Culture change may be coming, but it's not here yet. The financial sector will pay itself £3.6bn in bonuses this month: banks are rumoured to be rushing to beat any proposed cap. Even 70% state-owned RBS will pay generously, despite losing £28bn at the blackjack tables of investment banking. The government braces itself for outrage.
But there is not much it can do beyond what has been done to stop bailed-out boards' noses going to the trough. RBS's catastrophic purchase of ABN Amro included contracts with traders to pay fixed bonuses regardless. A one-line bill in parliament denying them the cash can't be done: they would sue, and anyway, governments can't simply set aside contracts. Traders in many banks will claim bonuses for "success", because they work in foreign exchange and bond markets that do well when shares bucket. Stand back and watch the explosion of public indignation.
Barack Obama's thundering words resounded around the world this week. He castigated "disgusting payoffs" and "lavish bonuses", fixing a $500,000 pay cap on bailed-out banks and firms. Is it heartening or depressing that Labour only dares echo such words when Obama has said them? It raised top tax two weeks after Obama won an election promising the same. After 12 years of celebrating the filthy rich, Peter Mandelson finally tells RBS to reconsider "exorbitant bonuses" and "how it looks and what public opinion will be".
So is this nearly the end of the bonus culture? Not yet. Mandelson added the crucial rider: "Obviously you have to work in a market, you've got to recruit the best people and keep the best people in place and motivate them."
No change there, then. The rationale for runaway pay was market competition; but the crisis revealed they were not brilliant, just deluded group-thinkers harvesting bonuses in a rising market. Often, when meeting them, they seemed lacking in intellectual curiosity, ignorant about ordinary life, breathtakingly selfish, and to have testosterone where their brains should be. Ask the universities: those heading for the City are rarely the cleverest, just the greediest.
Responses to Obama's modest pay cap of $500,000 have been revealing. The chief executive of Deutsche Bank warned that US talent would flee the bailed-out banks: "Talent will be happy to work for us." But astute observers dismiss that as bravado - the mobility of these masters of the universe was always exaggerated. In Britain as elsewhere, few top CEOs are foreign and few foreigners want our "talent", as Work Foundation research proved. There never was a shortage of talent, just a tiny club of self-proclaimed silverbacks, head-hunted from one company to another for mushrooming inducements. And mass sackings make the "market" excuse weaker than ever.
Even more revealing is the warning to Obama that if bailed-out bank chiefs get no bonuses until they pay back state cash, they will stop lending in order to store capital for that payback. In other words, everything about bonuses creates perverse incentives. It motivated them to take insane risks with bonuses pegged to share price. It encouraged auditors to turn a blind eye. Now withholding bonuses will apparently make banks do wrong again, just as the no-bonus threat drove Barclays to borrow at exorbitant rates elsewhere.
If nothing can be done about this year's bonuses, at next month's budget a white paper on bank regulation and Lord Turner's Financial Services Authority review will look to the future. Reforms will be proposed, but don't hold your breath for radicalism. Those giving advice are all in the game: Sir Philip Hampton, newly arrived to clean up RBS, is being paid £750,000 plus a £1.5m bonus for a part-time job on top of his Sainsbury's £450,000 part-time stipend, so where will culture change on remuneration be? New non-exec directors don't include sharp-eyed, lower-paid academics or heads of Oxfam, the research councils or other experienced institutions outside the Square Mile. You get no culture change from people who think earning a couple of million is as normal as tax avoidance.
What could be done? Abolish bonuses altogether. The evidence is that they don't work or have perverse effects. Performance-related pay demotivates losers without motivating winners. Changing the greed culture needs champions, so turn the Low Pay Commission, which sets the minimum wage, into a pay commission with a remit to set guidelines on the maximum shareholders should tolerate. Obama's $500,000 translates in the UK to 15 times the median pay of £23,000. That seems a generous maximum: CEO total pay packages have risen in the UK to 75 times the average pay within a company.
At this budget Labour should consider reward from top to bottom. It would be the right time to raise the minimum wage. If inflation is likely to be zero or less, will benefits be adjusted accordingly? Labour should take steps to narrow the great income divide in this last chance to halve child poverty by 2010. That would cost £2.7bn - less than this month's City bonuses.
Six opinion polls in a row give the Conservatives a lead with a 60- or 70-seat majority. It's easy to see why, as this crisis summons angry calls of "time for a change". It makes sense in the US, where politics and economics are in harmony. Obama arrives to clean up the explosive aftermath of Cheney-Bush neo-conomics. He reasserts the communal values of the state and public services, and the fairer distribution of rewards.
But in the UK everything is out of joint. It should be Labour riding to the rescue after a Tory era of City excess, debt and bubble. The idea that the Tories can reinvent themselves as the nation's saviour from the City culture is bizarre. They are the City, and the City roots for them, however ardently Labour wooed its denizens.
Watch the outburst on bonuses this month signal a growing demand for a fairer sharing of pain and gain. If the Tories are the answer, what is the question? But "Throwing the rascals out" may be enough to get angry people to vote for them, despite pollsters finding little enthusiasm for Cameron and Osborne. So Labour has only a year to become the culture change voters seek. On bonuses, could it begin with the sound of Gordon Brown echoing other Obama words this week: "I screwed up"? "