Last weekend I walked into the clubhouse after my hockey match and stumbled upon a debate around bankers – their pay, bonuses, benefits and how they have ruined the economy.
I know it’s not strictly mortgage-related, but I thought it was worthy of a mention.
I listened intently to the debate and concluded that the majority of people were in agreement.
It was all the greedy bankers’ fault – they take massive salaries and bonuses, and they don’t do anything but move money around from one place to another, right?
I have a number of clients who work for large investment banks. They get a £120,000 basic salary and £300,000 bonus.
Some of their colleagues have a £150,000 basic salary and bonuses that stretch into the millions.
I also have some clients who are Premier League footballers. One player I deal with is on a £30,000 per week contract and takes home £90,000 for a month after deductions on his latest payslip. Lucky him I guess.
“But he doesn’t do anything substantial, he doesn’t save a life,” I hear you say.
Everyone has their own skill set and people pursue their chosen careers as vehemently as they can. If someone offered to pay you those sums of money, I doubt your response would be, “Certainly not, I don’t deserve money like that. It’s not like I save a life or anything”.
You’d simply say thank you and be on your way. Just like everyone else would, if they’re honest.
But have these people brought down the economy? It’s a big leap, but let’s say that actually, these people are doing more to help the economy than anyone gives them credit for.
My client – on £420,000 a year – is contributing as much tax as more than 30 average wage earners
Take my client on a basic salary of £120,000 with a £300,000 bonus – £420,000 in total remuneration for this year.
He easily falls into the top tier of taxation – 50% for earnings over £150,000. In total, someone on £420,000 a year would pay around £157,900 in tax for one year.
Someone on an average UK wage – £32,500 – would pay £5,200 in tax. So my client is contributing as much tax as more than 30 average wage earners.
My client pays 37.6% of his total remuneration in taxes. The average guy on £32,500 pays 16%. Cap bonuses? Cap remunerations for the highest earners? All you would achieve is to reduce the amount of revenue that would be generated for the state from direct taxation.
The options then would be to increase the amount of revenue generated through a rise in Income Tax to make up the shortfall or increase indirect taxation such as VAT and other hidden levies that commonly fall under the happy name of stealth taxes. A better solution? I hardly think so.
I believe the highest earners pay a massive amount of money back into the governmental coffers and that they do more than anyone to assist the state of the economy.
As a nation we need to stop bashing bankers and harassing high earners. They are giving back to the community in ways that nobody even considers.
Let’s move on from reading about this in every publication we pick up and hearing it on every TV channel and see the bigger picture.
If those people weren’t around, it would hurt regular people like you and me. I’m not saying we should run up to them with a big hug. After all, they haven’t saved a life or anything have they?