I’ve had a thought. And now I’m wondering: could this simple idea be the answer the UK needs?
Nobody will be surprised if I say I’m not keen on Labour’s planned benefit cut. I think it’s the wrong move because it attacks disabled people and takes money out of the economy when it desperately needs to have cash coming in. The optics are terrible, as anyone can see.
So I started thinking of other ways to raise the cash Labour needs – or achieve other economic benefits that would relieve the government of the need to spend money elsewhere; this would make the saving on benefits unnecessary.
I’m not saying this will achieve the same savings because I don’t know what it will achieve, but here’s what I devised:
A modern bonus tax for financial institutions – with a purpose.
Bankers’ bonuses have been a source of resentment among the rest of us for many years – especially after the financial crisis of 2008 onwards that was caused by bankers who continued to take huge bonuses in the years following.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
This new levy would include other financial institutions like hedge funds, investment firms, private equity and insurance firms, so the banks would have no reason to complain that they were being unreasonably targeted while others were not.
And if they say a tax is not justified, it would be reasonable to remind them that banks benefited from government bailouts and central bank interventions such as low interest rates and quantitative easing). A tax ensures they give something back, without harming their ability to lend and invest.
A bankers’ bonus tax in 2009-10 raised £3.5 billion. The amount paid by UK financial institutions in 2022-23 was estimated at £13.5 billion so it is reasonable to assume that another such tax will also raise billions.
But here’s the hook: I’m suggesting that the new tax is optional – and short-term.
Bonuses up to a named ceiling (which could range from £100,000-£250,000) would not be taxed. Any amount above that ceiling would be taxed at a high rate (I was advised 50-75 per cent). This would keep bonuses competitive but not excessive, and also prevent public scandals over financial institutions receiving huge payouts while ordinary customers face high mortgage rates and low savings interest.
The optional part
Banks could then be incentivized to reward customers with reduced fees, increased savings interest rates, or improved lending terms. A “bonus-to-customer” tax relief system could let banks avoid the tax if they redirect the money into better services. This would help customers directly, making it politically popular.
Hedge funds, investment firms, insurance firms and private equity don’t serve everyday customers in the same way, so customer-facing incentives wouldn’t work. Instead, they could avoid or reduce the tax if they:
- Invest in UK businesses and infrastructure (like green energy, tech startups, regional development projects).
- Offer lower management fees for smaller investors (if they operate funds open to the public).
- Fund apprenticeships or workforce training in finance and financial technology.
Short-term
The tax would be time-limited, partially to avoid market distortion. It could run for several years as a test of its effectiveness, with an option to extend or adjust it as necessary.
But another reason to limit its operation might be in order to embed the alternative practices described above as a new normal, once their advantages become apparent; this measure could lead to a change in the way financial institutions think about their money.
In time, it may be hoped that the customer incentives will be popular with savers and they will come to expect better savings rates and loan terms – so the banks will have to keep offering them, even without the tax incentive.
And we may hope the investment firms will see that UK-based funding will be good for everybody’s businesses (there will a return for the financial organisation if all goes well, let’s remember), and the tax payments will make the government happy.
Given all those green flags, it would seem reasonable for the financial organisations to keep doing these things.
By keeping the system in place until financial institutions naturally embed these behaviours, they would start seeing customer reinvestment and productive business funding as standard practice, not just as a way to avoid the tax.
It could then be seen as a catalyst for cultural change in the financial sector rather than just a short-term revenue grab.
Given those possibilities, it would be a good idea to keep it in place for as long as it takes for those ideas to become embedded in the policies of the financial organisations.
Also – realistically – financial institutions need time to adjust their strategies and see the benefits of reinvesting rather than just paying bonuses. And regular reviews would ensure loopholes don’t develop and that banks aren’t just finding workarounds.
As banks and firms internalize the practice of customer reinvestment or business funding, the tax rate could decrease – but if they continue rewarding excess bonuses over reinvestment, the tax stays high.
Once the new way of operating is embedded, there would be no need to keep the tax as it would have outlived its usefulness.
This way, the policy isn’t about punishing banks, but about reshaping their priorities so that their success is more aligned with the public good.
Safeguards
Some banks might try to devise what are known as “workarounds”, like converting bonuses into salary increases, so the policy would need safeguards, like only applying it to variable pay (bonuses, stock awards, etc), and there would need to be examination of overall executive pay structures to prevent hidden workarounds.
Bonus regulations could be introduced to prevent a return to excessive pay, so bonuses could only rise with inflation or bonus pools must be linked to long-term financial stability rather than short-term profits.
And a review mechanism could bring the tax back if old behaviours return.
Benefits
The key benefits of this approach are that:
- The banks help ordinary customers by improving savings rates and loan terms.
- Investment firms contribute to the economy through UK business growth, rather than just making the rich richer.
- No sector is targeted unfairly, meaning industry pushback is reduced.
The choice between paying the tax or investing in customer services (banks) or UK businesses (other financial organisations) means the money may be spread between schemes that businesses say they need, and policies that the government believes are vital for the country as a whole (like infrastructure, the NHS and education).
Banks and investment firms won’t be forced into schemes they don’t see value in, but they also can’t just hoard excessive pay without consequence.
It gives financial firms control while ensuring the excess money benefits society.
It prevents talent flight since firms can still reward top performers .
It provides public legitimacy to the banking sector by ensuring that it contributes fairly.
And this way, if banks argue that they know best where to put their money, they actually have to prove it—or else they pay up.
And that brings us to the big win – a financial sector that works for more of us:
- Savers & borrowers get better deals, making finance feel fairer.
- Businesses get more investment, supporting economic growth.
- Government still gets revenue, but in a way that incentivizes positive behaviour.
- Financial institutions maintain profitability, but with a more responsible model.
Also, it:
- Creates a long-term shift without being a permanent tax burden.
- Encourages financial institutions to change on their own, not just because they’re forced to.
- Balances market freedom with responsible financial behaviour; and
- Stops excessive bonuses creeping back in, without unnecessary government interference.
This way, banks and firms are given a clear path to self-regulation, while customers and businesses keep benefiting from fairer financial practices
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
Could this simple idea be the answer the UK needs?
I’ve had a thought. And now I’m wondering: could this simple idea be the answer the UK needs?
Nobody will be surprised if I say I’m not keen on Labour’s planned benefit cut. I think it’s the wrong move because it attacks disabled people and takes money out of the economy when it desperately needs to have cash coming in. The optics are terrible, as anyone can see.
So I started thinking of other ways to raise the cash Labour needs – or achieve other economic benefits that would relieve the government of the need to spend money elsewhere; this would make the saving on benefits unnecessary.
I’m not saying this will achieve the same savings because I don’t know what it will achieve, but here’s what I devised:
A modern bonus tax for financial institutions – with a purpose.
Bankers’ bonuses have been a source of resentment among the rest of us for many years – especially after the financial crisis of 2008 onwards that was caused by bankers who continued to take huge bonuses in the years following.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
This new levy would include other financial institutions like hedge funds, investment firms, private equity and insurance firms, so the banks would have no reason to complain that they were being unreasonably targeted while others were not.
And if they say a tax is not justified, it would be reasonable to remind them that banks benefited from government bailouts and central bank interventions such as low interest rates and quantitative easing). A tax ensures they give something back, without harming their ability to lend and invest.
A bankers’ bonus tax in 2009-10 raised £3.5 billion. The amount paid by UK financial institutions in 2022-23 was estimated at £13.5 billion so it is reasonable to assume that another such tax will also raise billions.
But here’s the hook: I’m suggesting that the new tax is optional – and short-term.
Bonuses up to a named ceiling (which could range from £100,000-£250,000) would not be taxed. Any amount above that ceiling would be taxed at a high rate (I was advised 50-75 per cent). This would keep bonuses competitive but not excessive, and also prevent public scandals over financial institutions receiving huge payouts while ordinary customers face high mortgage rates and low savings interest.
The optional part
Banks could then be incentivized to reward customers with reduced fees, increased savings interest rates, or improved lending terms. A “bonus-to-customer” tax relief system could let banks avoid the tax if they redirect the money into better services. This would help customers directly, making it politically popular.
Hedge funds, investment firms, insurance firms and private equity don’t serve everyday customers in the same way, so customer-facing incentives wouldn’t work. Instead, they could avoid or reduce the tax if they:
Short-term
The tax would be time-limited, partially to avoid market distortion. It could run for several years as a test of its effectiveness, with an option to extend or adjust it as necessary.
But another reason to limit its operation might be in order to embed the alternative practices described above as a new normal, once their advantages become apparent; this measure could lead to a change in the way financial institutions think about their money.
In time, it may be hoped that the customer incentives will be popular with savers and they will come to expect better savings rates and loan terms – so the banks will have to keep offering them, even without the tax incentive.
And we may hope the investment firms will see that UK-based funding will be good for everybody’s businesses (there will a return for the financial organisation if all goes well, let’s remember), and the tax payments will make the government happy.
Given all those green flags, it would seem reasonable for the financial organisations to keep doing these things.
By keeping the system in place until financial institutions naturally embed these behaviours, they would start seeing customer reinvestment and productive business funding as standard practice, not just as a way to avoid the tax.
It could then be seen as a catalyst for cultural change in the financial sector rather than just a short-term revenue grab.
Given those possibilities, it would be a good idea to keep it in place for as long as it takes for those ideas to become embedded in the policies of the financial organisations.
Also – realistically – financial institutions need time to adjust their strategies and see the benefits of reinvesting rather than just paying bonuses. And regular reviews would ensure loopholes don’t develop and that banks aren’t just finding workarounds.
As banks and firms internalize the practice of customer reinvestment or business funding, the tax rate could decrease – but if they continue rewarding excess bonuses over reinvestment, the tax stays high.
Once the new way of operating is embedded, there would be no need to keep the tax as it would have outlived its usefulness.
This way, the policy isn’t about punishing banks, but about reshaping their priorities so that their success is more aligned with the public good.
Safeguards
Some banks might try to devise what are known as “workarounds”, like converting bonuses into salary increases, so the policy would need safeguards, like only applying it to variable pay (bonuses, stock awards, etc), and there would need to be examination of overall executive pay structures to prevent hidden workarounds.
Bonus regulations could be introduced to prevent a return to excessive pay, so bonuses could only rise with inflation or bonus pools must be linked to long-term financial stability rather than short-term profits.
And a review mechanism could bring the tax back if old behaviours return.
Benefits
The key benefits of this approach are that:
The choice between paying the tax or investing in customer services (banks) or UK businesses (other financial organisations) means the money may be spread between schemes that businesses say they need, and policies that the government believes are vital for the country as a whole (like infrastructure, the NHS and education).
Banks and investment firms won’t be forced into schemes they don’t see value in, but they also can’t just hoard excessive pay without consequence.
It gives financial firms control while ensuring the excess money benefits society.
It prevents talent flight since firms can still reward top performers .
It provides public legitimacy to the banking sector by ensuring that it contributes fairly.
And this way, if banks argue that they know best where to put their money, they actually have to prove it—or else they pay up.
And that brings us to the big win – a financial sector that works for more of us:
Also, it:
This way, banks and firms are given a clear path to self-regulation, while customers and businesses keep benefiting from fairer financial practices
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
you might also like
Let’s start the New Year with some hopeful news
More mistakes in the script? Correcting Cameron’s New Year speech
Osborne wants a ‘year of hard truths’. Here’s one: He’s HIDING the truth