Mervyn King: Pay bankers the same as doctors

Warning: Mervyn King said banks must not be a "burden" on the taxpayer
12 April 2012

Bankers' bumper salaries should be slashed to levels similar to those of other professionals, the Bank of England Governor suggested today.

Mervyn King argued that "thoughtful" people in the City would accept that many multi-million-pound pay deals should be cut.

The governor, who is himself paid about £300,000 a year, appeared to advocate that bankers should be paid salaries comparable to lawyers, accountants and doctors — although he did not specifically mention these professions.

He told MPs that Barack Obama had opened the door to radical reforms in the Square Mile which were vital to ensure it thrives.

In a blow to Gordon Brown, he bluntly dismissed the idea being pushed by the Prime Minister for a worldwide "Tobin tax" [on high-risk speculation]. The Bank of England also signalled support for the US president's plans to limit the size of banks — a move opposed by the Government but favoured by the Conservatives.

However, it is Mr King's words on the need for reforms which are likely to spark anxiety in the Square Mile still reeling from Mr Obama's aggressive proposals and the 50 per cent tax on bonuses above £25,000 in Britain.

Arguing that the City was so big that a major overhaul was needed to protect the taxpayer from future financial crises, Mr King told MPs: "The more thoughtful bankers will recognise that this is likely to create a banking system which in the long run will earn normal rates of return...

"It's very unlikely to justify, I think, the sorts of extraordinary remuneration that we have seen."

Mr King stressed that the British economy was so heavily reliant on the banking sector, which was five times as big as Britain's GDP, that it needed to be better protected against another financial crisis.

"The only way in which we can really sustain a large international financial centre in London ... is if we can make sure it doesn't impose a prospective burden on the UK taxpayer," he told the Commons Treasury select committee.

He admitted that steps to limit the impact of another financial crisis could reduce the size of the City.

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