LUCY FARNDON COMMENT : Bankers are still partying despite tough talk from the Government


Alistair Darling unveiled new laws to rein in banking bonuses this week

Alistair Darling unveiled new laws to rein in banking bonuses this week

Labour would have better luck persuading the electorate to believe in fairies than its economic predictions. There is no more mileage in ministers keeping up the pretence that the UK is 'better placed' than others to emerge from recession.

Cue Alistair Darling saying at the party conference that it is still 'too early' to say whether the UK is coming out of recession, despite the optimism of independent forecasters.

Nor does he have much hope for the dole queues, warning unemployment will keep rising for a long time.

And the cuts in spending that have been looming large are now being dressed up as a necessary medicine to reduce the deficit in the public finances created by a decade of excess.

With nothing to crow about at its annual back-slapping shindig, the government had little choice but to come up with some new legislative proposals.

Banker bashing is a good one. It is guaranteed to win popular support. And, regardless of how distasteful the bonus proposals are for bankers, none would dare to openly criticise in case they got lynched or had their country piles vandalised.

There are a few within the banking community who share the disgust felt by the wider population about how a single sector could be allowed to wreak so much damage.

JP Morgan's investment banking bigwig Bill Winters, tipped as a potential future chief executive, blamed 'greedy' bankers and 'inept' risk managers for the crisis.

Strong words of contrition have also come from Goldman Sachs boss Lloyd Blankfein, though it is not clear how much of this is heartfelt or merely good media management.

Either way, these executives are in the minority. Most bankers and their boards of directors still have little comprehension of why they are so hated.

They have even less understanding of the need for restraint and certainly won't be giving up their holidays or dragging their children out of private school if they can possibly help it.

The Chancellor may be planning to talk tough this week when he calls in the remuneration committee heads of all of the big four banks.

But his plea for a voluntary reduction in 2009 bonus payments will fall on deaf ears.

Banks make billions by ruthlessly exploiting tax loopholes, transferring business from one country to another and channelling their activities through an opaque network of companies that few can understand. Darling can't suddenly turn tigers into pussy cats by tickling them on the tum.

If legislation comes in, they won't be able to ignore it. But much of what is being proposed is still vague and sidesteps the issue of caps on overall pay or bonus levels.

It also appears focused on board directors, not on the traders who are taking the big risks.

Scrapping annual cash bonuses for top executives will ruffle a few feathers. But over time basic pay will rise, or share rewards will be more lavish.

When remuneration committees meet over the next month or two to discuss the annual payouts, it will be business as usual.

The flood of rights issues and debt restructurings, and the hive of activity in bond, equity and currency markets will lead to large cheques for many investment bankers.

Champagne corks will be popping in the City and Canary Wharf this Christmas, albeit more discreetly.

If the party is over for anyone, it is Labour not the banks.

Muted celebrations are expected in Canary Wharf this Christmas

Muted celebrations are expected in Canary Wharf this Christmas

Aside from the surge in Wolseley's share price, there was nothing to get excited about in its results briefing yesterday.

Better than expected profits were driven by taking an axe to costs, not an improvement in the underlying health of its businesses.

Though many of the countries in which it operates are seeing the green shoots of recovery, it could be years rather than months before this filters through to the building sector.

Housing markets have stabilised, but the key problem for developers is securing the financing for projects.

Wolseley fears an acceleration in the declines in its commercial markets, which were initially propped up by demand from ongoing building work on offices and hotels.

Many developments that were begun ahead of the credit crunch are now coming to an end, but new projects aren't being signed off.

New boss Ian Meakins kept mum on strategy, suggesting he doesn't believe much can be done that is not already being done.

While most companies in other sectors are hoping for a better year in 2010, analysts predict Wolseley's profits will keep falling for another two.

And having shed 30,000 out of 80,000 employees, it is hardly in a position to capitalise on an economic revival when it does come.

No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards.

We are no longer accepting comments on this article.

Who is this week's top commenter? Find out now