A tax on bankers’ bonuses could curb excessive pay, according to an MP.
Steve McCabe (Lab Hall Green) suggests taxing excessive bonuses as the nation’s financial services watchdog warned that higher taxes could be imposed on banks.
Lord Turner, chairman of the Financial Services Authority, incurred the wrath of the City after claiming the banking sector had grown too big, with parts that were “socially useless”.
He said: “If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit.”
The peer said he would consider imposing a tax on financial transactions, known as a Tobin tax.
He said: “Higher capital requirements against trading activities will be our most powerful tool to eliminate excessive activity and profits. And if increased capital requirements are insufficient I am happy to consider taxes on financial transactions – Tobin taxes.”
Lord Turner added that the financial sector had become “swollen beyond its socially useful size and seems to make excessively large profits”.
Mr McCabe said other methods of taxing the banks could also be considered.
He said: “If bankers are earning bonuses which are excessive, and which most people agree they do not deserve, we could take some of that money back by taxing their bonuses.”
Lord Turner’s comments were slammed by the City, described as “damaging and damning” by Howard Wheeldon, senior strategist at BGC Capital Partners.
“Lord Turner has gone way beyond his current brief – it is certainly not his business to dictate the size of an industry – neither of course is it his job to protect it in the context of its importance to the UK,” said Mr Wheeldon.
He added: “Should this stupid idea ever be taken to heart or see the light of day by any government now or in the future then it really would be time to turn out the lights in the UK.”