Youth Unemployment and Bank Bonuses

Debate between Jake Berry and David Ruffley

Monday 23rd January 2012 Commons Chamber

[Mr David Ruffley (Bury St Edmunds) (Con)]

Youth unemployment and bankers’ bonuses are both too high, and the Opposition hope that by taxing the latter they can help the former. Let us first agree that help for the young unemployed is vital. The scar of joblessness destroys self-respect and will also damage the long-term economic growth rate of this country. What are the Government doing about it? They have already announced a record number of apprenticeships—440,000 in this Parliament—as well as a £1 billion youth contract and more than 250,000 more work experience places. The proposal for a tax on bankers’ bonuses is what I want to focus on. My starting point is that crony capitalism and big financial rewards for failure not only are morally offensive but they subvert the principles on which successful capitalism depends.

[Jake Berry]

Let me pick up on the point about things being morally offensive. We have heard about the Leader of the Opposition calling for Fred Goodwin’s knighthood to be removed. Does my hon. Friend agree that if that happened it would also make sense for former Labour Cabinet members who were part of the Government who led to this bankruptcy for Britain to give up their peerages in the other place?

[Mr Ruffley]

That is an interesting suggestion. I also think that the former Prime Minister should make a personal apology when our Prime Minister, who is an infinitely better one, strips Sir Fred Goodwin of that ill-deserved knighthood.

Currently, there are excessive bonuses within the sector that give capitalism a bad name. They have fostered the belief that there is a class of people who pay themselves pretty much what they like while the rest of the country has to deal with the consequences of what many of those people served up to this country by way of financial crisis. The idea that this is something that Conservatives are casual about is utterly false. The speculation by the Mayor of London about what the greatest pro-enterprise Prime Minister of the previous century would have thought of today’s sorry state of affairs was interesting. He said that we should ask

“what Margaret Thatcher would have thought of a system where directors sit on each other’s “remcoms”—remuneration committees—and defend each other’s expanding awards, even when the directors in question have presided over commercial disaster of one kind or another. She would have thought it was absurd.”

All Conservatives think that is absurd and that something must be done about it. We think that two things should be done. First, we want to encourage people of talent to come to the UK, stay here and make the City of London the greatest financial capital on planet Earth. The second thing we need to do is foster a regime in which performance is more closely tied to reward. Quite frankly, that is not extant.

I suggest that a new blanket tax on bankers’ bonuses would undermine those aims, or at best do nothing to advance them. It would do nothing to distinguish between cases in which an executive had genuinely earned a reward by turning around a failing organisation, increasing profitability or increasing returns to shareholders, and cases in which executives had taken advantage of lax scrutiny to take excessive rewards for their failure. There is a distinction between the rich and the undeserving rich, of whom Sir Fred Goodwin is a terrible exemplar.