Liz Truss Day 9: Bankers’ Bonuses

September 17, 2022 | By Paul Mackenzie Ross | Filed in: finance, politics.

Just over a week since she was anointed as the political leader of the United Kingdom, Liz Truss’ chancellor, Kwasi Kwarteng has dropped the mother of all bombshells on the British public.

Not much has really happened in the political sphere since the announcement of a windfall for the energy companies on her first full day as PM.  The blank cheque, to be written for and by paid by the UK public, will be eventually be placed in the accounts of the energy companies whilst oil and gas providers keep their massive and unexpected profits.

Then Queen Elizabeth II died and the nation’s focus centred on the longest reigning monarch, her life, and the steps for her state funeral and the incredible logistics that incurs.

But by Wednesday 14th September, the news featured a story that The Treasury was considering removing the cap on bankers’ bonuses. As a member state of the EU, we had to cap bankers’ bonuses at two-times an employee’s salary. With all the “successes” of Brexit Britain, what’s being considered now is the ability of bankers to earn even more than wage + 2x wage.

Apparently, the idea behind this uncapping of bankers’ bonuses is that it will attract more banking business to The City.

This is wrong on so many levels!

With a “cost of living crisis” in full swing, food banks, excruciatingly high energy bills, biggest ever UK national debt, massive inflation, rising interest rates, stagnant wage growth, the pound at its lowest in 35 years and people struggling to put food on the table, fuel their vehicles, and pay their energy bills – isn’t it completely outrageous to be offering more money to those already on more money than the rest of us?

Let’s list all those things again, shall we?

  • Cost of living crisis
  • Food banks
  • Highest ever energy bills
  • Biggest ever national debt
  • Inflation at around 10%, highest in 40 years
  • Interest rates highest in at least 10 years and potentially about to rise again
  • Stagnant wage growth
  • Pound at lowest value since 1985

Against a backdrop of ALL these horrendous issues, the new Tory government has not charged a windfall tax on oil and gas giants, is borrowing an undefined amount of money, is adding it to the already monumental UK national debt, is charging the public for the bill, and is now thinking of allowing bankers’ to earn more than three times what their salary is.

Alright for some, isn’t it?

Yet again, the loud and clear signal the Conservative government is putting out to the country and the world is that they only care about the rich.

Do you know how much bankers earn? There are multiple sources of data, but one source indicates that a banker with less than 3 years’ experience can earn around £37,000 a year. For a banker with over 20 years’ experience, it’s over £110,000. I’ve been in my industry over 22 years now and I don’t earn anything like that! And most poor souls earn even less, with the average wage in this country being something like around £29-£30,000.

Of course, the City of London has welcomed the plans, but then they would wouldn’t they? Whilst the rest of the country’s population have to suffer with being saddled with yet more debt – isn’t that more business for the bankers?

It’s yet another clear shout from the Government that they believe in trickle-down economics. If you let the rich get richer, EVERYONE BENEFITS from the fact that they have even more money than they had before.

If there’s one thing you can do to counter this wealth grab it’s this – Buy shares in the banks that make money out of you.

I realised a little while ago that, whilst I’m being charged interest and paying fees to banks, a certain proportion of that is going to shareholders. It’s easy to become a shareholder these days and so I’ve invested in the banks that take money from me. Their dividend yields are better than savings interest rates, so I get a better return. I’m no big shareholder by any means as I’ve got little more than pocket change invested. However, as with all investments and savings, I’m relying on time and compound interest to help me out. As a current alternative to a savings account, the returns from the shares I’ve picked are much better. Also, the value of the banking shares I’ve picked has risen, so that indicates they will only rise further and pay out more if

It’s a long way to go before I match and hopefully surpass what the banks are taking from me, but as a long term strategy, it could provide a reasonable passive income, it’s something to cash in when I retire (Or use to supplement my meagre pension projections), and most importantly I see it as a discount. Or think about it as lending to them and earning interest on it, which is exactly what you’re doing.

But isn’t that all a bit hypocritical and I’m part of the problem? I don’t see it that way – I’m playing them at their own game, and if more regular Joes did too, it would be close to something like renationalisation, right?

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