The British banking system announces a controversial prediction today of profits of around £1 billion every week of 2011 while the rest of the country faces the biggest spending cuts in many decades.
Between them the UK’s top five lenders are expected to earn £51.7billion in 2011, or £200million for each working day, according to City estimates.
Interestingly, despite the rest of us scrimping and saving to survive the monthly bills, Britain’s two state-owned banks RBS and Lloyds are predicting double profits on last year.
The drastic rise in profits are likely to result in huge bonuses for the high-flying bankers this time in 2012, where the yearly debate about whether these bonuses should be given, and still nothing will be done by the treasury to ensure the taxpayer gets a cut of the money.
With city workers starting to be dished out the £7 billion bonuses of 2010 over the next few weeks the question is how much is going back to the government for our public services?
But bankers can expect to receive even more lavish rewards for their efforts in 2011 as banks squeeze yet more profit from their customers.
The extreme rise in profits could bring news of senior board members paying themselves extreme bonuses again. However, for the last two years we have seen some, such as Lloyds Chief Executive Eric Daniels waive at least part of their bonuses under public pressure.
The profits surge intensified calls for a hike in the Government’s new levy on the banking industry.
Labour’s Chuka Umunna said the Government’s plan to raise £2.5bn from a new tax was just a ‘pin-drop in the context of profits of more than £50billion’
The Government will raise as much as £2.5billion a year from a new charge to be based on the size of a bank’s loan book.
But Chuka Umunna, a Labour member of the Treasury Select Committee, said: ‘These profits lend credence to those who argue that the bank levy should be set at a higher rate.’
The £2.5billion the Government plans to raise from its new tax on bank balance sheets is just a ‘pin-drop in the context of profits of more than £50billion’ and a £7billion bonus pool, he said, adding: ‘They can well afford to contribute more to the Exchequer to reduce the budget deficit.’
But Lord Oakeshott, a Liberal Democrat Treasury spokesman, said: ‘Bankers working for RBS and Lloyds would not be in work if they had not been bailed out by the taxpayer.
This is a statement of truth and I do understand that bonuses do need to be paid in order to remain competitive with the still commercial banks within the industry but let’s be reasonable. With some bankers earning £300,000 per annum already to give a bonus of up to £1 million is simply ridiculous. Especially when you consider that most of us are happy with £20 in M&S vouchers in a card from our ‘normal’ employers.
This year the top five are expected to earn a 40% increase in profits of up to £51 billion and yet the rest of Britain is still trying to recover from it’s longest recession on record.
But it is claimed that despite these predictions the money isn’t coming back in to the economy with some small and medium-sized businesses being refused the credit that they need to keep their businesses going through these difficult times.
Lord Oakeshott said: ‘UK banks are still not doing the job they are meant to be doing, which is to support small- and medium-sized businesses and maintain the supply of mortgages to homeowners.’
Well this just explains why my old Nan used to say never trust the banks and kept all her money under the mattress right up until the day she died.