In the Conservative manifesto of 2019, there is not a single suggestion that the party would abolish the cap on bankers’ bonuses that was introduced after the 2008 financial crisis. The absence of such a commitment is hardly surprising. Even to have hinted at such a move would have been electorally damaging to the Tory party, especially in the wake of the austerity years in which most people’s real wages had continued to fall steadily below pre-crisis levels.
Even more important, it would have blown a hole in the central promise of Boris Johnson’s campaign. Levelling up the country in the wake of Brexit was the cornerstone of his manifesto. Although vague in far too many ways, levelling up represented a turn away from the myth that the prosperity of the rich would somehow water everyone else’s gardens. The electoral appeal of the policy turn was huge. Thousands of low-income voters embraced the Tory party, helping Mr Johnson to an 80-seat victory.
The suggestion that the chancellor, Kwasi Kwarteng, is now considering scrapping the bankers’ bonus cap is another signal that Liz Truss supports a very different, more deregulated and much more market-driven economic policy to that of Mr Johnson. The absolutely explicit intention is to remove the constraints, such as they were, that were imposed on the banks, the financial sector and the City after the 2008 crash. The government has no mandate for such a move.
As a gesture of contempt and indifference towards ordinary households at a financially horrendous time, Mr Kwarteng’s idea is hard to beat. The cost of living has become an increasingly grim battle for millions, inflicting spending choices that no one should have to make. With colder weather beginning and the choices likely to become ever more stark, the details of last week’s energy price cap scheme are still unexplained.
Instead, the chancellor’s priority is to fire up a sector whose collapse 14 years ago landed tens of millions of households with lower living standards even before the current cost of living rises and inflation made things tougher still. Be clear: this policy will widen the wealth gap, not narrow it. At the very least, Mr Kwarteng should impose tight controls on bank salaries to compensate in part for any changes to the bonus cap.
By floating this plan, Mr Kwarteng is saying he is more interested in helping the rich than the poor. This is the very opposite of what many of the 14 million people who backed the Tories three years ago thought they were voting for. If Mr Kwarteng and Ms Truss think this is now the road to another Conservative election victory, they have taken leave of their senses. If they want to go to the country on a platform of bigger bonuses for bankers and wage crackdowns on nurses, care home staff, teachers, cleaners and other emergency workers, then they should put that to the test as soon as possible.
It is a wilfully perverse misreading of the mood of the nation. Modern Britain may not have had it with capitalism, but the country is in the market for greater corporate responsibility, more social fairness, and effective government financial action at times of crisis. It may also be more impressed by the corporate strategy displayed by the Patagonia sportswear company, which has given all its profits to fighting the climate crisis, rather than by investment banks and hedge funds that remain fixated on share prices, dividends and bonuses as if the crash had never taken place, the planet was in benign balance and its people were living secure lives. If Mr Kwarteng thinks his idea will be welcomed, he will be making a very costly moral and political misjudgment.
