“The deficit reduction programme takes precedence over any of the other measures in this agreement, and the speed of implementation of any measures that have a cost to the public finances will depend on decisions to be made in the Comprehensive Spending Review. We will significantly accelerate the reduction of the structural deficit over the course of a parliament, with the main burden of deficit reduction borne by reduced spending rather than increased taxes.”

Chancellor George Osborne, who has announced an emergency budget for June 22nd, said he would outline plans on Monday for an initial £6 billion’s worth of cuts.

The coalition has plans to cut Ministry of Defence spending by 25%, while proposing private capital investment in the Royal Mail.

The Accord supports the introduction of a banking levy and the reduction of the bonus culture in the finance sector. Meanwhile it will be interesting to see if the coalition can succeed where the Labour government failed, in getting banks to lend money to businesses.

“There is an urgent priority that is getting lending going to small- and medium-sized businesses. That is an absolute urgent priority,” said Osborne.

Instead the Financial Times report says that the 50% tax levied on bonuses over £25,000 is more likely to bring in a more welcoming £2.5billion to the government, after a survey conducted through the UK banks.

While the Treasury could not confirm the Financial Times figures the much needed extra cash would help to payoff some of the Governments record budget deficit and help the UK on the road to financial recovery.

finance minister christine legarde

France are to follow the lead outlined by the UK government in Alistair Darling’s recent pre-budget speech and introduce a special one off tax on banker’s bonuses for 2010.

French Finance minister Christine Legarde has said that a bill will be put before the French parliament in January that will commit tax bonus payments of over 27,000 euros, to fifty percent taxation.

The French government had indicated last week that a similar tax to that announced by the UK would be announced, but no further details were available at that time.

Germany’s Chancellor Angel Merkel has said that she is sympathetic to the idea but fears that it may be against German law.

In what is seen as an open attempt to lure US President Barrack Obama on board, the article says;

“This crisis has made us recognise that we are now in an economy which is no longer national but global, so financial standards must also be global. We must ensure that through proper regulation, the financial sector operates on a level playing field globally.”

Calling for a ‘new compact between global banks and the society they serve’, Brown and Sarkozy said;

“We agree that a one-off tax in relation to bonuses should be considered a priority, due to the fact that bonuses for 2009 have arisen partly because of government support for the banking system. However, it is clear the action that must be taken must be at a global level. No one territory can be expected to or be able to act on its own. And if we can find a solution, implemented consistently across the major economies, then we may find a way to ensure that taxpayers do not pay for the risks taken by the banking sector.”

In the US a poll has revealed that 75% of the public believe that none of the US banks that recieved state aid should even consider paying bonuses this year.

nice cash bonus!

The shadow chancellor George Osborne was greeted with howls of derision today as he called upon the UK’s high street banks to clampdown on big bonuses and instead to make the cash available to businesses to help people keep their jobs.

Osborne said he was talking about “emergency measures this Christmas” when he made the statement, “Let’s end the big cash bonuses. If there’s spare cash at the bank it should be lent out to small businesses, medium businesses, to help people keep their jobs. This is all about dealing with the ongoing recession.”

Osborne stressed his aim was to open fresh credit lines for struggling businesses. The Tories reckon that reining in cash bonuses would free about £10billion of desperately-needed loans.

Predictably his stance infuriated bankers and a member of the cabinet denounced it as ‘populism’, but then surely that is what politics is all about. City brokers BGC Partners’ David Bulk said, “It is profoundly wrong. The idea is supposed to be a vote winner, but it lacks practicality. It is far too rigid if he wants London to maintain its presence at the top of the financial tree. We need a sensible bonus culture, but not this. He is completely and totally wrong.”

Another city banker who chose not to be named claimed; “It’s all just a political game because the man on the street wants to bash bankers.” So at least one banker understands how the general public feel about the banking bonus culture, even if he fails to grasp it fully.

The Treasury Chief  Secretary Liam Byrne said: “We have already introduced the toughest bank remuneration policy in the world. Banning all bonuses for retail banks is unworkable but we are presently negotiating with RBS and Lloyds on the payment of the 2009 bonuses.”

The new approach is designed to permanently change the behaviour of those who breach market rules by imposing punitive costs on them, wiping out any profit they make from their wrongdoing, the FSA said in a statement today.

The FSA say that under the new proposal a company found guilty of breaking the rules would be fined up to 20% of the income from the product or activity deemed to at fault. Individuals found guilty of breaking rules would be subject to a minimum £100,000 fine.

“By hitting companies and individuals in the pocket where it hurts, the fines will be a stark warning to others on what they can expect to pay for flouting our rules,” said FSA director of enforcement Margaret Cole.

The new rules are open for consultation until October 21st, the FSA expect the rules to be in place by the start of February 2010.

Darling did not mince his words in an interview with The Independent when he said; “There are people who are too complacent in my view. They need to be brought back to earth.”

“It is not them I am particularly worried about. It is the rest of us who are being affected by it. The individuals concerned [in the banks] are not operating on their own. Some are only operating at all because of very substantial support from taxpayers, who are entitled to tell the Government we must not repeat the mistakes. If they go back to the way they were – to business as usual – without asking themselves over and over again whether they understand what they are doing, that would be disastrous for them and the rest of the world.”

Strong words from Darling, who is hoping that the White Paper to be unveiled next week will bring the Bank of England (BoE) and the Financial Services Authority (FSA) into a more workable partnership, with both sides promised more powers.

The bank will play a more central role in preventing a future boom and bust crisis and assessing risks to the banking system as a whole as well as individual banks.

The FSA will be responsible for not allowing a return to the ‘bonus culture’ of pre-crisis banking, they will also have the power to force banks dealing in high risk areas, to increase capital reserves as a safety net.

The chancellor insisted that the two parties would work closer together in the future saying “They are not competing with each other. They are complementary.”

An agreement was reached with shareholders on Friday and today’s Financial Times believes the deal to be worth up to £9.6million for the new CEO, made up with a basic salary and performance related bonuses.

Hester will receive a basic salary of £1.2million, a projected £2million in annual non cash bonus payments and almost £6.6million in long term share options according to the FT report.

Hester was appointed last year to restructure the bank following the departure of Fred Goodwin who had led RBS to near collapse and in need of a £20billion bail out by the UK government.

A statement from UK Financial Investments says:

“In their discussions with the RBS board, UK Financial Investments have been very clear that the awards must be based on long-term sustainable performance and that is the case with this proposed package. Our objectives in relation to RBS are to ensure that the value of the business grows so that we can get the maximum possible return for the taxpayer”

Home Secretary Jacqui Smith came under investigation last month after making dubious claims of £12,000 a year for a room at her sisters house.

Now an enquiry is to be made by the governments watchdog committee that will examine the system of allowances paid to MPs. It is backed by Gordon Brown who has also asked that the review look into other issues such as outside interests and second jobs.

Those accused insist that they have done nothing wrong and have acted within parliamentary rules, but there is no rule to say that you should make false claims for expenses that do not exist. As elected members of parliament they should also have the intelligence to understand that what they have done is morally wrong regardless of any precedent.

Now the thick skinned embezzlers are making noises about increasing their income so that they do not need to make up their paltry wages with indecent expenses and allowances. MPs it appears are about as greedy and obnoxious as their bonus seeking financial counterparts and about as successful too.

The message is really quite simple-This country will not tolerate rewards for failure.

AIG

New York Attorney General Andrew Cuomo has announced that he expects to recoup around half of the $165m bonuses paid out by insurance group AIG after the company was bailed out by the US government in September last year.

AIG had posted accounts for the last three months of 2008 showing the biggest quarterly loss in  corporate history at $61.7bn.

Responding to both public and political outcry, Cuomo has managed to ease  a difficult situation by ensuring that any payments made to American citizens working for AIG would be returned, without the need to pass new legislation that would make the bonuses subject to a 90% tax.

While many of the beneficiaries have agreed to return the bonus payments, there is still a question mark over the balance of some eighty odd million. It remains to be seen whether the Attorney General has done enough to appease the public, who are still seeing failure at the highest level rewarded with huge amounts of cash.