Labour is facing a left-wing backlash after saying it will not scrap Liz Truss’ decision to lift the cap on bankers bonuses.
The defiant shadow chancellor Rachel Reeves has said that Labour will champion the financial services industry in the UK, and although the cap on bankers’ bonuses was “the right thing to do to rebuild the public finances […] that has gone now and we don’t have any intention of bringing that back.”
“And as chancellor of the exchequer, I would want to be a champion of a successful and thriving financial services industry in the UK,” she added.
The regulations, which limit annual payouts to twice a banker’s salary, were introduced by the EU in 2014 in a bid to avoid excessive risk-taking after the 2008 financial crisis.
Former prime minister Liz Truss and chancellor Kwasi Kwarteng made the decision to scrap the cap on bankers’ bonuses in 2022, as a means to encourage global banks to create jobs, invest and pay taxes in the City of London.
Mr Kwarteng said the bonus limit was pushing up basic salaries and driving activity outside Europe.
Keir Starmer had previously vowed to curb banker’s bonuses by reinstating the cap back in 2022, stating: “removing the cap on bankers’ bonuses when people are really struggling to pay their bills shows the Tories are absolutely tone deaf to what so many people are going through.”
After coming into effect last year, the decision faced a backlash for rewarding bankers and failing to address cost-of-living concerns affecting households across the UK. Trade unions have also called for the cap to be reinstated, with the TUC declaring that the removal of the cap was fuelling “greed is good”.
The four big banks, HSBC, Lloyds, Natwest, Barclays paid an estimated £4 billion in bonuses in 2021, and an estimated 3,000 UK bankers earn more than £1 mill per year.
The intervention is one of the strongest signals yet from Starmer’s Labour that the party has fully parted with the left-wing influence of former leader Jeremy Corbyn.
Mr Corbyn was heavily critical of bankers, calling them “speculators and gamblers” who crashed the economy in 2008.
Ms Reeves comments are clearly timed to coincide with Labour conference with business chiefs tomorrow, where Labour will seek to convince business that their investment is safer with a Labour government than it is with the Conservatives.
Driving economic growth is a core mission of Keir Starmer’s Labour, and the leader has pledged to make the UK the highest growing economy in the G7.
Mr Starmer and Ms Reeves have been heavily courting businesses up and down the country over the past two years to gain their support in the hopes of driving domestic investment.
Mick McAteer, co-director of the Financial Inclusion Centre and a former board member of the Financial Conduct Authority, has told the BBC that the party was “going too far”:
Former Labour party leader Jeremy Corbyn was critical of the financial services industry
“It seems to have forgotten the mistakes of the previous Labour administration which allowed finance to become too dominant, leaving the UK one of the most exposed global economies when the devastating 2008 crisis came.
“Ordinary people and the UK’s public services are still paying the price for that failure,” he said.
“The City finance lobbies are very vocal at promoting the benefits of the sector. The City doesn’t need another champion in Labour,” Mr McAteer added.
Kwasi Kwarteng lifted banker’s bonuses in the 2022 mini budget
