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Do we really want to cast George Banks and his family out of 17 Cherry Tree Lane?

By Paul Goodman

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I seem to gravitate towards unpopular occupations.  During my early thirties, I took to journalism.  In my early forties, I must have decided that journalists weren't detested enough, because I became a Member of Parliament.  In my early fifties, I must have concluded that I'd made a mistake, because I'm now a journalist again.  But I'm beginning to wonder why I don't just go the whole hog, and take up banking.  I couldn't possibly be more unpopular than I am now.  (And I'd be better off, too.)

Bankers.  We hate them.  All of us.  All of them.  Socialists hate them because they tear bread from the mouths of the workers.  Businesses hate them because they charge usurious rates on loans.  Pensioners hate them because they pay miserly rates for saving.  Customers hate them because they rip us off.  Euro-sceptics hate them because they're catspaws for "the EUSSR".  Nazis hate them because they're tools of ZOG.  They're all at the same time fatcats, vultures, gnomes of Zurich - physically difficult, psychologically possible.

Above all, we hate them because their selfishness, avarice and rapacity fired the recession.  They're eating our money, like Patrick Bateman devouring people in American Psycho.  (He was doing something else to them, too, that bankers do to us.)  Or, if you prefer more restrained language, they're stealing it, like Trollope's Augustus Melmotte.  (Now, there's a real paragon of unpopularity: he was both a banker and an MP).  Melmotte took his own life, which is a shame, though only because it foiled us from getting there first.

Like the poor, bankers will always be with us - the wealth of the one causing the plight of the other.  In 1984, the capitalists, long gone, cling to their top hats in propagandist cartoons, a reminder that they're not so much vultures as vampires, the undead we can never kill.  Except we can.  We can do it if we cut their bonuses.  And even if that doesn't kill them, it'll teach them.  We may not be richer afterwards.  But I promise you, we'll feel a whole lot better.  Axe those bonuses now!

That is, very roughly, the mood.  When the Party was in opposition the time before last, back in the 1970s, a few cussed souls would have marched against the prevailing whirlwind - writers, think-tanks, the odd speech writer to the Leader of the Opposition, a few backbench MPs.  But media sensation's now more rampant and party discipline, partly in consequence, more rigid.  No Tory Parliamentarian is going to go over the top, in either sense, to defend Gordon Gekko.

Fast-forward to opposition in 2008 and the financial crash.  The Cameron/Osborne duo tacked before the storm.  By the following autumn, Cameron was declaring that no bank employee should be paid a bonus of more than £2000, if the taxpayer owned a "large stake" in it, and Osborne that the Government should stop retail banks paying "significant" cash bonuses.  The manifesto said that "We will put in place a levy on banks", a Conservative Government being "prepared to act unilaterally if necessary", and that it would "empower the Bank of England to crack down on risky bonus arrangements".

I don't blame them for running before the gale.  Politicians must sometimes do so, not least when public fury has a point.  The bankers and the system shoulder a vast dollop of the blame for the smash.  The bankers lent to people who couldn't afford to borrow; the system said that this was all just fine and dandy.  The tail of blame must be pinned on the donkey.  But why stop there, if one's in the business of moral enquiry?

After all, where does blame begin and end?  Why fix one's gaze on only one frame of the storybook?  Why not start with the politicians who encouraged subprime lending in the first place, or those who didn't raise interest rates when they should have done, before working through to the bankers who held packages of the debt, to those who sold them the debt, to those who sold them the debt - and so on, ad infinitum, all the way through to those who bundled up those packages in the first place, or financed the original loan?

And why stop there, either?  What about the actors lower down the financial food-chain - the property developers, venture companies and mortgage lenders who built and sold lower-income Americans homes and debt they couldn't afford, on expanding estates and new projects in El Paso and San Antonio?  What of the bureaucrats who eased the borrowing conditions?  What about the analysts and auditors who said that these arrangements were sound?

And what - if we're really to follow the story from beginning to end - of the borrowers themselves: the poorer workers and, heaven help us, students who took on debt they couldn't afford to repay?  Shouldn't they shoulder a share of the blame too?  (Though be very careful here: subprime borrowing made sense for some people.)  At which point, let me make a declaration of disinterest: some of my worst enemies are bankers.  But of one thing I'm as certain of as death and taxes: the bankers weren't solely to blame for the crash.

As I suggested earlier, politicians must sometimes run like smoke and oakum, the Surprise flying from the Acheron or bowing to the tempest on the far side of the world.  Cameron, Osborne and the Treasury team did so very niftily.  Osborne sprung a higher levy on the banks yesterday.  Then there's the banking commission, which the Chancellor prudently kept out of Vince Cable's hands.  And Project Merlin, with its lending targets for the banks.

Osborne's right to scrap Gordon Brown's lamentable tripartite regulation system - Howard Flight's been spotlighting its failures for years (try this recent example) - right to warn that "Europe must put its house in order", and right to urge that banks be well-capitalised and have tougher stress tests with new liquidity requirements to "strengthen Europe’s banks so that they, and not taxpayers, pick up the bill for future crises".  And he's right, finally, to remind those who hadn't noticed that Britain hasn't sole charge of its banks.

But while politicians must sometimes yield to the storm, they should do something else, too.  They should always, however shyly and hesitantly, be searching for a way of sailing where they want to.  In other words, they should persistently seek to do what no Nelsonian swashbuckler, no Master and Commander ever born has ever done: namely, try to change the weather - in other words, the intellectual terms of trade, even though this carries with it the risk of stories about gaffes, splits, rows and apologies.

This means a dual aim, which separates out symptoms from causes.  The latter must be tackled, and there's no shortage of ideas about how to do so.  Some experts want to revisit Glass-Steagall.  Others, in a related move, want to break up our big, transnational banks and replace them with smaller, local ones.  Others still, like Steve Baker and Douglas Carswell, to work towards the end of fractional reserve banking.  These usually require agreement and action among many actors rather than one, and for that reason are difficult for governments to execute (as well as hard for the layman to grasp)

But if there are lots of ideas around about causes, there's one big one around about symptoms, which is extremely simple for the layman to grasp and politically pain-free for the Government to execute, or at least try to: namely, to swing the axe on those bonuses - while calling, in doing so, for the banks to do two things at once - build up their reserves and increase their lending, between which objectives there's a tension, to say the least.  However, dealing with symptoms rather than causes risks disturbing our old friend - the law of unexpected consequences.

For better or worse, I'm no expert on the perfectly legal business of tax avoidance.  But I've a hunch that, if enough bonuses are hiked with enough indiscrimination, some of the bankers in question will ultimately either a) find some other way of being payed or b) if they can't, leave Britain in search of more obliging tax regimes (though Governments abroad might well waver at guaranteeing some of their debts of some of the banks).  I leave you to judge whether the first is more likely than the second.  Fraser Nelson has cited evidence that it's happening already.

Cameron, of course, wasn't proposing a widespread "crackdown on bonuses" - and I think still isn't, though I'm not sure.  He was restricting his gaze to banks in which taxpayers have "a large stake".  And the Government could certainly, for the sake of the argument, stop Stephen Hester's bonus.  There might be no harmful consequences for the Royal Bank of Scotland.  But then again, there might, if he and his board decided to push off in consequence.  And even if they didn't, government won't want to lessen the potential profits the taxpayer would gain from selling the Government's stake.

Now, the Prime Minister and Chancellor know all this as well as you or I do, indeed better.  They must address two audiences: the voters and newspaper editors baying for blood, and the men who have the money that makes the world go round (and can usually leave this small corner of it).  And indeed, there's a terrible truth at the root of this business: we all need banks, damn them.  We need somewhere to put our money in and draw it out, unless we want to return to gold under the bed or barter goods by E-Bay.

In which case, let me start the bidding.  George Osborne and I both have houses in Buckinghamshire, and I propose to swop mine for his.  The Chancellor won't take me up any more than he will tax bonuses out of existence.  He knows darned well that they haul in a barrel of loot in Treasury revenue - a point that Tony Parsons conceded in the Mirror, of all places, fairly recently - and that City recovery's indelibly inked into the OBR's growth figures.

Allister Heath spelt out the numbers, in a piece brutally entitled: "Shock, horror: UK needs rich people". As he put it, "327,000 souls on £150k or more actually ended up paying over a quarter of income tax this year".  Not all of them will work in the City - rather than for, say, some of our local councils - but some of them will and, unlike most local authority chief executives, they tend to be in demand abroad.  Which is why Alistair Darling, as Chancellor, went all sotto voce on the matter.

And why Boris, who's never been sotto voce about anything in his life, tub-thumps a drum for the City as a Mayor of London should, God Bless Him.  Cameron has the Liberal Democrats to keep happy - especially Cable, to whom briefing out a raid on bonuses is a tried-and-tested distraction technique when the old bumbler's in trouble.  But there are recent suggestions that the Government's in retreat from bonus-bashing, and will rely instead on tweaking the bank levy upwards if it has to, and on a bonus disclosure regime of popular intent and dubious precedent.

I end where I began.  Bankers: yes, we hate them, often rightly.  Unfortunately, we also need them, and Osborne needs their revenues.  So it's time to stop mistaking symptoms for causes, and end our Freudian obsession with bonuses and size.  But, in return, bankers need to start providing us with a few decent role models.  Let's see now: I've cited Patrick Bateman, Augustus Melmotte and Gordon "Greed is Good" Gecko.  Any of them would have sat quite comfortably on the Federation of Conservative Students' National Executive in 1982.  Come to think of it, I'm sure that at least one of them did.

But I'm not convinced they'd wow public opinion, being less likely to sway floating punters than swindle them.  No, someone else is required.  So step forward, George Banks.  OK, he turns a bit peculiar, with his strange turn of interest in feeding birds and flying kites.  And I concede that "Mary Poppins" is in some ways a left-wing film, for reasons I can explain at length if anyone's remotely interested.  But he gets made a partner in the end.  So all turns out well.  And don't forget: there still one of two bankers just like him, really there are.

It's decision time for Britain's financial service industry, the City, bankers - and their pay.  Let's not shirk the big questions.  Do we really want to stuff this angel in a bowler hat?  Are we really proposing to bag George Banks's bonus, breach his privacy by disclosing his earnings, and slap a bank levy on Dawes Tomes Mousley Grubbs Fidelity Fiduciary Bank, just as it's rebuilding itself after that terrible run on its reserves?  Are we really going to cast George Banks and his family out of the paradise that is 17 Cherry Tree Lane?  After all, our future prosperity's at stake too.  Here he is singing "The life I lead."  Don't let me stop you joining in. 

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