As a row broke out over attempts by bankers to defer bonus payments in order to exploit forthcoming tax cuts, it was announced that the starting salaries of police officers were to be cut by a fifth.
According to the Daily Telegraph, the outgoing Bank of England governor, Mervyn King, warned the banks that they risked provoking the anger of the rest of society if they pressed ahead with plans to delay parts of bonus pay-outs until after the top rate of tax was cut to 45p from 50p in April.
His comments to the House of Commons Treasury Select Committee followed reports on Monday that Goldman Sachs was considering whether to postpone the payment of deferred share awards from 2010 and 2011 until after 6 April. The investment bank has since backed down and decided against the move.
“I find it a bit depressing that people who earn so much seem to think that it’s even more exciting to adjust the timing of it to get the benefit of the lower tax rate, knowing this must have an impact on the rest of society,” King said.
He described such a move as “rather clumsy, lacking in care and attention to how other people might be”, pointing out that, in the long-run, financial institutions depended on good will and society – they did not exist in isolation.
Lord Oakeshott, a former Liberal Democrat Treasury spokesman in the House of Lords told the Guardian, meanwhile, that Goldman Sachs was “so greedy, they know no shame”.
He said that the current situation was a “real test for [Prime Minister David] Cameron and [Chancellor George] Osborne”, and referred to remarks made by the PM in June when he described comedian Jimmy Carr’s tax avoidance activities as “morally wrong”.
Ongoing change
“Will it be selective indignation all over again, criticising Starbucks, but not Goldman? Osborne excoriated aggressive tax avoidance in the Budget – he should now name and shame Goldman and confirm that this behaviour would disqualify them from government contracts,” Oakeshott added.
City sources said that a number of other banks had also considered following Goldman’s lead on delaying bonus pay-outs until the new tax year, but some, although not all, had rejected the idea to avoid negative publicity.
Meanwhile, the Home Secretary Theresa May announced today that the starting salary for police constables in England and Wales would be cut by more than £4,000 to about £19,000 per annum, in the first major overall of pay and conditions for more than 30 years.
She told MPs that she was accepting the recommendations of the Police Negotiating Board on the change and, by the summer, expected to hold more talks about bringing in compulsory redundancies for officers of all ranks.
The move follows a landmark review of pay and conditions by the former rail regulator Tom Winsor, who is the first non-police officer to hold the position of Chief Inspector of Constabulary – which is something that has angered rank-and-file officers.
Steve Williams, chairman of the Police Federation of England and Wales, told the Telegraph that officers were disappointed, but had agreed to be bound by the decision of the arbitration board.
In news elsewhere, however, Michael Gove, the education secretary, unveiled plans to end automatic pay progression for teachers, which are worth about £2,000 each year, in order to move them onto a performance-related pay structure.
The shift will enable head teachers to set teachers’ salaries largely as they wish following performance appraisals and will effectively end national pay bargaining. Current national pay scales will simply become part of advisory documents in future. The move is expected to lead to threats of more strike action, however.
