City of London Corporation celebrates end of cap on banker bonuses

City of London Corporation celebrates end of cap on banker bonuses
Image source Unsplash

The City of London Corporation has celebrated the government’s plans to scrap caps on banker bonuses.

The council said the move will make sure London remains one of the top financial hubs in the world.

In 2014 bankers’ bonuses were capped by the EU at double their annual salary in response to the 2008 financial crash.

But after Chancellor Kwasi Kwarteng announced in his mini-budget on Friday (September 23) that banks such as Barclays, Clydesdale, HSBC, Lloyds and Santander UK will be able to award bankers as they please.

The decision has been welcomed by the City of London Corporation, which says the move will allow them to compete with other financial hubs around the world.

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The City of London Corporation’s policy chairman Chris Hayward said: “It is vital that the UK is internationally attractive to remain a world-leading financial centre. Removing the bankers’ bonus cap will reaffirm the UK’s status as the world’s financial services centre.

“Pay in the sector should reflect performance and take account of the wider economic environment. Scrapping the bonus cap will give banks the flexibility to recognise strong performance and show restraint when necessary. It demonstrates we are open for business.”

In the past year at least 440 banks or financial services are moving parts of their businesses or assets to European cities, according to an analysis by London think-tank the New Financial.

The City of London has also welcomed a freeze in corporation tax at 19 per cent and it hopes that the two policies will help the corporation to continue to create jobs and invest across the country.

Announcing the mini-budget Kwasi Kwarteng said: “We need global banks to pay taxes here in London – not in Paris, not in Frankfurt and not in New York.

“All the bonus cap did was push up the basic salaries of bankers or drive activity outside Europe. It never capped total remuneration… As a consequence of this, we are going to get rid of this.”

But the move was criticised by the Labour Party for being a “return to the trickle-down of the past.”

Shadow Chancellor Rachel Reeves said: “Bigger bonuses for bankers, huge profits for energy giants, shamelessly shielded by Downing Street, and all the while ministers pile the crushing weight of all of these costs onto the backs of taxpayers.”

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