'Appalled and angry'

Unite has slammed the government for reportedly considering lifting the cap on bankers’ bonuses, after the plan was leaked to the Financial Times (FT) on Wednesday (September 14) night.  

The FT reported that chancellor Kwasi Kwarteng, himself a former financial analyst for investment banks, is seeking to scrap the cap on bonuses — first introduced in the aftermath of the financial crash in 2008 — to supposedly help the City of London’s competitiveness on the global stage.

The cap was first established in 2014 as part of EU legislation, included as part of a number of City reforms. The cap currently limits bankers’ bonuses to 100 per cent of their yearly fixed salary, or double that with shareholder approval. Under the cap, a banker who earns a £1m annual salary, for example, could not take home a year-end bonus of more than £3m.

The plan to scrap the cap drew fierce criticism from all sides, especially as the plan is being weighed up at the same time that the UK is facing the worst cost of living crisis in generations, with millions of workers facing real-terms pay cuts as wages fail to keep up with skyrocketing inflation.

Commenting, Unite general secretary Sharon Graham said, “Workers will be appalled and angry at these plans. When millions are struggling to feed their families and keep the lights on, the government’s priority appears to be boosting the telephone number salaries of their friends in the city.

“Britain’s economy is now dominated by rampant profiteering. Removing the cap on bankers’ bonuses will make that worse. Last year Britain’s banks made £456 billion in profits. So the Chancellor’s signal to the city is ‘let it rip’ further and further, while the Bank of England lectures workers about pay restraint. You could not make it up.”

It is possible that the plan could be announced next week as part of what the chancellor has called ‘a fiscal event’, or mini-budget, but insiders in the Treasury told the FT they believe that it may instead be announced as part of City reforms later on.

Commenting on the plan to scrap the bonuses cap, executive director of the High Pay Centre, Luke Hildyard highlighted the twisted logic implicit in removing the bankers’ bonuses cap at a time when “the rest of the country has undergone an epic cost-of-living crisis and profound economic hardship”.

 “We know that bonuses in the financial services sector have helped the richest 1% of the population to capture an increasing share of total UK incomes,” he said.

“Removing the cap would be a pro-rich ideological measure that sends a depressing message about who policymakers listen to and think about when making economic policy.”

TUC general secretary Frances O’Grady likewise slammed the government at a time when “nurses [are] given real terms pay cuts” while “City executives [are] given unlimited bonuses”.

Even with the cap in place, the UK’s major banks reported this year the largest bankers’ bonuses since the financial crash. Barclays, for example, raised its total bonus pot, included deferred bonuses, by 23 per cent to nearly £2bn. Meanwhile, HSBC raised its total bonus pot by a third to £2.6bn for 2021. This was the highest level since 2014.

By Hajera Blagg