£7bn bonus bonanza for City workers fuels anger
Published 05/10/2010 | 08:00
Anger over City workers' pay packets is likely to be fuelled by new figures showing cash bonuses hitting £7bn this year.
The Centre for Economics and Business Research (CEBR) said pre-tax City bonuses are continuing to recover to pre-credit crunch levels, although slightly lower than last year's pot of £7.3bn.
Bankers and other City workers, such as fund managers, have largely been blamed for the financial crisis and recession.
But Benjamin Williamson, CEBR economist, said the taxman will take home more of this year's £7bn bonus pot, which excludes share windfalls, after the new tax rate of 50% on incomes over £150,000 came into force.
"Our research shows that the public coffers stand to gain considerably more from City bonuses than City workers themselves." he said. "A whopping £7bn bonus payout will be easier to stomach if the lion's share goes to the nation."
City workers - staff in investment banking, equities and bonds, derivatives, corporate finance and fund management - will take home around £3.2bn after paying national insurance and income tax, CEBR said.
But the Government will take around £4.1bn in tax, as employers also have to pay main rate national insurance contributions of 12.8%.
The CEBR said bonuses in 2010 were lower overall compared with last year due to the "weaker" performance of City firms during the second half of this year.
But looking further ahead, it has forecast total cash bonuses close to the £10bn mark, as the financial sector recovers and the number of City workers increases.
The CEBR research showed the steep rise in bonus payments in the years leading up to financial crisis. In 2002, the reward pot was just over £3bn but this rocketed to £11.5bn in 2007.