Private sector pay

We are just entering the period when financial institutions declare their 2011 corporate earnings and in many cases the 'bonus pool' that will be shared among their employees.

Following the bail-out of RBS, Lloyds and HBOS, the retail and investment banks now fall into two camps.  Part state-owned (see earlier) and those others institutions such as HSBC, Barclays JP Morgan, CitiCorp and Goldman Sachs, which received zero bail-out funding from the UK government  - we will call these latter type - private institutions.

We can expect lots of the usual froth from commentators about 'excessive' bank bonuses and how the 'government ought to do something about it'.

So what can the government do?

Well in the case of the part state-owned RBS, Lloyds and HBOS, they can use the shareholdings, that they hold on behalf of the UK people, to limit the amounts of payouts.  These could be limited to those that are required to meet contractual obligations - some people have bonuses built into their contracts of employment and if they meet certain targets, then legally, these must be paid - and they can then limit other payouts to zero or to certain pay grades etc., however, they and the other shareholders see fit.

In the case of the private institutions, it is really none of the business of government to interfere in how the shareholders (otherwise known as owners) spend the income of their company.

If the government wants to affect such private sector bonus payouts, it could do so through the tax system (as I have proposed, on an earlier blog) but it cannot and should not dictate to private companies on the remuneration that they give to any of their workers.

If the government wants to set the tone around pay restraint, then maybe they should concentrate on the areas which are within its span of control................

So, set a cap on the pay of anyone employed by a public organisation.  So local authority executives, civil servants, military chiefs, ministers, BBC executives, etc.  My suggestion would be around  £100,000 per year.  Many private sector companies have re-organisations and require personnel to re-apply for their role, so do the same with all of the above - get them to re-apply for their job but at a reduced rate of maximum £100,000.  Oh, and let's make the maximum include taxpayer contributions to pension funds.

That might start to sound a little more like 'we are all in this together' in action!

Labour, Cuts and the Unions

Labour is apparently in conflict with its trade union backers because it has now 'apparently' come out in support of public expenditure cuts and 'endorses' public sector pay restraint and goes further and suggests that public sector workers might take pay cuts to prevent job losses.

Labour now 'apparently' supports public expenditure cuts.  However, in certain of its confused and conflicting statements it still maintains that the cuts being implemented, against Labour's opposition, by the Coalition, are too deep and too fast.  That sounds like trying to be both pro and anti cuts.

Interviewed on the biased BBC, by Nick Robinson, Ed Miliband was asked

QUESTION: "Some people think this is curious because it gives you an excuse to say: 'Well we oppose this cut', only to say a few weeks later, 'actually we back it, we've got to live with it'."
ANSWER: "No, it's not about backing the cuts that are being made. We don't want these cuts to be being made. It's not in the interests, for example, of safety on our streets to be having the speed of cuts we're seeing in policing. Or in the interests of the economy to have the overall pace of cuts - that's why we say too far and too fast.

Make your own mind up as to whether Labour back or oppose the cuts and then let Ed know what he should say!


Labour 'endorse' pay restraint.  Well maybe the leader and Shadow Chancellor now do

Ed Miliband recently said:

It's a hard choice, but when you are faced with the choice between protecting jobs or saying the money should go into pay rises I think it's right to protect jobs," he said.

"In the end there's no easy choices in government... I think is absolutely right that we say we've got to prioritise employment."

Several Labour MPs have reportedly criticised the move, among them Austin Mitchell, who supposedly called it 'barmy' and accused Mr Miliband of "weakness".

Mr Miliband said Mr Mitchell was "wrong", adding: "We are absolutely determined that Labour shows we would be fiscally credible in government."

I can't help think that this is a smokescreen and the following backs up my thoughts.

Labour suggests that public sector workers might take pay cuts to save jobs.

I believe this is a cynical attempt to encourage the public sector to hunker down and weather out the economic storm that we are facing.  This is in the mistaken belief that doing so will be temporary and will be lifted when (if,?) Labour returns to power.  The Labour leadership (and their union counterparts) know full well that the country simply cannot afford and will not be able to afford the public sector to ever get anywhere near as big as it was under Labour. 

I am sorry to all those 'diversity officers' out there, and  all the other low-value adding but oh so right on and nice to have positions which get in the way of people living their lives and taking responsibility for their own lives, but you need to find a new career - the country cannot afford to employ your services and pay from the public purse.   


Call me cynical but I can't help but feel that the bluster from the unions is manufactured.  Leaked letters?  Public letters to The Guardian.  I smell an orchestrated campaign.  Goes something like this:

• Labour needs to build economic credibility with the Public.
• Labour to public back cuts because Public endorse and see necessity for cuts.
• Labour to endorse pay restraint in public sector because the Public think that the public sector should share the pain and have been cossetted by Labour.
• Labour endorse 'negotiated' deals that see public sector pay cuts to 'protect' jobs.
• Unions to express outrage, publicly, with letters to the press and privately, with letters that get leaked.
• Cue the two Eds standing firm and saying we have to be responsible and economically credible and then saying things which undermine their earlier stance (the latter is unintended but neither Ed really want to upset their union backers)