The financial crisis would not have happened without City bankers engaging in risky, opaque, complex transactions. The report estimates top city bankers destroy £7 of value for every £1 they are paid privately.
The New Economic Foundation Report, a left think-tank, says that, when compared with bankers, hospital cleaners and many other low-paid workers contribute far more to society and this should be reflected in their pay.
The authors have assumed that the financial crisis and recession would not have happened without city bankers engaging in risky, opaque, complex transactions. Guessing the cost of the recession on the rest of society, they estimate top City bankers destroy £7 of value for every £1 they are paid privately.
Regarding the report, the Financial Times said that if the figures are accurate, a rational government should shut down the City. Naturally, the City disagrees and so does the Treasury, which sees benefits in properly regulated activity in the Square Mile.
The report presents the following facts concerning City bankers:
· Although City bankers’ rewards are a closely-guarded secret, it is generally understood that the few senior partners in the major finance houses can take home somewhere between £5 million and £10 million a year. A handful will earn substantially more. Meanwhile, top hedge-fund managers can end up making hundreds of millions a year.
· These enormous earnings are the result of profit-taking on a huge scale. The reasons why this is possible are complex but are linked to the dominant position of finance in the economy.
· Contrary to what might be expected, given the vociferous defence of the importance of wholesale banking to the UK economy, the City of London contributes only around 3 per cent of value added every year.
· Claims have been made about the trickle down effects of wealthy City bankers’ spending in the economy, but there is little real evidence to back this up. We hear less about the damaging effects of the City on society.
The report concludes that far from being ‘wealth creators’, City bankers are being handsomely rewarded for socially damaging activity. They are not just overpaid; they are overpaid at the expense of others.
FT article (subscription needed)
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