Interesting discussion between Don Paskini at LibCon, and John Rentoul (here, and responding to Don here).

John wrote that Labour’s decision to tax bankers bonuses was a further nail in the coffin of New Labour and their hard won reputation for economic competence, and that it would lose the goodwill of the types of voters in marginal seats that they need to win future elections, rendering them unelectable for a generation.

Dan replied pointing out correctly that the polls actually showed that higher taxes on the wealthy are popular, and the penalisation of city bankers especially so. John’s response was that they were popular in the short term, but would do much greater damage to Labour’s image in the long run.

I’ve some sympathy for John Rentoul’s view here. Polls on whether the public agree with a policy or not do not always tell the whole story. When looking at a policy there is the direct effect of whether people agree with it or not, and the indirect effect of what associating themselves with that policy will do to a party’s image.

The example I normally use is not taxing the wealthy, but immigration. Polls consistently show that immigration is an issue people care about, and that they want harsher restrictions upon it. Surely immigration would be a winning issue for the Conservatives? Not necessarily, since they have also spent the last four years trying to change their image to look less reactionary and “nasty”. If they made anti-immigration a key message, it might itself be popular, but would risk making them look bigoted and unpleasant.

It’s the same with taxing the rich. If tax hikes are necessary, polls always show that people much prefer them to hit the rich. Equally, penalising bankers is a route to easy popularity. The downside is that it risks making Labour look like a party that doesn’t like success or aspiration, an image that Tony Blair managed to shed.

It’s a balance though, and in this particular circumstance I don’t know if John is correct. It may be that the public’s desire to see the bankers cut down to size and appetite for taxes that apply to those richer than them outweigh the potential damage to Labour’s image – the reality is that in judging trade offs like this, polling can’t necessarily give you a firm answer.


108 Responses to “Is bashing the bankers risking the New Labour image?”

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  1. I would say that because of Rentoul’s sycophancy towards Blair, and bilious hatred of Brown, all is comments have to be read with this in mind.

  2. I suspect Anthony’s commentary on this is broadly correct – that while punitive taxes on high earners per se would be unpopular, the concept of tackling the bankers now does not fall into this category in most people’s minds.
    Rentoul talks of the “negative effect on perceptions of Labour over the long term because it makes the party look as if it doesn’t like success”. Most people don’t regard bankers as the most ‘successful’ of people right now, and so long as this doesn’t become part of a ‘soak the rich’ campaign I can’t see it doing much harm to Labour for four main reasons; 1) It is seen as fair 2) It is time limited to meet extraordinary circumstances 3) Cameron has indicated broad support for it 4) It is being copied internationally.

    Of all these point 3) is probably the most salient. If this was a return to rabid leftist politics then surely Cameron and Osborne would have jumped on it straight away for their own campaign purposes, but instead they appear to have backed the principle and the method.

  3. I think Rentoul is correct about the long-term consequences of Labour’s bankers-bashing policy – particularly as if it continues, we’ll likely see various financial institutions moving their bases elsewhere.

    I think it’s cheap politics myself – Brown has had 12 years to regulate banking and has successfully wriggled out of his personal responsibility by placing the blame on bankers themselves rather than the laissez-faire environment in which he allowed them to operate. Now his efforts to seem tough and punitive risk long-term negative economic consequences for the sake of scoring a few cheap points in time for a general election. I’ve no doubt it’s very popular in some quarters, but they tend to be those quarters where noses are cut off to spite faces.

  4. CLAD – bear in mind certainly (and John has come down very firmly on one side the argument!), but it doesn’t mean the broader point that popular policies can still have a negative effect is wrong.

    Alec – I think it’s less of a problem for the Conservatives to back it, because no one is ever going to think they don’t like rich people, so they can happily jump onto a popular policy. The reason the Conservatives don’t go even more on anti-banker stuff is probably just because they think it would be bad policy.

    (It’s probably the same for Labour with immigration, they probably wouldn’t suffer in the same way the Tories would if they did go heavily on immigration because they are the party that has traditionally supported and sympathised with Britain’s ethnic minorities. When Gordon Brown said “British Jobs for British Workers” people thought it was a bit ham fisted, but no one seriously thought he was revealing some inner racist. )

    It’s the Nixon to China thing. There are some things a right wing politician can get away with a left winger couldn’t (and vice-versa)

  5. One also has to consider who is most pleased by a particular policy, and who is most offended by the overall image.

    If your popular policy has the effect of making people who are inclined to support you more likely to go out and vote, that’s advantageous, to an extent. But if it has the effect of damaging your image among swing voters, then it’s probably a negative, overall.

  6. The bankers bonus is red meat for the heartlands and may well contribute to sustaining Labour’s slow recovery in its core recovery. Further to the comments above, it would be good to get polling from marginals on a question along the lines of “Will new, higher taxes for the rich discourage entrepreneurship and enterprise?”

  7. I meant of course, that the tax on bankers’ bonuses is red meat for the heartlands (Freudian slip no doubt…)

  8. I don’t agree with John Rentoul at all. A large part of Labour’s recent problems can be attributed to voters believing that the party does not act in favour of those it exists to represent. This is a bold step and John grossly underestimates the anger felt towards the irresponsible bankers who have frittered so much away and lined their pockets doing so. This measure in fact doesn’t go far enough for many people but it is unmistakeably the act of a Labour government and insofar as it isn’t the sort of thing Blair would have done makes the Party that little bit nearer to that which its erstwhile supporters would like it to be.

  9. What is undeniably damaging for Labour, IMHO, is the rise in National Insurance contributions.

    Barnaby – I think that’s true up to a point – but there’s a risk that you just end up with higher turnouts in Labour-held seats, as a result.

  10. “safe Labour seats” that is.

  11. I accept your point Anthony, but as Alec said, these are not seen as punitive taxes by the electorate at large. It’s not as if it is the ‘pips squeaking’ message. The vast majority of those that will be affected by this tax will be Tory voters. And has been shown by all post PBR polling, the vast majority of the electorate support the policy.

    @James Ludlow

    Brown has long campaigned for tighter international regulations on markets. He did not bring them in unilaterally, because he didn’t want to damage the City’s competitiveness.

  12. @ Barnaby – “the anger felt towards the irresponsible bankers who have frittered so much away and lined their pockets doing so”

    But it was Brown who presided over all of this, first as Chancellor and now as Prime Minister. And now the Angry are obediently focusing their attentions on the scapegoat he’s provided and letting him off the hook.

  13. James – Argh! Don’t go reeling off into an argument about who is responsible or not so early in a thread. The site is about discussion of public opinion and polling, and whether they are right or wrong to do so, polls repeatedly show that people blame banks and bankers for the mess (they blame Gordon Brown too actually, but to a lesser extent).

    Let’s accept that, and move on. There’s no point arguing about whether they are wrong to do so because we can’t change it :)

  14. Excuse typo – RBS, not RSB.

  15. @James Ludlow

    [snip – when I’ve hauled people in for derailling the thread with partisan arguments, please don’t start it off again! – AW]

  16. Sorry Anthony. I posted that before you stepped in.

    [No probs – AW]

  17. The news that many of the affected banks are going to take the tax on the chin and pay the bonuses anyway suggests the “punish the bankers” has turned into “punish the banks”.

    The extra tax comes out of the bank’s profits rather than the pockets of the beleagured bonus-earners, so not so vindictive.

    I can see this becoming a more damaging issue for Labour if there is a hint that it will be repeated, or become standard.

    I think we’ve had the discussion on the optimum level of tax before the winners start deserting – and it was around 43% (ignoring other “hits” such as limiting reliefs to 20%)

    FWIW I was one of the many who voted Labour in 1997 in the belief that they had left the “pips squeak” policy behind. Darling could neutralise the issue by emphasising that it is intended for this tax year only.

    Many centre-ish, reasonably well-off voters will have doubts otherwise.

  18. I am afraid we need to get real. No self respecting bank ( other than those owned by the tax payer ) will be paying this tax. The “collect period is from January through to April, and only applies to banks, not other financial institutions. They willeither, and some already have, move the payment to June or the appropriate people to Geneva. This is an ill thought out policiy on the back of the proverbial fag packet.

  19. I take the point about turnout in safe Labour seats. It would however be a mistake to think that working-class voters live only in safe seats. They live in marginals too, and often in great numbers.

  20. I think CAP’N SCOOBY has it.

    This will appeal to core vote for Labour, which is Brown’s target right now ( and judging by the Polls -successfuly targetted )

    The irony is considerable though.

    The tax is not levied on Bankers but on Banks.It was designed to change their behaviour & reduce bonus payments.

    It is reported that most Banks plan to pay the tax and pay the bonuses. The result is twofold :-

    1) The Banks’ employees will not suffer ( except by dint of Income Tax) as portrayed. The Banks’ shareholders will presumably suffer as earnings available for dividend are compromised.

    2) The levy will raise more tax than anticipated.

    So it might be surmised that this will be :-

    Politically popular on the core left ( which matters to Labour)because they are under the misapprehension that this taxes bankers.

    Politically unpopular amongst the middle class ( which doesn’t matter to Labour )because their dividends get reduced, and they will know the bankers are the reason.

    Financially beneficial to the Treasury because the purpose of the levy ( reduced bonuses) will be ignored.

    Two up to Darling I think.

  21. Interesting that the higher tax policy is especially popular with older voters, because a lot of marginals have younger than average electorates. For example, both Swindon seats, both Milton Keynes seats, Redditch, Tamworth, etc.

  22. I was just about to make the same point as John TT made regarding the fact that this isn’t about hitting the bankers personally. I’ve seen a couple of reports suggesting Darling was very conservative in his estimates about bonus levels and some are expecting the tax take to be much higher at around £2.5b – that would help make the tax move more popular I feel.

    I also think Sean Fear is right in that the NI move is potentially more damaging. However, there appears to be a general view that bad news is expected, that something has to be done and one way or another it’s going to hurt. If Tim Montgomerie is anything to go by the Tories themselves are nervous about a 20% VAT campaign from Labour which is the likely alternative to the NI rise – more regressive and worse for the least well off. In this atmosphere, while there are always greater risks for labour in putting up any tax as AW says, it’s hard to see how the Tories can capitalise fully as the questions over their own policy prognosis will always be lobbed back at them. Indeed, what the polling seems to suggest is that voters don’t like Labour’s PBR measures (except the bank tax) but some are more frightened of what Osborne will do instead. Clearly there is the issue of which groups these are and how their geographical spread will affect seats, but nonetheless the impact is out there.
    I still maintain Cameron was wrong to make such a loud noise about cuts – it frightened the horses and has given Labour a chink of light. At the very least, it has allowed Labour to get away with raising some taxes.

  23. Who is overpaid? The Guardian are running a blog on the proposed BA strike and many people think BA cabin crew are
    vastly overpaid and immature to boot.. Someone I know who studied economics at University told me the median wage in the UK was £10 000, PS Did a member of the Cabinet state today that ‘we were in a grave financial state’.?

  24. Alec,

    Assuming that Cameron expects to win, I don’t think he has any option but to speak about cuts.

    Winning on a “no cuts” platform, and then having to implement them, would do far more damage to the Conservatives in the medium term, than not winning in the first place.

  25. Barnaby JL Marder

    “I take the point about turnout in safe Labour seats. It would however be a mistake to think that working-class voters live only in safe seats.”

    I presume you are being ironic in suggesting that Labour voters are working class? If so, I suggest that you append (Fe) to your posts – otherwise someone will think you are serious!

  26. Plenty of Labour voters are working class, particularly in their heartlands.

    I think it’s just too early to say if, in the long term, Labour’s image in key marginal seats is damaged by this move.

  27. Sean Fear

    YouGov latest poll – Lab support in ABC1 – 31% : C2DE – 30%

  28. The polls need to be considered within the context of the political debate at the time. At the moment, this is being dictated largely by Labour and their attack on bankers. At the same time, the Conservatives have been very quiet – probably keeping their cards close to their chest.

    Labour have very successfully turned bankers into the enemy of the state, the Reichsfeinde, responsible for all our ills in order to distract the masses from the government’s failures. It’s a classic political technique – and historians will note how it is not the first time that a European government has chosen to blame the ‘money lenders’ for a countries woes. For a political party to attack any single group based simply on their occupation is as disgusting as attacking a group for the colour of their skin or their religion. Not all bankers are bad and greedy – many have generated most of the wealth on which (with the massive debt we now have) the New Labour project was built.

    I think that today in parliament we got from the shadow defense minister a glimpse of what the the Conservative GE rhetoric will be – “the country is in a mess due to gross economic mismanagement by Labour”. The fact that many banks have not needed ‘saving’ or state aid, that the government failed in its duty to regulate the banks, and that New Labour was happy to collect the taxes from those that were profiting from iresponsible lending has been glossed over to-date. There has been no genuine debate on the Labour government’s role in the mess. I imagine that the lack of debate, and the narrowig in the polls, will change when the Conservatives start their GE campaign. Labour want to focus on the future as they know they can not defend their past performance. I don’t think that they are going to be allowed to get away with that.

    Only when we’ve had these issues have been debated publically will be know where parties stand in the polls.

  29. Colin you are ignoring the following:-

    If Darling’s scheme works and the banks drastically cut back on the cash bonuses they pay out there will be a major loss of tax revenue on the bonuses at the top tax rate (plus some lost N I revenue). This may be greater than the tax achieved on the bonuses actually paid out.

    To the extent that the tax bites it will not necessarily hit dividends but may reduce the bank’s Reserves carried forward and reduce their lending capacity. Whether or not the dividends are reduced the Government as a major shareholder in the banks could be disadvantaged.

  30. I think it has come to a point now that people are fed up of ‘X Factor’ Politics. Basically very little substance but plenty of marketing, PR and manipulation of the masses.

    We need a straight fight between right and left for the first time in twenty years. The New Labour premise has always been geared towards a centre right perspective of ultimately leaving the free market to do what it wants with some redistribution, extra public spending and a moderate increase in worker’s rights.

    The facts are as follows:

    1) The free market system has led the whole economy to near collapse with the backbone of it (the banks) not being able to exist without support from all of us through our taxes and cuts in wages and benefits.
    2) Despite this many bankers are keen to get their snouts in the trough as soon as possible again. Showing that this elite do not possess any morality as well as not creating wealth and jobs without state support.
    3) Labour appears to be undergoing some sort of deathbed conversion to the idea of redistributing wealth through the 50% tax, bankers bonus tax as well as restricting tax relief for pensioners on high earners.
    4) The majority of these measures affect the top 5% meaning the vast majority of the middle classes do not take the hit as much as the wealthy.

    I believe a class based politics in these circumstances would be very popular. This is not about hatred it is about sticking up for yourself and not allowing the vast majority to be pushed around by an elite at the top who have seen the cloak removed from them that not only are they greedy, they are not wealth creators or business geniuses at all.

    Karl Marx was right about one thing. It is the working people who create the wealth. Without them getting out of bed each morning these institutions and bosses within them would not be creating the profits and becoming millionaires of their backs.

  31. Mike

    I am happy to volunteer to be paid millions by the banks – on which I will happily pay 50% tax, NIC, and the extra tax.

    I’m sure there are others like me.

  32. Apologies, Anthony. I’m tired and a bit cross today and being too argumentative.

    Dinner party now – I’ll return in a better, less argumentative state of mind tomorrow.

    Other people: behave yourselves!

  33. @ MIKE
    “If Darling’s scheme works and the banks drastically cut back on the cash bonuses they pay out there will be a major loss of tax revenue on the bonuses at the top tax rate (plus some lost N I revenue). This may be greater than the tax achieved on the bonuses actually paid out. ”

    Yes-that point has certainly been made Mike.
    I was merely thinking of the implications if what is reported is correct-ie that Banks will take the hit & pay the bonuses.

    In any event, this is a once off measure. It has no medium/long term elements, or any semblance of strategic thinking in it.

    It is a populist ;one time;pre-election vote winner ….whose central objective seems to have been secured ie more votes rather than less bonuses.

    A strategic & sustainable approach to the problem of “short termism” in banking bonuses, would have been the use of of regulation on Banking Reserve Ratios and Bonus Entitlement /payment method.

  34. “Karl Marx was right about one thing. It is the working people who create the wealth. Without them getting out of bed each morning these institutions and bosses within them would not be creating the profits and becoming millionaires of their backs.”

    You could just as easily say that wealth wouldn’t be created for anyone unless well-off people invested their money in businesses in the first place.

  35. “4) The majority of these measures affect the top 5% meaning the vast majority of the middle classes do not take the hit as much as the wealthy.”

    But they still take a hit, without a doubt.

  36. A very interesting piece Anthony.

    I think an awful lot depends on how any Party promulgating or talking about difficult issues is perceived by the public. If for example Labour came to be seen as anti business/aspiration thenin the medium term the bashing of the bankers may not play so well.

    Immigration became a turn off for voters as far as the Tories were concerned as it played in to a perception that they were narrow and a bit nasty. Very interesting though to know how it would play now with the voters in view of the excellent work David Cameron has done
    in “decontaminating the Party” I wonder whether it might play rather better.

  37. Take it from me Labour’s not likely to lose votes from
    their attitude to bankers bonuses. It seems to me that Cameron & Osbourne are no more sympathetic to us
    as a tribe. Will my vote change? I think not, I’ve a very long memoury. Oh and I’m still a workingclass banker
    worth every penny that I’ve earned

  38. I agree that the jury is out on much of this.

    One should remember that popular views can change.

    For much of the 40s and 50s the ‘new deal’ (USA) or ‘fairness (UK) agenda was in the ascendant. It changed gradually during the 60s and 70s until Regan/Thatcher created an ‘new orthodoxy’ now.

    The answer to those who say the market must decide is that the market did not know its own business. New Labour may have solved an old problem but not resonate in the current circumstances.

    Maybe if the conservatives thought a ‘Blair’ was what they needed will turn out to have been the right answer for the wrong election. I supect we may be in the process of creating a different orthodoxy – like the 1970s – than the one we all thought prevalent until the banking collapse.

    It may be that there is a greater apetite for policy that would have been regarded as unacceptable five, ten or twenty years ago; as the 1980s policy would not have been accepted even in the Nixon/ Heath governments.

    How polls can pick this up I don’t know. But maybe we should be asking different questions than those we’ve formulated. There is a big group of voters who vote LibDem who might well be attracted to a more ‘egalitarian’ ‘fair’ eceonomic policy and that possibly could create a new consensus.

    Will Brown offer Lib Dems PR and if he does will Cameron not have to offer the same? It’s interesting times we may be living in no matter what party you supoort.

    But the proof of all this dpends upon Labour creeping up further in the polls than they have to date.

    This is now not impooible but I must say that I’m still to be convinced a turing point for Labour has been reached. Everytime this has appeared to happen in the last five years it has vanished like a mirage.

    But what I’ve written may still be relevant to the next government….hence my view that like 1992 this may be a good election to lose.

  39. @ ALEC :-

    “I still maintain Cameron was wrong to make such a loud noise about cuts – it frightened the horses and has given Labour a chink of light. ”

    It depends what you mean by “wrong” Alec.

    If the GE is won by Labour after a campaign designed not to frighten the horses, is Cameron in a worse place?

    If such a victory is a narrow one-perhaps reliant on an accomodation with other parties, and Labour introduce a fiscal tightening which bears no resemblance to their pre GE promises, what then?

    A government which sought no mandate for a scale of fiscal tightening which it subsequently finds ( or knew ) will be necessary.

    Another election in 2011 -on a central Labour plank of what exactly?

  40. The tax rate under Brown’s administration has been doubled from 10% to 20% on the poorest. The tax rate on those earning £20,000 a year upwards has been raised via national insurance increases. The tax rate on bonuses of more than £25,000 has been raised to 50%.

    Looked at in this context we see a high tax regime being installed for every sector of income in our economy. And it is already a very high tax rate economy, with extensive fiscal drag. Heartlands appeal arguments raise two questions; what is going on in the Heartlands that such widespread tax-hikes do not hurt; and what is going on in the Heartlands that without tax-hikes on working people Labour will lose support?

  41. Hatfield Girl must have a short memory. In 1997 Income Tax was 24%, GB has reduced that to 20%. The 10% band was a short term measure introduced by GB to give quick relief to the lowest paid. NI thresholds have been raised to coincide with Income Tax levels. For small businesses CT was 25% (I know I paid it) – GB introduced the low income threshold of £10,000, and a CT rate of 10% – this was then lowered to 0% to stimulate new businesses. GB also introduced the R&D Tax Credit. These and other tax reduction measures stimulated UK business out of the 1990’s recession. As the economy recovered these measures were removed and replaced with direct tax levels that are well below those GB inherited from John Major. The other major reform was the raising of tax thresholds for older people – so that the first £9490 of all income is now Tax Free. In reality there has been a major shift of tax from the lower paid, and those on fixed incomes – towards tax on expenditure. Working Tax Credits have helped the low paid more. National debt was 43% when Labour came to power, that fell to 37% on the eve of the current recession – which is why we have been able to stimulate the economy at a lower % costs of GDP than other major indutrialised nations. Accusations of GB being a Tax Raiser are simply incorrect. By all means attack him on other policies, but please be factual when referring to tax rates

  42. Matthew,
    I agree with so much of what you said!We have endured 30 years – or 29 if we exclude the last 15 months – of right of centre Governments.Ted Heath and Harold Macmillan were way to the left of Blair and Brown.

  43. If i’m a gambler and win I pay no tax under this Government. If I’m a share speculator I pay 18% top rate tax. If I clean toilets I pay 32% on any pay over £7000.

  44. Anyone know when the December Ipsos-MORI poll is coming out?

  45. @ANDY STIDWELL

    They seem to do the fieldwork mid month (now-ish) and publish a week later. So I should be expecting it on the 22nd or 23rd of this month. Unless the analysis gets delayed by the Chrimbo bash.
    :-)

  46. ‘Accusations of GB being a Tax Raiser are simply incorrect. By all means attack him on other policies,…’

    EG, You are defending Brown, but I am not attacking Brown in this forum. The thread is about the damage polices popular with certain groups could do to over all Party image. Hence it is interesting to consider why tax rises on all sections of the electorate are interpreted as a response to Heartland political desires.

  47. I know it might be a naive question but here goes:
    Given that the tax on bankers’ bonuses is a one off windfall, aren’t those bankers likely to do something clever whereby they might defer getting their bonuses until another year? Alternatively, if the tax is so punative mgiht they not forgo them and have a larger salary instead?
    I’m sorry if this is a bit rambling but if either of these then occur might it not be possible for this windfall tax to be a complete flop?

    I know there are some very learned folk on here, perhaps you may know the answers to these questions???

  48. HARDPRESSEDTQY:-

    It isn’t a tax on the recipient employee ( bankers).
    It is a once off levy on their paying employers ( banks)

    The Treasury have said they will dissalow avoidance of the sort you suggest-but have not yet issued guidance-including on what constitutes a “bank” for this purpose.

    Some banks have said they will pay the tax, and pay the bonuses, thus forgoing the change in behaviour which the levy was intended to encourage.

  49. …………& by the way Darling’s proposal is in respect of “discretionary cash bonuses”.

    Pending detailed guidance notes this is presumed therefore to exclude “non-cash” bonuses ( shares) and/or so-called “guaranteed ” bonuses, which are contractually payable & not discretionary.

    Until the fine print appears know one knows how this will all turn out.

  50. Hardpresse… Many of the banks have decided to pay up, probably raising up to four times the amount Darling expected (according to City a.m.) Kind of defeats the object of repairing their balance sheets, or kind of proves the banks are returning to rude health, depending on your view.

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