Words: Tom Ward
It’s fair to say that Brexit has not been what the Tory government – and indeed, the 52 percent of Brits who voted for it – had hoped. Brexit has added almost £7 billion to the country’s grocery bill since 2019 (https://edition.cnn.com/2023/08/29/economy/uk-food-imports-safety-brexit/index.html) with the government now forgoing health and safety check on food imported from Europe for the fifth time in three years amid fears that extra checks will push up food prices even further.
Brexit has made access to the European market more complex and costly for UK-based banks, with hubs such as Frankfurt, Paris and Amsterdam swooping in to take business elsewhere. Notably, chipmaker ARM announced plans to list in New York instead of London earlier this year. Meanwhile, according to an April 2023 report from the International Monetary Fund (https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023) (IMF), GDP should remain more or less stagnant in the UK and the EU until 2028. “Brexit has made no positive policy impact, and the banking industry remains fragile on both sides of the English Channel,” reads a 2023 report from GIS (https://www.gisreportsonline.com/r/brexit/).
The government’s solution? Remove bankers bonuses in a bid to boost the competitiveness of the City. “A bonus cap is not routinely imposed in other leading international financial centers outside the EU,” the Prudential Regulation Authority (PRA) said of the new rules that came into effect on 31 October, adding that the cap had been identified as “a factor in limiting labor mobility.”
It’s a move that makes sense for an uber-rich prime minister who is obsessed with the idea that everyone needs to study maths for as long as possible, but it doesn’t quite add up. Caps on bankers bonuses were introduced over a decade ago, in 2014, following the 2008 financial crash – itself caused by bankers awarding themselves exorbitant bonuses.
The fallout led to some of the worst Tory (and Lib Dem) -led austerity in recent memory, leading to job and home losses, as well as a great sense of anger among a British public whose taxes were now going to bail out the bankers. The resulting economic uncertainty undoubtedly created conditions which then lead those in economically-damaged areas to grasp onto Brexit as the answer to all of their problems (by the way, whatever did happen to that £350 million for the NHS?).
Guardian banking correspondent Kalyeena Makortoff (https://www.theguardian.com/business/2023/oct/31/tories-bankers-bonuses-tuc-rishi-sunak)points out that the moves have led to the Trades Union Congress accusing the government of “promoting a “greed is good” culture among bankers, who it said would be able to “cash in on unlimited bonuses.”
“The Conservatives are presiding over the worst cost of living nightmare in generations. But as millions struggle to cover the basics, executive bankers are now being given unlimited bonuses. City financiers are already raking it in. They don’t need another leg-up from the Tories,” TUC general secretary, Paul Nowak said. “[Rishi Sunak is] following in the footsteps of his predecessor Liz Truss – feathering the nests of the wealthiest while turning his back on working people.”
Naturally, the Conservative government has always been against bankers caps, arguing in 2013 that they would lead to higher fixed salaries. Now the PRA has argued that removing caps would align pay with performance and allow banking firms “further flexibility over their cost base to deal with downturns.”
The cap had limited bonuses to two times bankers’ salaries, meaning the average City worker could only bag a maximum of £120,000 in extra annual payouts. Under the cap banking executives could only take home a bonus of max half a million quid a year. Doing away with this will finally allow them to earn a proper living wage.
All in all, it feels like a big, churned up mess. Want to create a better British economy? Why not invest in education that doesn’t have to involve Pythagoras’ Theorem, and create jobs for everyone, instead of bolstering the wealth of the already wealthy?
The free-for-some isn’t set to kick off quite yet, though; the FCA has said higher bonuses are likely to be phased in over time. According to the Guardian, banking bosses had said the reforms were “unlikely to result in substantial changes to pay in the near term.” In fact, it could take up to seven years for some bonuses to go through. Let’s all just hope and pray that the bankers can hang in there until then.
Become a Gentleman’s Journal Member?
Like the Gentleman’s Journal? Why not join the Clubhouse, a special kind of private club where members receive offers and experiences from hand-picked, premium brands. You will also receive invites to exclusive events, the quarterly print magazine delivered directly to your door and your own membership card.
