Kwasi Kwarteng is under fire after unveiling his plan to lift the 2014 restrictions – to help Britain’s struggling economy “go towards growth”, he will argue. The Trades Union Congress (TUC) said the move comes as real pay cuts are imposed on public sector workers and “millions struggle to keep their heads above water”. Mr Kwarteng was also warned he would make a mockery of promises to “take the country up” because it would give “a further rocket boost” to London, the financial services hub. And Mick McAteer, a former Financial Conduct Authority board member, attacked a “bad idea” that would have encouraged aggressive risk-taking ahead of the disastrous 2008 crash. It would create incentives for “misselling toxic socially useless financial products,” he warned, adding: “I’m not sure it’s been appreciated how dangerous tough competition can be.” Frances O’Grady, the TUC’s general secretary, said: “Nurses have had their wages cut in real terms. City officials gave unlimited bonuses.” Caroline Lucas, the Greens MP, sarcastically tweeted: “Great – because the biggest problem with our economy right now is surely the bankers not being paid enough.” There was no immediate response from either Labor or the Lib Dems, who are observing a period of national mourning following the Queen’s death. The cap, introduced by the EU amid opposition from the UK, requires bonuses to be capped at no more than 100 percent of fixed pay, or twice that with shareholder approval. His removal will come as millions of workers, especially in the public sector, face substantial pay cuts as wages fail to keep up with inflation of around 10%. The Treasury said no decisions had been made and Boris Johnson backed away from making the move because he feared a political backlash during the cost-of-living emergency. But Mr Kwarteng wants to boost London’s competitiveness against New York, Frankfurt, Hong Kong and Paris, according to people briefed on the discussions. The cap has irked U.S. investment banks that employ tens of thousands of employees in London because Wall Street typically offers lower fixed salaries with large performance-related bonuses. But Vince Cable, the former Lib Dem business secretary, called it a “disastrous step in revisiting the mistakes before the financial crisis”, saying of the Tories: “They never learn from history”. Luke Hildyard, executive director of the thinktank High Pay Center, said: “Abolishing the cap would be a super-rich ideological measure that sends a depressing message about who policymakers are listening to and thinking about when they make economic policy.” . Fran Boait, of Positive Money, which campaigns for a fairer economy, said: “Giving bankers uncapped bonuses at a time when millions of households are choosing between food and heating is beyond deafening. – its a shame”. Andrew Sedance, a former member of the Bank of England’s monetary policy committee, questioned the move when the government wants to “hold down public sector pay”. “There may be some longer-term arguments for pursuing this policy, but I think the timing would be very bad if they did it now,” he warned. Mr McAteer added: “What does removing the leveling bonus cap mean? Why give London a further rocket boost?’ But Philip Augar, a former banker – while he agreed that the image of the cap’s aging was “absolutely terrible” – agreed that it was flawed and that its removal could boost the city. “It’s made things worse because the banks have just gone over the cap by raising wages, and that means they’re locked into a very high total compensation package,” he told BBC Radio 4. “It’s a globally competitive industry. Pay rates are set, not in London or in Europe, but in New York, and I can understand the idea that you might want to make London more competitive by freeing up the cap.’ The chancellor will deliver a mini-budget next week, having pledged to “do things differently under new leadership” and return annual economic growth to 2.5%. But it is possible Mr Kwarteng will leave changes to the City of London for a later date – with next week’s event already set to include £30bn of tax cuts for the wealthy.
