UK

George Osborne's Tax Break Sees Bankers Bonuses Rise And Coalition Lose £85 Million

20/08/2013 12:10 BST | Updated 20/08/2013 15:58 BST
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Chancellor of the Exchequer George Osborne talks to parents and staff, during a visit to a nursery in Hammersmith, London.

Bankers' bonuses have continued to soar over the last year, with the coalition losing as much as £85 million in tax after Chancellor George Osborne said he would scrap the 50p upper income tax band.

The finance and insurance industry paid out over a third of the £36.9 billion bonus pool paid out across UK business in 2012/2013, at £13.3 billion, according to figures from the Office for National Statistics. This equated to an average of £11,900 per employee in financial services and a 1% boost in bonuses paid out since last year.

However, Osborne's introducion of the lower 45p income tax band, announced in his Budget last year means that the taxpayer has lost out on £85 million as banks deferred £700 million of bonuses to April this year.

This action caused controversy when briefly considered by the bank Goldman Sachs, which backed down after then Bank of England governor Mervyn King intervened.

This bonus deferral would mean bankers bonuses were 4% higher in the year to April at £38.6 billion.

PCS General Secretary Mark Serwotka told the Huffington Post UK: "George Osborne's decision to cut the tax rate for millionaires is not only a disgrace when services to millions are being cut, but it is now clear that companies have deferred bonuses to allow the highest earners to avoid the 50% tax rate.

"With an extra million people living in poverty thanks to this government and half a million reliant on food banks, it is clear we are far from being all in this together."

TUC General Secretary Frances O'Grady said: "The return of big bonuses shows Britain is booming for the super-rich. While ordinary people suffer the longest wage squeeze in over a century, those at the top have seen bonuses rise by a stonking four per cent.

"Not content with giving the super-rich a tax cut, the Chancellor has also showered them with an extra gift worth tens of millions of pounds, courtesy of the taxpayer, by giving them plenty of notice to defer their bonuses and avoid the 50p tax rate.

"The shape of Britain's recovery looks increasingly like one where the same old elites hog the gains, while ordinary workers are expected to take declining living standards on the chin."

Oil and gas workers received the next highest average bonus at £6,700. However, total bonuses for staff in the construction sector, technical industries and administration fell.

In 2012/13, the average private sector worker received £1,700 in bonuses, compared with an average of £100 for public sector workers excluding those at the state-owned banks.

ONS Bonus Statistics
ons