Belfast Telegraph

We're in a new era, but it hasn't dawned on bankers

By Steve Richards

Imagine the thoughts that whirled around the mind of Stephen Hester as the bonus season moved into view. I suspect very few did.

He seems a man untroubled by doubt. Perhaps the odd reflection came. "There will be a bit of bother with the bonuses. Always is. It will pass" or "these damned politicians are trying to interfere. My peer group will be getting a bonus. I should, too."

It was not until Sunday when Hester was faced with both humiliation and a practical obstacle in the form of a Commons vote against his bonus that his thoughts turned towards action. The banker earns incomparably more than any politician and has power that most politicians would die for. Yet he has not felt obliged to explain during the furore why he felt he deserved a bonus.

We can with certainty make an assessment of what did not form part of his internal reflections.

At no point, even when facing the heat of national vilification, did Hester consider that perhaps he already possessed more money than he needs and that, therefore, he would forgo his bonus.

In spite of his silence, or perhaps because of it, we can draw an important lesson. Contrary to current political fashion, exhortation and cultural pressures are not enough to bring about change.

Greed and distorted market values trump the fear of vilification every time. As a result, the relationship between politics and markets is bound to become more complex now Hester has relented.

Yet political leaders cannot turn away now that the public mood is set. Ed Miliband reflected, and to some extent anticipated, the new moral awareness. David Cameron also knew over the past week he could not be on the wrong side of the mood.

There is a global market in banking that is out of control. Hester's rivals are getting big bonuses. Unilateral action against a single banker solves little.

The situation is not neat, but a mess. All political leaders, here and abroad, are feeling their way to a new era after the previous one closed with the collapse of Lehman Brothers in 2008.

In the meantime, we are in a state of flux. Symptoms of transitional change are everywhere.

The bonus row is another indication. Not so long ago Labour ministers yearned to be associated with top bankers. Now a Tory Prime Minister feels the need to show distance.

For Britain, the sequence has a familiar air. In the 1970s, Edward Heath's government knew it had to deal with the unions, but did not know how to and was partly terrified of what would happen.

The same fearful calculations paralysed the Labour government that followed. In relation to the banks, Gordon Brown did not want to appear prescriptive when he took over RBS and nor does Cameron now.

Yet Brown knew, and Cameron senses, that nothing would be quite the same again. Miliband has a clearer ideological grip, as Thatcher had in the late 1970s.

The saga of the Hester bonus is not the end of this tumultuous phase. His climbdown marks an historic sign of weakness from those with a suddenly outdated sense of what they are worth.

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