FROM THE LAND OF CHEESE AND CHOCOLATE…

George Osborne and the Con Dems are prettymuch on their own when it comes to standing up for the bankers and their bonuses. Swiss voters have overwhelmingly voted in a referendum to impose some of the world's toughest controls on executive pay. Almost 68% of the Swiss voters backed plans to give shareholders a veto on compensation and ban big payouts for new and departing managers.

More popular than the Bankers...

While understandably some Business groups argued the proposals would damage Swiss competitiveness ordinary Swiss voters were more concerned with the growing economic divide in the country. The Swiss vote came a few days after the European Union agreed new measures to cap bankers bonuses. Referendum results showed that all 26 Swiss cantons backed the proposals, with 1.6 million voters voting "Yes" with 762,000 voting “NO”.

Multibillion dollar losses by Swiss banking giant UBS (which were covered by the Swiss government), and thousands of redundancies at pharmaceutical company Novartis, have caused a wave of anger in Switzerland as high salaries and bonuses for managers had remained unchanged. The new measures  give Switzerland some of the world's strictest corporate rules, with Shareholders having a veto on salaries, golden handshakes will be forbidden, and managers of companies who flout the rules may  face prison (now there’s a nice idea!).

The so called "fat cat initiative" will be written into the Swiss constitution and apply to all Swiss companies listed on Switzerland's stock exchange. Last week the European Union agreed a deal which means that bankers bonuses will be capped at a year's salary, but can rise to two year's pay but only if shareholders approve. The Con Dem Government has argued the EU bonus rules will drive away talent and restrict growth in the financial sector.

Remember this...

"It is wholly untenable to have millions of people making sacrifices in their living standards only to see the banks getting away scot-free." 

Nick Clegg, Deputy Prime Minister, 17 December 2010 

and also this...

"Bankers have to realise that the British public helped to bail out the banks and it is very galling when they see bankers pay themselves unjustified bonuses." 

David Cameron, Prime Minister, 17 December 2010

The former New Labour government made much of its light (more like non-existent) financial regulatory touch, well at least until the wheels came spectacularly off the wagon. The Con Dem's have effectively refused to take any action over banking regulation until after the next Westminster general election. Interestingly enough before the government limos arrived (and they were in government) before the last Westminster election Vince Cable (currently the Business Secretary) and George Osborne (currently Chancellor) were at it hammer and tongs as to who was going to be toughest when it came to regulating and controlling the worst excesses of the banks.

Personally I think that The Con Dem UK Government (and their formerly New Labour predecessors) have missed an opportunity to break up and 'privatise' the larger 'publicly owned' financial institutions, they should have sold the shares on the open market with specific quotas on how many shares any one institution can own. From where many people are sat these bloated overgrown banking organisations appear to be a serious block on the ‘free market’ and too busy lining their own pockets. George Osborne and the Tories appear to have reluctantly gone along with the much publicly stated need to regulate the more unsavoury aspects of the banking sector, but, whether they will actually and eventually do anything is open to question.

Perhaps they ought to come clean and simply declare an interest as regulating the banks in the City may impinge on the acquisition of future lucrative directorships in City banks unless they have them already that is? One question that may also remain unanswered is whether or not they will do anything about tax evasion, tax avoidance and the regulation tax havens? It's odd really because the Con Dem's have displayed such zeal in their efforts to chase people on benefits.

A QUESTION OF PRIORITIES?

At the end of the day it comes down to a question of priorities, two different issues bankers bonuses and the bedroom tax may well clearly define this Conservative dominated coalition government, and show that its priorities are at odds with those of most ordinary voters. David Cameron and Boris Johnson defence of pretty indefensible bankers bonuses and their strident criticism of European Union attempts to curb them is all too typical of a Westminster based political party that still reveres the City.

DC on a sticky wicket after the Eastleigh By-election?

This is not I suspect simply a Conservative position and that  this defence of bankers bonuses would also probably be made by the Labour Party if it was in power.  The EU has brought in a reasonable cap on bankers bonuses, seeking to limit them to no more than a year's basic pay, with an option for shareholders to agree to double it. I suspect that many voters along with many economists blame excessive bonuses in the financial sector for encouraging the risky irresponsible behaviour that brought on the 2008 financial crisis.

Top bankers and financial traders earned bonuses multiple times their base salaries, generating public anger over bonuses especially following the huge publically funded bail-outs of banks. Dave and Boris’s defence of the bankers and the Labour Party’s relative silence on the issue may, in my option have more to do with future job prospects for former Westminster politicians than it does with any heartfelt ideological love of the free market.

The other issue that will help define this Con Dem Coalition Government is its desire to bring in the "bedroom tax” (or housing under-occupancy penalty) which will hit on some of the society’s  most vulnerable people - including pensioners, people will disabilities, separated families and families of service personnel. The Con Dems are seeking to penalise those who are in receipt of housing benefit while having one or more spare bedrooms in their houses. Even the Department for Work and Pensions' figures show that 63% of the 660,000 claimants affected by the bedroom tax or their partners are disabled.

Plaid Cymru, the SNP and the Greens (and even the Labour Party in Westminster) have put pressure on the Con Dem Government to think again. The bed room tax is an ideologically driven exercise to save money at the expense of some of vulnerable people – potentially it could force around 400,000 disabled people and their partners out of their homes and is wrong both in principle and in practice.

This Conservative dominated coalition has defined itself by failing to tackle tax evasion to recover lost tax, by failing to deal with excessive profiteering by the big six energy companies and failing to curb the bankers excesses. Instead this Con Dem government is going after those who can least afford to be taxed and is actually going out to bat for the City and standing up for bankers bonuses.

SONS OF BANKERS AND FRIENDS OF BANKERS…

PLAID is right to call for any banking reform to benefit small businesses. It is very important that the Banking White Paper does not water down proposals for the separation of retail and investment banking interests which will protect ordinary customers money.

That said, few outside the Westminster village will be shocked to discover that the wealthy banking lobby have successfully in persuaded the Con-Dems to relax recommendations from the Independent Commission on Banking. These recommendations related to enforcing a separation between retail banks, which hold savers deposits, and investment banks which use investors funds to make money (casino banking).

Plaid also called for an end to credit default swaps for businesses, warning that small companies have been mis-sold complex financial products by banks and then have found themselves in financial difficulty afterwards. A complete separation of retail and investment banking interests should provide significantly better protection for customers and small businesses and should take much of the risk out of banking.

We should never again allow ourselves to be in the situation where private sector investment banker's failures can effectively bring the economy crashing down on the rest of us. Retail banks where consumers, including families and small businesses, deposit their savings need to be protected thus ensuring their long-term sustainability.

All pretty sensible stuff, the bad news is that the banking lobby already appear to have been busy persuading the Conservatives and Liberal Democrats to water down the recommendations of the independent commission on banking. The problem is that weakened proposals may not protect small businesses who have been mis-sold complex financial products in recent years and some of whom may never see their money again.

Plaid Cymru has long argued that banks should not have interests and risks which could be to the detriment of the entire sector and to the wider economy. The problem is that when New Labour had their noses in the trough (between 1997 and 2010) the importance of the financial sector grew from 11% of the total economy to more than 18%.

This unbalanced the economy largely because New Labour (and the Conservative Government's before them) turned their backs on the manufacturing sector, something that hit the Welsh economy and our manufacturing sector badly and ensured that an even greater inequality between London and the rest of the UK. This is one of the reasons why the UK was hit so badly when the crash came and has been struggling to recover since.

Interestingly enough a recent poll in the Independent on Sunday (17.06.2012) revealed that 59% thought that George Osborne is out of touch with the public (20% disagreed and 21% didn't know), 25% thought that he is leading the country's economy in the right direction (46% disagreed, 29% didn't know). Some 52% thought he was arrogant (24% disagreed and 24% didn't know) and 48% thought that he had made too many mistakes to be taken seriously (25% disagreed and 26% didn't know).

Additionally 25% agreed that George was doing a good job in difficult times - some 46% disagreed and 27% didn't know. The final poll question asked whether citizen Osborne is too posh to understand the financial pressures on ordinary people – 55% agreed, 23% disagreed and 22% didn't know.