EDITOR'S TAKE: A timely reminder that big bonuses mean big taxes

It's likely to be overlooked in the rush to denounce greed, unmerited riches, and mindless persecution of the general public, but the CEBR's latest missive on banking bonuses is framed in the context of the likely benefits to the Exchequer.

The London-based think tank has got a spurt on when it comes to optimistic banking-related predictions.

Yesterday, it suggested that an additional 14,000 jobs will be created in London this year. Today, it's suggesting that the total London bonus pool will rise by 12% in 2010, to 6.8bn.

The CEBR says that this will be driven - not by the 'dazzing trading results' cited by the Evening Standard yesterday, but by its predicted increase in City employment. Notably, the mean bonus is put at just 21.k.

Despite this low average, the CEBR thinks that a very large chunk of this year's increased bonus pot will go to HMRC.

Thanks to the new 50% tax rate and to employers' national insurance contributions of 12.8%, it's predicting that 2010 bonus payments will generate 4bn for the beleaguered 'taxpayer.'

Bankers, meanwhile, are forecast to pocket just 3.6bn after tax - 53% of the total, or 11.3k per head.

The analysis is a timely reminder that for all its vilification, the financial services sector does make a social contribution and is an important source of the UK tax take. Moreover, if the Liberal Democrats' proposals to restrict bonuses to 2.5k per head come into force, the Revenue could find itself substantially out of pocket.

CEBR predictions for the total City of London bonus pot

Source: CEBR