Bankers gave staff £10bn as Britain's young struggled for work

Goldman Sachs angers unions with massive bonus pay-outs as figures reveal one in five under 25 unemployed by late 2010

guardian.co.uk, Larry Elliott and Jill Treanor, Wednesday 19 January 2011

Lloyd Blankfein, CEO of Goldman Sachs, which gave its employees £10bn in 2010.
Photograph: Spencer Platt/Getty Images

Bankers were accused of "sticking two fingers up to austerity Britain" after it was revealed that Goldman Sachs had handed its staff a £10bn payday as new figures showed unemployment among Britain's young people had hit its highest level since modern records began.

Data from the Office for National Statistics showed that one in five people under 25 were out of work by the end of November last year – a total of 951,000.

Meanwhile, the Wall Street bank Goldman Sachs's announcement that its employees – 6,000 of whom work in the City – earned an average of $430,000 (£268,000) in pay and bonuses in 2010, prompted calls from Labour for a repeat of Alistair Darling's City bonus tax.

The Wall Street firm failed to repeat the "restraint" that it showed in 2009 when it cut its bonus pool in the fourth quarter of 2009 to make a $500m public donation to a charitable foundation.

The firm's 500 partners and other star performers will no longer be bound by last year's £1m cap on bonuses – introduced to appease the Labour government which had demanded pay restraint – and are now expecting multimillion-pound rewards in the coming days.

Union leaders reacted furiously tonight. The TUC leader, Brendan Barber, said the investment bank had "stuck two fingers up to austerity Britain by shelling out mega bonuses again".

Goldman's payouts coincided with new figures that showed overall joblessness, long-term unemployment and unemployment among the young all rose in the three months ending in November.

Official data also showed that total pay, including bonuses, rose by 2.1% over the last year, failing to keep pace with inflation which hit 3.7% last month.

The opposition joined with union leaders in attacking the government's record on jobs. The shadow work and pensions secretary, Douglas Alexander, criticised ministers for scrapping the Future Jobs Fund programme for young workers.

He said: "Unemployment in the public sector was rising between September and November without any compensating jobs growth in the private sector".

Nick Clegg piled pressure on the banks today by saying he wanted the City to sign a social contract with the government and play a greater role in providing funding for social investment, such as early intervention projects to help problem families. He wants the City to help build the "big society" by funding small social enterprises to deliver public services. "Social investment is an area where the expertise of the financial services industry could be usefully deployed," he said.

David Viniar, finance director of Goldman Sachs, defended the pay for its 35,700 staff. "We pay our people fairly, based on their performance," he said.

The bonus pool was 5% lower than in 2009 but did not drop as much as revenues, which fell 13% after business came to a standstill in December on concerns about a European sovereign debt crisis.

The Goldman announcement, the main barometer for pay on Wall Street and in the City, will be closely watched by UK banks such as Barclays and the Royal Bank of Scotland, which insist they need to compete with Goldmans for the best staff.

The payouts are likely to prove a political headache for the government at a time of rising inflation and mounting job losses. Data from the ONS showed that unemployment rose by 49,000 to 2.49m in the three months ending in November, pushing the unemployment rate up to 7.9%. The number of people under 25 was at its highest since modern records began in 1992. A third of the total unemployed had been out of work more than a year – 836,000, up 15,000 on the previous quarter – compared with a fifth when the recession started.

Bob Crow, the general secretary of the RMT transport union, said: "With the full impact of the ConDem cuts still to bite we are heading towards mass unemployment on a scale unseen since the Thatcherite 80s and the depression of the 30s".

There are fears that as public spending falls, unemployment will continue to rise if private sector companies are unable to create new jobs. Len McCluskey, general secretary-elect of the union Unite, said: "Unemployment is likely to get worse over the next year. The government must be living in a fantasy land if it thinks its policies will kickstart the economy."

Ed Miliband, the Labour leader, accused the government of "complacency". "The truth is you are cutting too far and too fast and it is British people who are paying the price," he told the prime minister.

David Cameron said the figures were a "huge concern" but took some comfort from the fact that the government's alternative measure of unemployment, the claimant count, fell by 4,100 in December to 1.456 million.

"The biggest task for this government and frankly for this country is to get to grips with the long-term structural problem of youth unemployment that has been going up for years in our country, and that went up by 40% under Labour," he said.

Morgan Stanley enjoyed a 30%-plus rise in revenues
and a big jump in profits. Photograph: Seth Wenig/AP

Related Articles:

Barclays to unveil radical pay overhaul

Major reforms needed, says banking inquiry head

Morgan Stanley awards staff $16bn as profits triple

Goldman promises more transparency with clients

Main Street to Wall Street: Drop Dead