Kwarteng plan to lift bankers’ bonus cap angers unions | Executive compensation and bonuses

Unions have reacted angrily to the prospect of the government scrapping the cap on bankers’ bonuses as ministers prepare for a return to near-normal politics next week, with a top mini-budget on Friday.

Kwasi Kwarteng, the chancellor, who will unveil plans for tax cuts and give more details of the government’s plans to rein in rising energy bills, is also considering whether to reject the legacy of an EU-wide cap on double bonuses salary of an employee. imposed after the 2008 financial crash.

While the cap was intended to curb the overly risky practices that helped create the crash, ministers are known to be concerned that the city risks losing out to other financial centres.

According to the Financial Times, Kwarteng wants to scrap the rules as part of what he calls “big bang 2.0”, a post-Brexit deregulation effort to make the City more competitive.

Sources told the newspaper that Kwarteng wants to boost the city’s competitiveness against New York, Frankfurt, Hong Kong and Paris, with one financier saying the end of the cap was a “pure Brexit dividend. Something you can present as a victory.”

But it would be a politically risky move at a time when most UK households face real pay cuts amid 9.9% inflation, as well as notably higher energy bills this winter, despite the government’s plan for maximum increases.

Frances O’Grady, the general secretary of the TUC, said people were “being lured by rising prices after the longest and toughest wage squeeze in modern history”. He added: “The chancellor’s No 1 priority should be raising wages for everyone – not boosting bumper bonuses for those at the top.”

Sharon Graham, the general secretary of the Unite union, said workers would be “scared and angry”. He said: “When millions are struggling to feed their families and keep the lights on, the government’s priority seems to be boosting the wages of their friends’ phone numbers in the City.”

Andrew Sentance, a member of the Bank of England’s monetary policy committee during and after the financial crisis, said it was a “very bad” time to consider increasing bankers’ bonuses.

Speaking on BBC Radio 4’s Today show on Thursday, Sentance said it risked sending “a rather mixed signal” amid a squeeze on inflation. “To appear to be allowing bankers to have bigger bonuses at the same time doesn’t seem very well timed. There may be some longer-term arguments for pursuing this policy, but I think the timing would be very bad if they did it now,” he said.

The submitted plans come as Kwarteng and Liz Truss prepare to fully lay out their economic plan based on lower taxes, reduced regulation and a focus on higher overall economic growth across all income brackets, as opposed to redistributive policies.

This has been delayed by the Queen’s period of mourning, culminating in a state funeral on Monday.

The Commons, which did not sit this week, is scheduled to resume on Wednesday with more MPs pledging allegiance to King Charles, which is not required but many are keen to do.

Thursday could see details of the Truss energy price freeze, which is estimated to cost around £150bn, particularly the only scheme yet designed to help businesses, as well as health news. While a draft parliamentary timetable says only that the Commons could sit on Friday, that is expected to be the day for Kwarteng’s “fiscal event”, which will set out an initial package of economic policies.

The Commons then goes into recess for the traditional party conference break and was due to resume on October 17. However, MPs will be asked next week to approve an earlier return on October 11.

Truss is due to be in New York after the Queen’s funeral for the UN general assembly, returning in time for the mini-budget.

While the new prime minister has seen her political agenda sidelined by the Queen’s death, the influx of world leaders ahead of Monday’s funeral will give her a chance to chat with some she might not get a chance to see in New York.

Joe Biden, the US president, is among a number of leaders Truss is expected to meet at the weekend at Downing Street and at Chevening, an official retreat the country is using while Checkers undergoes maintenance.

While No 10 insisted such meetings would include discussion of the Queen, Truss would also discuss wider issues. The full list of bilateral talks ahead of the funeral is expected to be released on Friday.

Leave a Comment