Bankers’ bonuses: No cap under Labor, says Reeves

The Shadow Chancellor told BBC Labor that he had no intention of reinstating the cap on bonuses for bankers that the Conservative government scrapped last year.

This comes as Mr Reeves sets out Labour’s plans to boost economic growth through the financial services sector.

He said the sector was one of Britain’s greatest assets and that his party would “unabashedly champion it”.

This marks a significant change from past criticism of the previous leadership’s policies and the removal of caps on bonuses.

Bonuses of up to 200% of bank employees’ regular salaries have been introduced across the European Union (EU) in a bid to curb excessive risk-taking among bank employees, which is blamed for the financial crisis.

The decision to remove the bonus cap was taken by Liz Truss’s short-lived government before the financial market turmoil forced the resignation of Prime Minister Kwarteng, who subsequently resigned as prime minister himself.

Rachel Reeves, the shadow chancellor and former Bank of England official, told the BBC there were no plans to reinstate the scheme, despite criticism from key figures in the Labor Party at the time and the UK trade union umbrella group. Ta.

“Capping bankers’ bonuses was accepted in the aftermath of the global financial crisis and was the right move to rebuild public finances,” he said.

“But it’s gone now and we’re not going to get it back. And as Chancellor of the Exchequer, I want to be a champion of a successful and thriving financial services industry in the UK.”

Around the time of Budget 2021, the Shadow Chancellor criticized bankers for “sipping champagne” and making “tax cuts”, saying himself that Labor “wouldn’t have done that”. [that]”.

Labor leader Sir Keir Starmer has also previously criticized the policy, saying it amounted to “a pay rise for bankers and a pay cut for district nurses” as industrial action broke out over pay and working conditions. .

Labor has now announced its strongest ever support for the financial services sector.

Mr Reeves said Labour’s policies also included a closer relationship with the EU, expanding financial centers outside London, streamlining regulation and increasing pension investment in British companies and green technology.

Labour’s new plans are the result of consultations with key financial stakeholders, including the chairman of Barclays, the London Stock Exchange, Legal & General, and the chief executives of Yorkshire Building Society and London Stock Exchange Group.

The report was released ahead of a major conference for business leaders that Labor will host in London on Thursday.

The Labor Party has been on a charm offensive against business and finance for some time now.

Labor has held shadow events when the government holds investment summits, such as the one held recently at Hampton Court Palace. The company recently hosted a business breakfast for the world’s business elite at the World Economic Forum in Davos, Switzerland, to convey its message that it is very business-friendly.

Many of Labour’s ideas to scrap onerous regulations are very similar to recent government efforts to keep up with new emerging technologies and other global financial centres.

But in an election year, the deliberate changes to taxes came as Jeremy Corbyn and John McDonnell supported the nationalization of some industries and called City bankers high-paid “speculators”. This is a deliberate tax change to show that Labor has changed since 2019.

Miles Sellick, chief executive of financial services organization TheCityUK, said: “Labour is committed to delivering a forward-thinking vision for financial services with a clear focus on innovation, modernizing the regulatory environment, boosting investment and the potential for growth across the economy. We have come up with a plan.” ”

But some in the industry are uncomfortable with Labour’s direction.

Mick McAteer, co-director of the Center for Financial Inclusion and former director of the Financial Conduct Authority, suggested the party had gone “too far”.

“Financials have become so dominant that we seem to have forgotten the mistakes of the previous Labor government that left Britain one of the most exposed global economies when the devastating 2008 crisis arrived.

“Ordinary people and Britain’s public services are still paying the price for that failure,” he said.

Mr McAteer added: “The city’s fiscal lobby is loudly promoting the interests of this sector. The city doesn’t need another Labor champion.”

The Conservative government is attacking Labour’s fiscal credibility and its pledge to reduce government borrowing as a share of national income in the next parliament.

Chancellor Rishi Sunak has named Labor’s 2021 pledge to invest £28bn a year in green technology as unachievable without tax increases and borrowing.

The pledge has been watered down to “ambition” by shadow business secretary Jonathan Reynolds, and Mr Reeves said Labour’s spending plans would need to be tailored to the situation Labor would inherit if it won. .

The Conservatives have signaled that any surplus in the public purse will be used to cut taxes, which Mr Reeves described as a “scorched earth” approach.