My colleague Kalyeena Makortoff has coverage of this on the business live blog. The idea has already caused a backlash. Andrew Sentance, who sat on the Bank of England’s monetary policy committee during the financial crash, told the Today program this morning. He said: I think it sends a rather mixed message when people are being squeezed about the cost of living and the government trying to encourage public sector wage restraint. So to appear to allow bankers to have bigger bonuses at the same time doesn’t seem very well timed. There may be some longer-term arguments for pursuing this policy, but I think the timing would be really bad if they did it now. And in a Twitter thread starting here, Mick McAteer, a former Financial Conduct Authority board member, says this is a “bad idea” that will encourage aggressive risk-taking. Interesting debate on @BBCr4today about the Government’s scrapping of bankers’ bonus capital. There are several reasons why this is a bad idea. It will encourage the type of aggressive, risky socially useless market behavior that we really don’t need. 1/ — Mick McAteer (@MickMcAteer) September 15, 2022 The cap on bankers’ bonuses was introduced as an EU rule after the bonus culture in the banking sector was seen as contributing to the risk-taking that caused the financial crash. George Osborne and the Tory chancellors who followed him never liked it in the first place, but after Brexit they avoided pledging to get rid of it because they realized that, regardless of the economic arguments, the politics of such a move would be terrible. But Liz Truss is a more ideological prime minister than any of her immediate predecessors. HuffPost UK’s Kevin Schofield thinks populism may now be out the window. I’m trying to follow the comments below the line (BTL) but it’s impossible to read them all. If you have a direct question, include “Andrew” somewhere and I’m more likely to find it. I try to answer questions and if they’re of general interest I’ll post the question and answer above the line (ATL), though I can’t promise I’ll do it for everyone. If you want to get my attention quickly, it’s probably best to use Twitter. I’m on @AndrewSparrow. Alternatively you can email me at [email protected] Updated at 09.54 BST Important events BETA filters Key Events (3) Julian Jessop, an economist at the Institute of Economic Affairs, a free-market think tank highly regarded by Liz Truss, says lifting the cap on bankers’ bonuses will send a “positive message” to the City. “Kwarteng seeks to scrap bankers’ bonus cap to boost City of London”…👍 I don’t think the cap has a huge impact, but getting rid of it would send another positive message. POSTSCRIPT. the ‘pay rises for bankers, pay cuts for nurses’ narrative is lazy… (1/2)https://t.co/JeudEJPmOr — Julian Jessop (@julianHjessop) September 15, 2022 … allowing commercial #banks to pay more of their staff will have no impact on public sector pay, except perhaps a positive one (more tax revenue). There are also much better ways to discourage excessive risk-taking in the #City, incl. long-term incentive programs. (2/2) — Julian Jessop (@julianHjessop) September 15, 2022 Thérèse Coffey, the new health secretary and deputy prime minister, has angered some NHS staff by “telling them to be ‘positive’ and avoid using political wonk ‘jargon’” as they grapple with job cuts and a worsening cost crisis of life”. The Financial Times reports. Coffey issued her instructions in an email setting out her communication preferences. She even mentioned her distaste for the Oxford party. In their story Donato Paolo Mancini, Sarah Neville and Jasmine Cameron-Chileshe state: Experts said the guidance — titled ‘Preferences of the new secretary of state’ — had been published on the Department of Health and Social Care’s intranet. An email, seen by the Financial Times, shows that Coffey’s guidance was also forwarded to staff at the UK Health Service. The rubric has angered health workers, many of whom were on the front lines during the Covid pandemic and who now face real pay cuts and added pressures as infection rates are expected to rise in the winter. Coffey’s office asked employees to “be accurate” and “be positive — if we’ve done something good, let’s say it and avoid double negatives.” The email was “overly patronizing . . . It makes you wonder if you’re in the right place when a new minister comes in with that,” said a person with knowledge of the mood at UKHSA…. Another senior public health official said they understood staff would see the reference to the Oxford parties, in particular, as “extremely supportive”. Therese Coffey. Photo: Maja Smiejkowska/Reuters

Lifting the cap on bankers’ bonuses would be an ‘ideological pro-rich measure’ that sends a ‘depressing message’, thinktank says

Luke Hildyard, executive director of the High Pay Center thinktank, says lifting the cap on bankers’ bonuses would be an “ideological measure” that favors the rich. He says: The bonus cap likely helped to limit bankers’ pay, but they’ve still hit record highs this year while the rest of the country has suffered an epic cost-of-living crisis and deep financial distress. We know that bonuses in the financial services sector have helped the richest 1% of the population capture an increasing share of total UK incomes. Removing the cap would be a pro-rich ideological measure that sends a depressing message about who policymakers listen to and think about when they make economic policy. Updated at 10.11 BST Here too there is some reaction to the proposal to lift the cap on bankers’ bonuses from political journalists and commentators. By Lionel Barber, former editor of the Financial Times (aka Bankers’ Gazette) If you no longer have frictionless access to the EU’s single market for financial services, you will be tempted to lift the cap on bankers’ bonuses to compensate the City of London. It doesn’t feel like a game changer and right now, it’s politically toxic. Welcome to Brexit! — Lionel Barber (@lionelbarber) September 15, 2022 From my colleague Pippa Crerar Workers will be rubbing their hands together with glee. — Pippa Crarar (@PippaCrarar) September 15, 2022 By Chris Giles, financial editor at the FT There is a valid argument as to whether a cap on bankers’ bonuses is good or bad for growth (short and long term)…. There should be no argument that the result is …small*

  • as long as there aren’t many more incentives to take big risks with other people’s money — Chris Giles (@ChrisGiles_) September 15, 2022 By Sky’s Beth Rigby Exciting @FT splash. Kwateng could scrap bankers’ bonuses. Logic = makes London more competitive, sell as Brexit benefit But definitely not a vote winner. Bankers bonus + no windfall tax a bold and genuine ideological split between parties that I haven’t seen in a decade 1/ — Beth Rigby (@BethRigby) September 15, 2022 (Rigby may have forgotten Jeremy Corbyn.) What is the logic? A scrap cap was introduced through the EU in 2014 as part of wider deregulation reforms. Goal = make the city a more attractive place for business. This increases the economy, helps the Ministry of Finance. BUT, political risk at a time when people are struggling and pub services are deteriorating, HUGE political risk — Beth Rigby (@BethRigby) September 15, 2022 As senior EU firm executive tells @FT: “It’s going to make it even harder for us to compete in London and with US banks overall” But he is quoted as saying: “It’s not a vote winner, I’m surprised it’s being talked about abt” >UK has long opposed cap. But Johnson did not proceed for fear of backlash — Beth Rigby (@BethRigby) September 15, 2022 Protecting energy companies from windfall taxes and allowing big bankers’ bonuses. What is the game? There seems to be short-term political pain now to stimulate economic growth (that Truss & Kwateng mantra) until the next election. But brace yourself for the backlash, this is a huge gamble — Beth Rigby (@BethRigby) September 15, 2022 From my colleague Peter Walker With policies like this and the complete exclusion of an extended windfall tax, it is probably fair to say that the Truss government is not ruled by focus groups and opinion polls. It will be interesting to see how long it lasts. https://t.co/GZUyjTUyfi — Peter Walker (@peterwalker99) September 15, 2022 By Jon Sopel from the News Agents podcast Scrapping the cap on bankers’ bonuses, no new windfall tax on energy companies and future tax cuts favoring the wealthiest. Well, you can’t blame the @trussliz government for being bold. But justice? https://t.co/jxwOo1bQt2 — Jon Sopel (@jonsopel) September 14, 2022 Updated at 09.47 BST

TUC says Kwarteng should prioritize higher wages for all, not boost bonuses for bankers

The TUC said the government should focus on pay rises for everyone, not increasing bankers’ bonuses. In a statement, Frances O’Grady, its outgoing general secretary, said: Bonuses in the city are already at a record high. While City executives understand this, millions are…