City bonuses forecast to rise to £6.8bn

The amount paid in bonuses to City workers is forecast to rise to £6.8bn this year, up from £6bn in 2009, according to figures published today. The forecast is likely to spark further outrage over excesses in the Square Mile, as ongoing investigations at Goldman Sachs continue to sully the already tarnished image of the banking industry. It will also be unwelcome for prime minister Gordon Brown, who has been forced to defend himself against accusations that he has failed to be tough enough with the banking sector. The figures from the Centre for Economic and Business Research show the bonus pool still some way from the peak of £10.2bn in 2007, the year that cracks began to appear in the financial system. But the amount of cash being handed out is again on the rise. It forecasts that £7.2bn will be paid out next year and £7.7bn in 2012. Brendan Barber, general secretary of the Trades Union Congress, said: "Ordinary people will not understand why City bonuses are on the rise again. The economy is still fragile. Businesses can't get the loans they need, public and private sector workers are frightened of losing their jobs, yet the banks and finance houses that caused the crash are laughing all the way to the City champagne bars." In 2008, the bonus pool fell to £4bn. Despite sluggishness in other parts of the economy, some of the biggest investment banks have been reporting a surge in profits and are again paying out large amounts to their staff. On Tuesday, Goldman released better than expected first quarter revenues and admitted its bonus and pay pool had reached $5.5bn (£3.3bn) in the first three months of 2010. JP Morgan enjoyed a 55% surge in first-quarter profits to $3.3bn compared with a year earlier. The CEBR said yesterday that the number of jobs in the City is set to increase by 14,000 this year, as the banks shrug off the recession and forecast that employment in the financial services industry would be back above 2008 levels next year. Barack Obama this week accused banks of losing touch with broader society, as he continues to press for a package of regulatory overhaul that is finally gaining momentum in Congress. "Some on Wall Street forgot that behind every dollar traded or leveraged is a family looking to buy a house, pay for an education, open a business or save for retirement," he told an audience in New York. The CEBR suggested the enlarged bonus pool will however be good news for the Treasury, with the new tax rate of 50% on income over £150,000. After income tax and national insurance contributions, the taxman is set to take around £4bn. "The recent change to the tax system has shifted the balance of rewards from City bonuses in favour of the government." said Benjamin Williamson, CEBR economist and co-author of the research. "Despite contributing billions of pounds in tax already the public's appetite for a larger slice of City bonuses will not go away"