Liz Truss is turbocharging bankers’ bonuses. What a gift for Labour
The timing is, to say the least, curious. Britain is facing its biggest cost of living crisis in decades. Workers are angry about crashing living standards. And yet one of the first things on the new government’s agenda is toscrap the cap on bankers’ bonuses. Kwasi Kwarteng may announce the decision as part of his mini-budget next Friday.
Make no mistake, there is an argument for what the chancellor is planning, namely that the cap hasn’t worked. Critics said when the EU brought in its legislation in 2014 that banks would find a way round the cap by simply paying higher salaries, and they have been proved right. Placing limits on one part of a package (the bonus) but imposing no constraints on the other part (basic pay) never made any sense. If the idea was that bankers needed to be paid less, it would have been more logical to go the whole hog and impose a cap on total remuneration.
That said, the decision to remove the cap now is a political gift to Labour and to unions, since it feeds into a clear them-and-us narrative. Bankers will be whooping it up in the champagne bars of Canary Wharf, but as a vote-winning strategy it may have its limitations.
According to the Office for National Statistics pay growth in the private sector is running at 6% as opposed to 2% in the public sector. Those working in the well-paid financial and business sector have been shielded from the worst of the cost of living crisis by generous bonus payments. Abolishing the bonus cap reinforces the already strong belief that there is one rule for bankers and another for everybody else. Inevitably, it is going to harden attitudes on picket lines. Sharon Graham, the general secretary of Unite, says that while the Bank of England lecture workers to
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