>54. At 10:46am on 16 Feb 2010, Dr Dave wrote:

Spread betting is subject to gaming tax rules, and hence seen as “tax free”.

Taxed at 11%.
It used to be that the tax was optional on when it was paid; it could be paid on making the bet or collecting the winnings.
Mathematically there was no difference to winnings whether you paid the tax up front or on collection, but non winning bets were therefore not taxed unless the person making the bet chose to pay up front.

#55. At 10:52am on 16 Feb 2010, Ian_the_chopper wrote:

“Two stories re banking on the Business pages today.
The first is this about Barclays big jump in profits.
The second is about record highs on credit card rates.
https://news.bbc.co.uk/1/hi/business/8517738.stm
The cynics amongst us might believe the two are linked.”

In their announcement, Barclays indicate that their profits (before tax) on the Barclaycard business declined from £789m (2008) to £761m (2009).

So, subject to a natural cynicism about using figures presented in GAAP accounts, I’d say that Barclaycard didn’t make a hugely increased contribution to Barclays’ profit.

#66. At 11:47am on 16 Feb 2010, Leviticus wrote:
“Taxed at 11%.
It used to be that the tax was optional on when it was paid; it could be paid on making the bet or collecting the winnings.
Mathematically there was no difference to winnings whether you paid the tax up front or on collection, but non winning bets were therefore not taxed unless the person making the bet chose to pay up front.”

Thank you – this leaves me even less sure how (profitable) FX trading in the UK could be outside of the UK tax net.

64. At 11:38am on 16 Feb 2010, Dr Dave wrote:

"We could try to arrange our own loans and investments, but most of us don’t"

Dr Dave - although I agree with the general thrust of your post I think you have slightly missed my point. The reason we don't arrange our own loans and investments is because it would be very expensive, time consuming and difficult to do so for the reasons mentioned in my first post. Try going out tomorrow to borrow £5k without visiting a financial institution, friends or family - I think you will find it very difficult to find anyone willing to lend you the money.

By utilising economies of scale and scope banks are able to reduce these search and transaction costs significantly thereby providing a vital service to our economy. It is known as "financial intermediation" and rather than being "analysis", it is a well understood and supported part of financial economics that has existed for century's.

Re Dr Dave,

I applaud your factual analysis. We do need more facts and less hysteria.

The GAAP profits however do highlight an issue for me. We all see the large reported profits of large corporations in the news. Off this, bonuses etc are paid, and we get an emotional sense of how successful a company is.

We also assume that the company will be paying lots of tax to HMRC, so it's all good. They do indeed pay lots of tax, but nowhere near the rates that you would expect.

Running my own company, I understand that tax accounts look different from published accounts. However it does seem that the large companies try very, very hard to minimise tax payable, on a scale that very few individuals are able to copy, and if we did, we'd probably end up in jail eventually.

So yes Barclays are making good profits, but the taxman does not see very much of this profit via Barclays. It will get more revenue from it's employees than the company.

In this respect, taxwise we're all better off if a corporate employs loads of people, than makes loads of published profit.

69. At 12:06pm on 16 Feb 2010, Felix Le Bon wrote:
“Dr Dave - although I agree with the general thrust of your post I think you have slightly missed my point. The reason we don't arrange our own loans and investments is because it would be very expensive, time consuming and difficult to do so for the reasons mentioned in my first post. Try going out tomorrow to borrow £5k without visiting a financial institution, friends or family - I think you will find it very difficult to find anyone willing to lend you the money.

By utilising economies of scale and scope banks are able to reduce these search and transaction costs significantly thereby providing a vital service to our economy. It is known as "financial intermediation" and rather than being "analysis", it is a well understood and supported part of financial economics that has existed for century's.”

I absolutely agree with you.

I just find it interesting that in some markets, where market intermediaries make the market work for everyone (like banking), this is commonly seen as dreadful and not adding value, whereas in others, exactly the same kind of activity is seen as part of everyday life and not a problem (like supermarkets).

The problems might be different, and it might be functionally impossible in the one case, and just very hard in the other, but some people seem to see certain intermediation roles as ‘worthy’ and others as ‘unworthy’, which I find curious.

> 68. At 11:55am on 16 Feb 2010, Dr Dave wrote:

Thank you – this leaves me even less sure how (profitable) FX trading in the UK could be outside of the UK tax net.

You and me both!

kedz wrote: Barclays has performed well versus it's peers... The people who are bank bashing now will be the first to complain if... Barclays ever decide to move their head offices overseas.
Right kedz, so you work for a Bank then if not for Barclays.
It's ok. I'm not the first to be 'bank bashing'... I'm the same with thieves and criminals... it's not their fault is it. They're part of the whole spectrum of human behaviour. But should any criminal move their HQ abroad they'll probably find themselves not getting away with so much as they are used to in the UK with its Brown's Woolly Puppet Brigade.
Now, had I said Banks are criminals?

Could you provide a cross-section of real-life bonus profiles so that I can relate to the actions that merited these bonuses? It would help put matters into perspective.

>69. At 12:06pm on 16 Feb 2010, Felix Le Bon wrote:

Try going out tomorrow to borrow £5k without visiting a financial institution, friends or family - I think you will find it very difficult to find anyone willing to lend you the money.


I think one of the problems is that, on the whole, we go to the institutions first.

I accompanied a friend of mine into town a fortnight ago, where he made a payment off of a short term loan had had taken with a company called 'Mutual' about a year ago. It was £500 originally, he had paid back (so far) about £800 or so and wasn't sure how much he had left to go.
Why did he go to them?
Two reasons:

1) The high street banks wouldn't lend to him. He hasn't lent from them previously and has no credit card- thus has no credit score. So they turned him down.

2) He didn't ask me!


I have told him to find out how much he has left to go and I'll lend him that amount without any stupid charges.


If more of us did simple things like this, less power over our lives would be held by the 'too big to fail' institutions!

How much would Barclays have made, if say the governments had sat back and refused to bail-out RBS and all the others?

1. Break them up. All of them. Just too dangerous and pose a threat to all of us.
2. Implement a RobinHoodTax yesterdya
3. Close all tax havens
4. Close down and make illegal all tax-dodgy strategies

So Dr Dave and Felix Le Bon - so you agree that the bankers are middle men

so why do the investment bankers seem to get paid so much more than other middle men?

also when bankers were 'middle men' many years ago they didn't seem to get paid as much?

the banking 'middlemen' who work in operations, call centres, the branches and IT providing the services that customers want don't get paid massive sums?

We were told (before the banking sector problems) that the extra pay for the investment bankers was due to the fact they had brought innovation to the financial world and made the financial world and economy safer - this turned out to be false!


It seems that the market for investment bankers is not functioning properly - there are many excellent graduates out of work atm who would be queueing up for jobs in investment banks - the wages could easily be lowered but those at the top don't want to as their own high wages are built on the myth of the superstar talent that they have!


One reason I believe the bankers seem to be able to pay so much is that their 'product' is money - all of our cash flows through their institutions and we don't have a choice about that?!


Any other ideas for why the market doesn't seem to be functioning properly for investment bankers pay at the top end?

I have no issue with Barclays paying bonuses. I have in the recent past worked for one of the large "Failed" banks, and have profited from bonuses (albeit no where near the "average" scale being discussed today). I received a bonus in line with my performance - as is the norm in alot of organisations.
I wasnt involved on the trading floors or in any way related to the business side which led to our current situation however I provided the IT systems and support they required to do their business.
The issue I have (and had at the time of working for said failed bank) is how the bonus pot is distributed - It is weighted in such a way that the high earners get more, and the low paid get less, if any.
Banks are not just the high and mighty, the pinstripe masses who trade peoples futures (pardon the pun) away and enjoy champagne, oysters and cigars no matter what the result. The large majority of banks employees are every day folks who earn between 10K - 20K a year, and sit on the phone, at a counter or in the many back office type functions. These are the people who are at this time taking all the heat from joe public for the state of the economy, for the bonus row and any other item that springs to their mind. some of what I have witnessed these customers do in my local branch is disgusting.......
These people who face the public day in day out, who see the hatred from customers, are the forgotten masses. They too pay taxes and are impacted as tax payers due to the bail out. They struggle to make ends meet like everyone else. They didnt make the choices and decisions that led us to our present situation, and had no ability to influence it. Yet due to the decisions and actions of an elite few in the company they work for they now have a working hell every day of their lives.
I agree with bonuses within sensible and resonable limits - I think Barclays have got their numbers wrong if they are giving as much to those as is stated - lets distribute the pot more fairly, and recognise the work thats done by the plebs on the front line......

At 12:22pm on 16 Feb 2010, Dr Dave wrote:

"some people seem to see certain intermediation roles as ‘worthy’ and others as ‘unworthy’, which I find curious"

Indeed it is curious. I think in the case of banking there are two reasons.

Firstly, due to the psychological affects of money (I am by no means an expect in this area, merely speculating) - people value money greater than any other commodity. As such they are undestandably protective of it and dilike the fact that a business can make vasts profits off the back of their money.

Secondly, many fail to understand, appreciate or take for granted the benefits a banking system provides (when it works of course!)to a well functioning economy but instead only see the costs to them i.e fees, charges etc. Brunel hated the "money lenders" but ultimately it was them that provided him with the funds to build his railways and bridges that greatly benefited us all.

# 5:

I agree with what you say. You would have thought there would have been more civil unrest due to the mess our wonderful financial geniuses have made and who now have the affront to reward themselves more bonuses. These people obviously have no shame. I think things might take a turn for the worse when we go into the double dip phase of this downturn. As soon as thousands of public sector workers are kicked out of work, unemployment begins to rise, repossessions increase, interest rates begin to rise I can see things turning very nasty. Maybe we should borrow a guillotine off the French and set it up in the city. How would the bonuses be worked out - number of heads lopped off - or quality of heads lopped off?

TheWalrus999 - The creation of value is not the same as moving money around.

True, a great deal of taxation comes from the big glut of profits enjoyed by Barclays, but by and large this is wealth that has been extracted from other areas of the economy (or freshly printed by the Bank of England).

Had Barclays not been given the coveted position of being licensed to extract money from the economy, then it's highly likely that similar aggregate tax would have been contributed by myriad other businesses - who might not have folded.

Did Barclays increase the nation's capital accumulation? Where they truly productive? No, that is for the small businesses, the entrepreneurs, the scientists etc IN SPITE of the actions of the modern banking industry.

77. At 1:09pm on 16 Feb 2010, danj180 wrote:

"so why do the investment bankers seem to get paid so much more than other middle men?"

Because a persons wage is determined - not by some subjective degree of worthiness - but by market forces. i.e supply and demand.

Although you believe the idea that investment bankers (I am not one by the way) are talented individuals is a myth, the reality is that there are very few people capable of doing that job. You need an exceptional academic record - often to postgraduate level, exceptional interpersonal skills and mathmatical ability, the ability to work under extreme pressure, to analyse vast quantities of information and make accurate decisions quickly and the desire and willingness to work very long hours. It is these attributes that make the supply of people who are capable of being an investment banker very low. This is not the case for other middlemen such as estate agents.

Conversley, a good investment banker will make millions for their employer. Thus they are in high demand by banks. High demand and low supply equals a high salary.

It is for exactly the same reasons why lawyers, accountants, neurosurgeons, footballers etc also recieve high salaries.

I am not defending the actions of some investment bankers who have behaved recklessly - they do not deserve any performance related pay. But the day we start dictating how much people should earn (a national obsession at the moment) based on some subjective degree of worthinesses, or by making them guilty by assoiciation (the case for most bankers)is the day we move into a Socialist state.

The incredible thing is that Barclay's liquid capital increased by around 80 billion pounds over the year. That is a huge amount of money. Compare this with the government gilt issue of 178 billion and you can see where it all went - onto the balance sheets of banks to increase their capital ratios. It is beginning to look like 178 bn maybe wasn't enough to give the rest of the UK enough working capital. Let's all stop worrying about it being too much.

So Barclay made a bomb out Lehmans by being in the right place at the right time with the right money. I have no hang up with that.
What makes me angry is the fact that RBS has no money to invest in this country but it could find $1b to lend to Kraft to make a hostile bid for Cadbury and ultimately put thousands of British people out of work.
I would like Robert to tell me how these investment banks make these billions of pounds. Is it because they are paying savers next to nothing interest on their savings and lending it out at between 5% and 30%?
Some say they make billions on the currency and derivative markets. If this is so for every buyer there is a seller, for every winner there is a loser. How come we never hear about the losers?
Which ever way you look at it we are all getting stuffed while they live a life we can only dream about.

Amazing.
Record profits,billions in bonuses and NO DIVDEND. Why does everyone want to be Goldman Sachs ??
If/When they make a loss, workers/assossiates will have to pay in from previous salary/bonus. Right ??

[1;MENDIP, Well Spring no.6. Meydan Carnival. please know your place of water.
2:Reading for the next few weeks is 'Felix Holt']]

When a bank employee earns more than a thousand nurses there is something wrong with capitalism and its days are numbered.

Would be nice if some of the money was used to help out british steel at redcar which this week is laying off all the work force.
The goverment should be wary and would be wise in not taking the public for granted, if these types of events keep happening public unrest will become an issue revolutions have started over lesser things especially at the moment with voter appathy levels sky high.

Instead of all these overpaid so called masters of the universe whose only reason for being is to line the pockets of themselves and their gordon gekko bosses, it would be nice to have a manufacturing industry in this country that actually made things, real things, not ethereal pots of money that just circulate between the chosen few. Bring on the revolution!

> 82. At 2:08pm on 16 Feb 2010, Felix Le Bon wrote:

Because a persons wage is determined - not by some subjective degree of worthiness - but by market forces. i.e supply and demand.

Unfortunately there is actually quite an excess of people willing to be trained as investment bankers and pick up extremely high salaries, but not enough jobs. The only reason such high extremes of qualifications are neccessary (allegedly, I know of a few who got their jobs through family not exams!) is because of the high volume of applicants.
In other words there is a very high supply- so that reasoning doesn't truly apply.


Compare this to engineering, where we have a deficit in recruits and are having to bring in talent from places like Zimbabwe- because we have run out of people we can get in from other EU countries!
Companies are having to look for people with appropriate A Levels rather than degrees, but I don't hear about any 6 figure salaries and 7 figure bonuses for keeping the lights on, the gas flowing, the water moving etc
Meanwhile we still see an exodus of engineers from the UK to Australia, New Zealand and the US...

You need ... the ability to work under extreme pressure, to analyse vast quantities of information and make accurate decisions quickly...

What about air traffic controllers?
High voltage grid controllers?
Gas grid controllers?

These people make decisions that can be life or death many times a day, every day. And there are fewer of each profession in the UK than a single bank has investment bankers!


Whilst it would be nice to think that supply and demand is the real reason for these inflated salaries and bonuses, the truth of the matter is that you have a group of people effectively in charge of both their own pay packet and the purse strings of the economy!



But the day we start dictating how much people should earn... is the day we move into a Socialist state.

Well, it would be nice to see one at last!
Unfortunately, the USSR was a totalitarian regime. A simple look at the occupiers of the Kremlin at any point during its so called 'communist' era will rapidly demonstrate that no such rules preventing a massive disparity betwen the top and bottom echelons of society ever existed.
We can see this also in China, where millions live hand to mouth based on their average wage whilst those at the top may as well be using gold leaf toilet paper!

Meanwhile the Labour party abandoned its principles and switched to a softly softly capitalist agenda.

The simple fact is that a middle man like a supermarket can be bypassed.
If I want to go direct to the farmer I can. If I want to go direct to the manufacturer it might require a large order (as they deal in pallets not individual parcels), but I can. If I want to go direct to the central bank I can't.

Supermarkets know they can be bypassed, Banks know they can't!
In fact, try getting a job with a big company and not have your wage paid via a bank. It's getting to the point where you have to have an account by law!

#70. At 12:21pm on 16 Feb 2010, Crookwood wrote:

"I applaud your factual analysis. We do need more facts and less hysteria."

Thank you - I appreciate your comments.



“However it does seem that the large companies try very, very hard to minimise tax payable, on a scale that very few individuals are able to copy, and if we did, we'd probably end up in jail eventually.”

It is certainly true that many large organisations in the UK and the US try to legally minimise the amount of tax they pay. It is also probably true that banks have more opportunities to undertake this kind of planning than industrial companies, for example, because of the mobility of human and financial capital, and their ability to access leverage.

HMRC’s own estimates of the “tax gap” (which includes both evasion and legal avoidance) in 2009 are as follows:

VAT: £11.5bn
Other indirect: £3.2bn (e.g. cigs, petrol etc)
Personal taxes: £15.8bn (income tax, CGT etc)
Avoidance by very large businesses: £3.1bn
Other corporation tax: £5.8bn
Other: £1.8bn

This would suggest that the majority of the tax gap comes not from banks avoidance (which would fall into ‘avoidance by very large businesses’) but from individuals not paying VAT and income taxes.

Looking at avoidance by anyone (corporate or individual) compared to other elements (fraud etc) gives the following comparison:

Avoidance: £4.7bn
Other: £35.3bn

So, whilst avoidance may be unpalatable, HMRC’s figures suggest it is small compared to other causes of non payment of tax.


===========================
“So yes Barclays are making good profits, but the taxman does not see very much of this profit via Barclays. It will get more revenue from it's employees than the company.”


I cannot say what the figures are for Barclays, but PWC produced a study in late 2008 relating to the financial year to 31 March 2007 with the following estimates for the taxes bourn by the financial services sector in London as a whole:

Corp Tax = £12.2bn = 2.5% of government receipts
Other = £20.6bn = 4.3% of government receipts
Total = £32.8bn = 6.8% of government receipts

“Other” in this case is business rates, employer’s NIC, stamp duties and irrecoverable VAT. The corporation tax paid by the sector equated to 27.5% of the total corporation tax collected in the year.

The sector also collected taxes on behalf of the government (PAYE, tax withheld at source, employee NICs, stamp duty reserve tax, insurance premium tax and VAT) totalling £35bn.

The total tax bourn and collected was £67.8bn, equating to 13.9% of the total government receipts in the year.

Employment related taxes (employer and employee NIC and PAYE) compared to other taxes in the sector as follows:

Employment related taxes: £25.7bn
Non-employment taxes: £26.8bn

So I suppose it could be argued that taxwise, a bit more is paid by the financial services sector than by its employees.

These figures do not take into account the taxation of dividends paid by the banks or other taxes paid by their employees – in particular, VAT and non PAYE income tax. I suspect that taking these things into account would probably tip the balance so more tax is paid by the employees than the employers.

However, I don’t think this is altogether unusual. In 2008, income tax alone was £147bn, compared to only £43bn of corporation tax, so without factoring in all the other taxes paid by individuals, it seems highly likely that HMRC gets more tax from employees than it does from employers.


===========================
“In this respect, taxwise we're all better off if a corporate employs loads of people, than makes loads of published profit.”

Yes, I think that is correct – particularly if the choice is between GAAP profit and employment. Certainly the government appears extract considerably more tax from employees and consumers than it does from employers, which is rather bad news for VAT and basis rate income tax come the next parliament.

# 89:

Hear, Hear! These people pay themselves what they want regardless of results.

#79. At 1:39pm on 16 Feb 2010, Felix Le Bon wrote:
“Secondly, many fail to understand, appreciate or take for granted the benefits a banking system provides (when it works of course!)to a well functioning economy but instead only see the costs to them i.e fees, charges etc.”

I think you may be right – I have been surprised how many people did not make the link between the banking system ceasing to function and a sudden inability to buy food…

Banks may well pay out generous bonuses to reward staff for their work but at this stage we don't know how much of the business taken on will turn into toxic debt nor do we know what provision the bank has made to ensure we don't get a repeat of the last financial crisis.

Given the meagre size of savings bonuses,it does seem that those within the industry are being rewarded to a greater extent than those actually investing their money in the bank.It appears that savers are putting their money at risk by funding the profit making schemes of the bank but only being paid a pittance.

I've yet to be convinced that the reckless, self-orientated bahaviour of bankers has changed and I feel more strongly that we are heading for yet another crisis.

89. At 3:33pm on 16 Feb 2010, Leviticus wrote:

"Unfortunately there is actually quite an excess of people willing to be trained as investment bankers and pick up extremely high salaries" "there is a very high supply- so that reasoning doesn't truly apply"

You are confusing the definition of supply in Labour economics. There are lots of people willing to be professional footballers but most do not posess the skills or attributes to do this job. The same can be said of investment bankers. Yes, many do apply (most lured by the lucrative rewards) but over 95% are rejected, many at the intial application stage simply because they do not fit the profile of what an investment banker needs to be.

If everyone in this country applied tomorrow to be an astronaught, does that mean we have a high supply of people capable of being an astronaught. No clearly it doesn't.....

"What about air traffic controllers? High voltage grid controllers?
Gas grid controllers? These people make decisions that can be life or death many times a day, every day"

Yes, there our other professions which share similar attributes - but comparing them is difficult and you are not considering the demand forces which impact on wages as well eg. the demand for air traffic controllers is limited by the number of airports.

"Compare this to engineering, where we have a deficit in recruits and are having to bring in talent from places like Zimbabwe"

I agree, we do have a deficit and this is not a good thing - but this is the fault of our education system not the bankers!

"Supermarkets know they can be bypassed, Banks know they can't!"

I'm unsure of the relavance of "bypassing" intermediaries - the reason banks are widely used is because they channel funds between investors and borrowers at a much cheaper rate than we could do individually (see posts 59 & 69). I struggle to see how this is a bad thing....?

As for your tendencies towards Socialism, that is a debate for another time but you provide some pretty good examples in your post of the failures of socialism.

Robert,

This is rubbish.

There was only one thing that worked in the UK economy and that was our financial services sector. Did they deliver 35% of all taxation?

8m people of working age can put there feet up. 4m with lame excuses. I can't read and write despite £5,000 per annum being spent on my education. I can't get a job despite going on three New Deal training programmes to teach me how to build, plumb or be an electrician. I only went on the programme because it paid better than benefits. I have no qualifications despite there being a free Open University. I manage on benefits despite our importing 1.35m guest workers to do the work that I choose not to do. The guest workers can manage, pay tax and NIC for my benefits and even send money home. I will not work on NMW at £7.62 per hour inclusive of the 28 days annual holiday the Unions bartered for me at Warwick University. I'm not going to give up free school meals, free prescriptions, free dental care etc to get a job and pay tax and NIC. And I will teach my children that I'm no fool and they are better off without education. It's all nonesense and look at the money that bankers get. It should be shared out.

It is being shared out. They pay your benefits. They make most of their money abroad. Your bank accout is loss making. Their bonuses are taxed at 58%, that's 50% tax plus 8% NIC. They did numerate degrees and burnt midnight candles. You can get a similar degree for free from the Open University. Go for it. It is work, work, work. Get there and you will choose to leave the counrty when the state takes half of your well earned income and gives it to others who would let there local market gardener go bankrupt when the guest workers go home.

We need you. Without you we have to get many of our investment bankers from abroad. We all have the same intel inside us. Read your children bedtime stories and teach them their times tables. Let them get some of the action. That is what their parents did. Your children's schooling is free, the Open University is free and your library is free. Go for it.

But perhaps you remember the 58% tax and you don't want to give up your free lunch, you don't like the thought of midnight candles and heavy maths. You prefer to read the SUN rather than a broadsheet.

Well please be thankful that we are not all like you and be grateful that some of us work 100 hours per week and fund others who at least have time on their hands and, all in all, may have a better standard of living, albeit not so spiritual.

You live in the land of opportunity. If your opportunity is to freeload then go for it before the money runs out.

Robert,

I have posted a comment above. Please read it and come back to me.

I love to argue. Is there anything else?

We are a democracy. A place where you can argue. You can speak freely, you can put your argument to the test and if, and only if, it is the best argument you can win.

It is not working as it should be. The best argument is not winning. A majority Parliament and a personality culture in the media is trashing the whole thing.

Who cares if Michael Porttilo is gay when we have a National debt of £850b and growing? Who cares whether Barclays Bank makes a profit if they pay taxes? We should delight that at least someone is making a profit for our pensions funds and the Exchequer.

I teach my children that the "Greatest story ever told" is the Socratic method. Your readers may know it as the Hegalian triad or thesis, antithesis and synthesis. I don't care. If they haven't read Popper they will be limping. If you agree that we learn more about the world daily and we do this with science or "common sense writ large" then let me put a proposal to your readers.

"Give me a reason why investment banker bonuses are bad and I will find the time to trash your reasoning."

Let the better argument win. If I loose I will have learnt something.

> 94. At 4:26pm on 16 Feb 2010, Felix Le Bon wrote:

You are confusing the definition of supply in Labour economics. There are lots of people willing to be professional footballers but most do not posess the skills or attributes to do this job. The same can be said of investment bankers...

If everyone in this country applied tomorrow to be an astronaught, does that mean we have a high supply of people capable of being an astronaught....

Actually I think you just emphasised what I was saying, though from another angle.
If everyone in this country were to apply and done their qualifying training to be an astronaught, then I think you would find we would have an awfully large number of people capable of being one. We wouldn't actually employ that number cos we don't have the spaces!

In other words, and in reference to the banks, we have an awfully large number of people who have the ability to be in these high paid roles- but the sheer supply means only the very top (save your laughter please) level are taken. As such, the supply/demand argument is not truly valid because there is actually a higher supply than any demand we have.

Conversely the demand for engineers is so high by comparison to supply that under the s/d argument our control rooms whould be filled with people getting a million a year. But they aren't!


I agree, we do have a deficit and this is not a good thing - but this is the fault of our education system not the bankers!

Didn't say it was, just that it highlights that their argument for such high renumeration is not as valid as they claim!


I'm unsure of the relavance of "bypassing" intermediaries -

That if you can do it the intermediaries value can be truly measured. When you can't it can't.
As I say, try getting a job in a big firm without having a bank account- not possible! It is also becoming (or has the law already come into force?) that you can't get benefits or a pension without an account.
All examples of how the middle man in this case can not be bypassed and therefore not correctly measured.


As for your tendencies towards Socialism, that is a debate for another time but you provide some pretty good examples in your post of the failures of socialism.

Simple really.
Many of the ideas are good, even great. But it gets condemned based on what various governments have done. Which is ironic, cos there hasn't actually been a socialist government yet- just more wolves in sheeps clothing!

The crude theory is that companies pay some people at the top very large bonuses to meet a relatively risk free but quickly rising return to shareholders but of course remuneration committees, mostly consisting of external directors from other companies who have an interest in maintaining 'relativities', approve easy schemes.

You pay staff in financially high jobs big bonuses to stop them running off with the money and allegedly 'motivate them' but its the fun of the chase and the status which does that. You pay bonuses to small people as a share in the organisations wealth gain... to make them feel good.

Many of the people getting high bonuses are either not resident in the UK or arrange their affairs as non doms or another tax benefiting status.

The best solution is to split 'Capital' off from the Bank as a separate company with only commercial relations with other banks.

Here is a copy of the comment I made on "Barclays profits, good or bad?"

There is only one response. Well done Barclays.

Good news for your pension provider, good news for HMRC, good news for state pensions and those on benefits. Bad news for nobody.

I'm sorry that the investment bankers are getting more than you. Get your cv in. Start by getting a numerate degree for free from the Open University. They need your talent to replace those that are leaving the counrty to avoid a 50% tax band.

Footballer's talent is OK but it doesn't do much for you.

I have seven children. I'm sorry. I only wanted two and almost forced my brothers and sisters to only have two. Anyway it happened and life has been solid work ever since.

But we did provide for them. We did read them bedtime stories and we did manage to get 5 into grammar school. We also had unbelievable obstacles but could only look to ourselves and not the state to keep the wolf from the door.

We got some straight A's at a level, a doctorate, two masters, two chemical engineers, one pharmacist, one biotechnical engineer and one chemist. The five chemical degrees are down to my wife having a pharmacy degree. The lust for science and engineering comes from me. We will even suceed in getting our son with autism to university when most of his schools thought it impossible. Only parents are responsible for their children and only parents teach them right from wrong and how to survive in the world. That's what parents do. Don't do it and you are a failure to your children.

Why am I giving this introduction?

Please go to comment 33 below.

What is the point when so many civil servants who spend 20% of their time doing their job and 80% of their time writing to cover their "a..." are the best paid in society and I haven't even mentioned their pensions or sickies?