CITY financiers will together pocket New Year bonuses of more than £6 billion – 50 per cent more than a year ago – as the rest of the country faces growing unemployment and public-service cutbacks, according to research published today.
Seven-figure pay-outs will be among the bonuses awarded to many of the top financiers of the major banks and financial institutions this Christmas, following months of bumper profits.
But City minister Lord Myners warned he could act to cap them,
saying taxpayers "will not tolerate" pay-outs which they see as unjustified.
Lord Myners has already said he will block big pay-outs at those institutions that have been part-nationalised, including Royal Bank of Scotland.
The prediction of a £6bn bonus pay-out pot, compared with £4bn in 2008, is made by the highly respected Centre for Economics and Business Research and is well in excess of previous calculations.
In April, the CEBR said it expected 2009 bonuses to remain at 2008 levels, but since then profits at the leading financial institutions have risen sharply as the stock market has soared.
The CEBR also says profits have increased because of a marked fall in competition following last year's crash, which has given some firms a near monopoly on business.
The prediction of a return to bumper profits will put fresh pressure on ministers to intervene, coming only a year after the City was effectively bailed out by the taxpayer, following a financial crisis that it was seen to have caused.
With business returning to normal in the Square Mile, senior regulators, such as the head of the Financial Services Authority, Lord Turner, have warned they will act to prevent such mega-bonuses from being handed out.
Lord Turner claimed last month that there were parts of banking that were "socially useless".
Lord Myners said earlier this week that he would curb bonuses at those banks which had taken taxpayers' money.
Commenting on the CEBR research, Lord Myners added: "Banks must realise that they are alive today only due to taxpayer support.
"Taxpayers will not tolerate bonuses they see as unjustified.
"The government has taken action to ensure that bankers' bonuses can no longer threaten the safety of the financial system. The FSA will be carefully scrutinising banks as they make final decisions on pay and bonuses in the months ahead."
Other political figures last night said City bonuses must be curbed to reflect public opinion.
Liberal Democrat Treasury spokesman Vince Cable said: "This big increase in bonuses does not in any way reflect the particular contribution made by bankers to the economy.
"These bonuses are coming from the fact that banks are earning money from substantial government borrowing and are able to earn bigger profits because there is less competition. What is particularly galling is that all their activities are, in turn, underwritten by the taxpayer.
"Ministers must stem public outrage by ending anti-competitive practices and ensuring that those getting big bonuses pay their fair share of tax, rather than escape via the many loopholes which the government has left."
A spokesman for the Scottish Government said: "When considering salaries and bonuses, financial institutions must be mindful of taxpayers' interests. These bonus figures are very significant, and restraint must be applied in the current economic climate."
The Conservatives have also warned against large bonus payments in the state-supported banks.
George Osborne, the shadow chancellor, said this month that an incoming Tory government would look at using the tax system to stop "unreasonable" pay and bonus deals.
But the CEBR said that, rather than penalising bonus payments, ministers needed to encourage competition in the financial sector.
The chief executive, Douglas McWilliams, said: "Any attempt to deal with bonuses is likely to be either unsuccessful or very damaging, unless it addresses the issue of lack of competition which is at the heart of the sharp rise in profitability."
However, leading City economist Roger Bootle claimed last night bumper bonuses this year were unacceptable.
He said: "I'm outraged. So many people say this is a mark of success. I don't think it is. It's a mark of failure.
"People talk about the wealth that these banks create. I think the big question is: are they creating wealth or are they merely distributing it to themselves? I think it's largely the latter."
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