Wednesday, January 21, 2009

Northern Rock Bonuses: The Economics of the Mad House

Someone left a comment on the blog earlier about Northern Rock employees being paid a 10% bonus this month. I assumed they were deploying humour in a way I did not get. But it turns out that they were speaking the God's honest truth! Could someone perhaps explain to this simpleton (i.e. me) just exactly what merited these bonuses because I am buggered if I can work it out for myself. The Tories have just issued a response...
Government policy is totally confused. Firstly, the state-owned Northern Rock is paying millions in bonuses to its staff, while Gordon Brown boasts of a banking bonus crackdown. Secondly, the Government is paying bonuses to people for achieving a policy that it has just reversed - shrinking Northern Rock's lending in the middle of credit crunch.

So the government is using your money and my money to reward people who work for a company which is failing to lend and was a prime cause of the banking crisis which is paralysing our economy. One wonders what they would have to do to be fired.


Anonymous said...

It is utterly insane. Got to be worth a few hundred votes in the marginals.

Mike Wood said...

Presumably these are the Tory bankers that Denis Skinner was talking about at PMQs

Unknown said...

"One wonders what they would have to do to be fired."

Approving a mortgage or loan should do the trick.

NudeEel said...

While we all know you love the drama Dale, this statement from your party is purely hysterical. "Millons" - have any of you done the maths?

Stephen Folan said...

Obama has just frozen pay for aides earning over $100,000 - maybe that will be a strategy Brown might want to consider.

Hacked Off said...

The Penguin

Anonymous said...

It's what you get in the public sector, bonuses regardless of how badly you perform.
So you can expect the same if any other banks are nationlised.

oracle3001 said...

Small beer compared to the £14 million an hour the government is over spending of our money (well possible future money earned)!!!!

Check out Guido for futher info

Unknown said...

So John, "One wonders what they would have to do to be fired."
Presumably, since I work for Northern Rock as a low-ranking call-centre manager, I am one to whom you refer as "they".
Your inference appears to be that I am in some way responsible (so should be in some way punished) for the decisions made at management board level over the last 10+ years which culminated in the run on the bank following what has been widely described as a global, economic "perfect storm"?
You know absolutely nothing about what the average worker has endured since September 2007, what development/pay "freezes" have been in place, or what degree of professionalism and commitment has been exhibited by regular, lower-echelon workers in paying back the loan MASSIVELY ahead of schedule, all against a backdrop of uncertainty and redundancy threat, and an almost constant tirade of media-led abuse and smug, smart-assed, faux-indignant one-liners from ill-informed, pompous "bloggers" such as yourself.
The total sum quoted is probably inaccurate, but even if it is not, how far do you think £8.8M would go in the grand scheme of things against a loan of £19B?
I suggest you keep your mouth shut and refrain from banging-out ill-thought out crap on your keyboard, at least until you have a clue what you're on about.

Damon From Birmingham said...


Many companies in the private sector have pay freezes in place right now. Most companies (outside of the City of London) don't pay bonuses to their staff no matter how much they beat their targets by. Northern Rock was bailed out by the taxpayers, those who remained there kept their jobs when they could so easily have lost them and for that they should be grateful (as I'm sure several thousand less fortunate individuals will testify after all the recent job losses).

Unknown said...


For someone so worthy of a bonus, you seem to be having trouble reading. I was quoting one of Iain's sentences from his blog post (You know, the one you were supposed to read BEFORE commenting). Specifically, the "One wonders what they would have to do to be fired." comment, to which I speculated "Approving a mortgage or loan should do the trick."

So do jog on, there's a good lad.

Newmania said...

Your inference appears to be that I am in some way responsible (so should be in some way punished) for the decisions made at management board level over the last 10+ years which culminated in the run on the bank following what has been widely described as a global, economic "perfect storm"?

Oh do piss off . I am now sitting in an office working , because no-one is going to bail us out .Do you think you get a bonus for trying hard ? What sort of a child are you ?.
“responsible “ ...”Punished “ what has that got to do with it ? Out here where we make a living not a cock up of everyhting we touch , if things don’t go your way that’s the end of that . You do not get a bail out and you certainly do not get rewarded for failure no matter how responsible a purchaser of paper clips you think you are .
You seem to think that the rest of the world, owes you a living and living in a part of the world where more tax payer hand outs are earnt than real money I am not surprised .
It tells you all you need to know about what a sick company it is to see that sort of rubbish.

You think £8.8 million is not much ? Why not give some of it to soem comnpanies who have done a good job and lose the dead wood .

Anonymous said...

If Brown were serious, he would do an Obama and slap a pay freeze on anyone over £80,000. Certainly forbid bonuses.

This whole bonus culture stinks. Bonuses should be irregular and for outstanding contributions to a business, not for doing your job.

All bonuses at the BBC could be stopped too, and a fifty per cent pay cut for anyone over £100,000 year.

Hard times should be shared.

Mr Mr said...

I think you will find that Gordon Brown has become insane.

Iain Dale said...

Keith, I'll ignore the rant elements of your comment. Oliver says what I would have said had he not said it.

My basic point is that it is insane to pay any sort of bonus to anyone employed by Northern Rock until the taxpayer has been repaid in full. Then you and your colleagues will be totally deserving of a bonus.

I totally accept that you and many of your colleagues were let down both by your bosses and the government's regulatory system.

Newmania said...

I totally accept that you and many of your colleagues were let down both by your bosses and the government's regulatory system.

You might just as well say all the people who are diligently making cars no-one will buy should be retained at the tax payers expense and then rewarded with bonuses .
Its the arrogant sense of entitlement that drives me nuts.Do you think the exploding numbers of unemployed "deserved it "?

Your kindly nature has got the better of your sense IMHO Mr.D

Trumpeter Lanfried said...

Keith @ 7.25 PM. You seem to think you are entitled to a bonus because the fact that your company went bust wasn't your fault.

It wasn't my fault either, so can I share your bonus, please?

Anonymous said...


Forgive me if others have been there before me today......

The outrageous notion of Northern Rock employees getting bonuses at the taxpayers expense for doing their jobs,
reminded me of a thought I had this morning when watching an item on Sky News.

So severe has been the decline in AIG's financial fortunes, that they seek to extricate themselves from
from their shirt sponsorship deal with with Man U.

I note that Northern Rock are still sponsoring a shirt deal elsewhere in the Premiership, presumably channelling our taxpayer
funding in the direction of this on? Should questions be asked?

PS Not sure that Blogger is behaving at the moment....or maybe its just me!

Doubting Richard said...


We are all having a crap time. Some of us are not going to get a bonus from the government for enduring that crap time. I have not had a pay rise in three years with the company except when I have been promoted. Things are very tight at the moment, and my job is at risk, we had redundancies in 2007 and the end of last year. I had the unpleasant task of informing a couple of those that we could no longer afford to employ them.

With luck and the hard work (and financial investment) of our management we are surviving for now, and will probably make it through the downturn. If we fail we cannot expect to be bailed out; none of the companies in our industry that have gone bust in the last twelve months (and there have been several, all bigger than we are) have been helped by the government. I have had some very experienced people from some of them enquiring about any jobs we might have, which if I had any would be far below what they had before in status and pay.

Think yourself lucky!

rob's uncle said...

I really think you should do your homework occasionally and inform yourself and your readers why these bonuses are being paid. It was state donTV that they were promised them for doing what they have done - reducing the loan book. The bank musyt keep its promise.

Seems straightforward enough to me - ad I was doing the washing up at the time so I was paying full attention.

Newmania said...

Nice work Trumpeter ....

Anonymous said...

My heart bleeds for you Keith - but you still have a job whilst many others do not and whilst many owners of NR mortgages are now without their houses.

This is why NR has been able to pay back money - they have dumped people leaving them to find other more expensive mortgages and have repossessed houses from others.

You have had a tough time - hah, what about these poor sods? Your getting paid for christs sake! Tough shit if your company has hit trouble - have you seen the unemployment figures?

Hang your head in shame.

nicobulus said...

As said above, your salary is for doing your day job and a bonus is granted for stupidity above and beyond the call of duty.

Employers should look to compensate employees based on the market conditions.

Market conditions indicate that having a job is a bonus.

Therefore you don't need additional compensation.

I have sympathy for your position, a lot of us in this country are in the same boat. But, tell me Keith, would you leave the Rock for a call centre job in Manchester or Scotland? Oh, that's right, not too many of those available right now.

Mark Thompson said...

Totally agree Iain and I have just posted my thoughts here.

I suppose there is now no chance of the decision being reversed. I get the feeling that they do not realise how bad this looks and how much of a bad taste it will leave in the public's mouth.

neil craig said...

If they were offered this contractually then they are entitled.

I suspect they were since paying a bonus for repayment ahead of time does sound like a reasonable encouragement - the error is that the repayment is being done not by making the company work but by gutting it even faster than it loses money - presumably that was not thought of at the time.

Anonymous said...

I'm afraid I'm a cynic here and can only in truth suggest that this has something to do with the security of Labour MPs seats.