New Chancellor Kwasi Kwarteng has been heavily-criticised over moves to axe the cap on bankers’ bonuses, as millions struggle during the cost-of-living crisis. Unions and economists were among those condemning the timing of the proposal to ditch the cap, introduced in the wake of the 2008 financial crisis, that limits annual pay-outs to twice a banker’s salary.
Sources close to Mr Kwarteng said no final decisions had been made, but hinted it could be part of a wider post-Brexit overhaul of City regulations would make London a more attractive place for global banks. The TUC said Mr Kwarteng should focus on raising everyone’s wages rather than “boosting bumper bonuses for those at the top”.
The Chancellor has promised a growth-focused shake-up of the economy and told City bosses last week: “We need to be decisive and do things differently.”
But planning to allow bankers’ bonuses to soar as millions feel the strain of the cost-of-living crisis was proving controversial. TUC general secretary Frances O’Grady said: “Bonuses in the City are already at a record high. While City executives rake it in, millions are struggling to keep their heads above water.
“Working people are being walloped by soaring prices after the longest and harshest wage squeeze in modern history. The Chancellor’s number one priority should be getting wages rising for everyone – not boosting bumper bonuses for those at the top.”
Economist Andrew Sentance, who was a member of the Bank of England’s Monetary Policy Committee during and after the financial crisis, criticised the timing of the plans. “It sends a rather confused signal when people are being squeezed in terms of the cost of living and the Government is trying to encourage pay restraint in the public sector,” he told BBC Radio 4’s Today programme.
Luke Hildyard, the executive director of the High Pay Centre think tank, said removing the cap would be an “ideological measure” that favours the rich. He added: "We know that bonuses in the financial services sector have helped the richest one per cent of the population to capture an increasing share of total UK incomes. Removing the cap sends a depressing message about who policymakers listen to and think about when making economic policy.”
Gary Smith, general secretary of the GMB union, told the PA news agency: “Apparently frontline workers asking for a pay rise risks increasing inflation, while allowing fat cat bankers to trouser monstrous bonuses ‘attracts talent’ and ‘boosts the city’."
Next week Mr Kwarteng is expected to announce a mini-budget but it was unclear whether an announcement on bankers’ pay would come in that “fiscal event” or as part of a wider package later on.
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