Leading article: Don't bank on more bonuses

The annual bankers' bonus round is under political attack on both sides of the Atlantic. And the industry has been circling the wagons in response. Objections to the expected curbs on the bonuses paid to the staff of banks receiving state support have been thrown up here in Britain.

None of them hold water. It is asserted that some of those expecting bonuses work for sectors that are still generating profits; that those who made the awful strategic decisions have already departed; that certain workers have bonuses written into their contract. But these arguments crumble when confronted with the simple fact that these individuals would be out of work had they been employed in any other sector.

They worked for businesses that failed catastrophically by any conceivable measure. It is simply by virtue of their working in banking that they still receive a salary, let alone a bonus. The state had no option but to rescue the banks because the alternative would have been economic meltdown.

There is a further argument in defence of bonuses, namely that such payments are needed to prevent talented individuals from defecting to rival banks still in the private sector. Lose these individuals, the argument goes, and the business suffers, thus hurting taxpayers whose money has been used to prop up these concerns.

That such an argument has been deployed suggests an industry in a bizarre state of denial about its own weakness. The age of the hyper-profitable financial services sector is over. Banks everywhere, even those that have not fallen upon the state for a bailout, are contracting their operations, not expanding them. They are not hiring, but firing. There might be some movement of staff at the margins if bonuses are squeezed, but the days when the majority of bankers could credibly threaten to defect to another employer unless showered with money are emphatically over.

Of course, if these workers disagree they are perfectly entitled to put their theories on the state of the employment market for bankers to the test. If they insist on arguing that they could get substantially more money elsewhere, the response of the Government should be to show them the door and wish them luck.