Sometimes, just sometimes, I can’t help but to feel sorry for David Cameron. My sympathies are extended to him as he faces yet another debate with Brussels and the EU, which he seems so keen to make Britain a big part of.
The Prime Minister seemed to be forced into pledging an in-out referendum on the EU in January as mounting pressures from both the electorate and his own backbench squeezed Cameron to announcing the referendum if he was still occupying 10 Downing Street during the next Parliament. Even due to this, within his pledge, he made a heartfelt plea declaring a new vision for the Union, a vision he is keen for Britain to play a pivotal role in.
It is for these reasons that it is especially awkward for Cameron when there is a proposal by Brussels that he opposes. It presents him personally with a massive conflict of interests with an increasing number of euro sceptics to please and a risk of looking like he is willing to throw his own beliefs out the window to oppose the Union.
The regulations I’m referring to involve banker’s bonuses and more specifically the capping of said bonuses. Officials from the 27 member states, along with MEPs and the European commission have decided to propose a cap to bankers’ bonuses at roughly a year’s salary, a figure which could be doubled if the banks stakeholders approve. The move is part of the wider Capital Requirements Directive (CRD) set out by the EU to try and combat the sort of behaviour that led to global financial meltdown five years ago, when taxpayers ended up picking up the tab for the failing banks.
Of course, with the directive coming from the Union, the process is not over by a long shot, there are still a number of boxes that need to be ticked for the initiative to actually be enshrined. The next step is approval by EU governments (most of which appear to agree with the plans), with the enactment date looking to be next year. Amendments are permitted, however the main points from the CRD will probably remain the same.
Almost as soon as the motion was passed there was a strong reaction from the blue side of the coalition with Prime Minister Cameron and Mayor of London Boris Johnson both dismissing the plans as preposterous and as having the potential to ruin the struggling European economy all over again. Their viewpoint is that if the plans are passed banks will move to the likes of Zurich, Tokyo or New York where their rampant lifestyles would be free to continue. They also pointed to their own measures on banking bonuses as evidence that Brussels’ plans were unnecessary. These measures include capping cash bonuses at £2,000 and deferred payments, which saw £300m taken back from Barclays’ bonuses.
Cameron and Johnson’s arguments are sound; legislation against banks (all big business for that matter) is dangerous territory as they have such large amounts of fiscal influence. Doing nothing and pretending the issue has gone away is almost worse than this however, and it is this that the PM and Mayor of London are being guilty of. The PM’s spokesman even came out and said "bonuses are very significantly down on where they were in 2010. So you are seeing real responsibility and restraint." This has got to be lodged as delusional statement of the week- they seem to be ignoring the fact that despite recording a loss of over £5bn the Royal Bank of Scotland still paid out £600m in bonuses. Claiming there is responsibility and restraint in the banking industry is one of the most ridiculous things I’ve heard from a politician’s office for a long time.
The Prime Minister highlighted how many banks held their headquarters in London, suggesting that the move will affect the UK significantly more than any other nation. However, again this could be seen as being short-sighted, as Berlin is one of many European capitals that have a strong banking industry. In reality Cameron and Johnson seem to be out to defend London’s so called ‘fat cat’ culture- one of the reasons why my aforementioned sympathy for Cameron runs dry pretty quickly.
Banking bonuses is an issue for the public to easily express anger at and call for reform, and it is right they do so; the business of banking has gone unchecked for far too long now. The biggest problem now is just how big and powerful they have become, because of their unregulated nature they are no longer just a fiscal force but a political one too. This is why Cameron and Johnson want to tread carefully, but Brussels do have the right idea and surely those receiving the disproportionate bonuses didn’t expect their easy ride to last forever?
Next week the government will take its qualms with the proposed cap to the EU through either George Osborne or Treasury minister Greg Clark, but it is unlikely to have any real effect on the final bill, which brings us back to the earlier point of Cameron’s awkward position. This is the first challenge he has faced from Brussels since his speech on the Union and he has to approach the situation delicately, if he’s too harsh and the proposed referendum of 2017 does happen he will probably have to eat his words when he campaigns for Britain’s continued membership. On the other hand if he steps aside without much argument he may face (another) massive backbench revolt over the EU, not to mention face ridicule from UKIP, who are gaining good political ground on the back of nationwide euro scepticism. It will be interesting to see how this situation unravels, as Cameron will have to try and be at his statesman-like best to operate a middle-ground and get the best for everyone. However, he may find the middle-ground can erode pretty quickly if too much stalling takes place.
By James Read