Moral outrage

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: Lord Myners, the City minister, is allegedly worth £30m ($47m). He is an unlikely tribune of the people. Yet he has been sounding off, more vociferously than his colleagues, about “unacceptable” pay deals for bankers. Derivatives traders are not footballers with unique talents and “should not be paid as though they are”, he said last month. More recently he has railed against “market failure”, accusing big clients of investment banks of not challenging the fees and margins they are charged. The crisis does not seem to have affected the way bankers are rewarded. Lack of transparency makes them seem the more villainous. “The nation is angry about this. I’m angry,” says Lord Myners.

But such attempts at moral suasion are not working, and those in authority seem reluctant to do more. “We are not an incomes regulator,” says Hector Sants, chief executive of the Financial Services Authority (FSA). The watchdog’s only sanction is to demand more regulatory capital from those banks whose pay policies appear to be putting their firms at greater risk.

The Treasury could influence matters at RBS and Lloyds Banking Group, two big banks in which it has substantial shareholdings, but is reluctant to micromanage. There was not a murmur when RBS hired a head trader for a rumoured £7m in total. The government worries that any attack on bankers’ pay could drive financiers offshore, depriving the exchequer of much revenue. City bonuses, which dropped from £10 billion in 2007 to £4 billion in 2008, could bounce back to £6 billion this year, says the Centre for Economic and Business Research (CEBR), a consultancy.

They mirror the health of a financial-services sector that in the good times brought in up to £67 billion in annual tax revenues, estimates PwC, an accounting firm. This fiscal year the figure could drop to £39 billion, says Douglas McWilliams at the CEBR, although banks’ recently buoyant business may increase it. A windfall tax on profits, discussed by both government and opposition, might put any recovery at risk. So could the slightly softer option of preventing banks from offsetting past losses against future tax bills.