United Kingdom: chancellor plans to scrap cap on bankers’ bonuses

Kwasi Kwarteng, the UK Chancellor of the Exchequer, is planning to scrap the cap on bonuses in the finance sector. The plans were reported on 15 September, less than two weeks after he was appointed to the role by the UK’s new prime minister Liz Truss. His aim would be to make the City of London more attractive to financial firms, some of which opt to focus their presence on countries that do not impose such a cap. As a reminder, the bonus cap, in place since 2014, was the result of European Union rules imposed after the 2008 financial crisis (see article n°7485) and limits bonus pay to 200% of one’s annual salary. Even before Brexit, the UK was against the cap, to the point of filing an appeal with the European courts, which was finally abandoned. One criticism often put forward of the cap is that it entails higher fixed costs for companies, who have to offer higher salaries to attract bankers. The UK’s Trades Union Congress meanwhile slammed the proposal, with general secretary Frances O’Grady saying workers “are being walloped by soaring prices after the longest and harshest wage squeeze in modern history”. She adds: “The chancellor’s number one priority should be getting wages rising for everyone – not boosting bumper bonuses for those at the top.” The UK finance ministry declined to comment. On Friday 23 September, Kwasi Kwarteng is set to unveil a series of budgetary measures, including tax cuts.