Bankers’ Bonuses: Removal of Cap

Treasury – in the House of Commons at on 6 February 2024.

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Photo of Sam Tarry Sam Tarry Labour, Ilford South

If he will make an assessment of the potential impact of removing the cap on bankers’ bonuses on the financial sector.

Photo of Jeremy Hunt Jeremy Hunt The Chancellor of the Exchequer

Removing the bankers’ bonus cap was a decision made by the independent Prudential Regulation Authority, which has long said that the cap was completely ineffective; it did not limit pay or make banks safer.

Photo of Sam Tarry Sam Tarry Labour, Ilford South

The cap on bankers’ bonuses might have been a great newspaper headline, but it did little to tackle the City’s excesses. Financial institutions quickly changed remuneration packages and structures so that risk takers still receive substantial pay-offs, sometimes even taking them through offshore mechanisms. Does the Chancellor agree that what we need is enhanced regulation to mitigate excessive risk taking in the square mile? That could require, beyond merely capping bonuses, a move toward an alignment of interests focused on the form of bonus payments, share allocations and deferred amounts, and robust clawback mechanisms for those who have behaved maliciously, in order to deter misconduct in the square mile more effectively?

Photo of Jeremy Hunt Jeremy Hunt The Chancellor of the Exchequer

I suspect that when the hon. Gentleman tabled his question, he was not expecting that the biggest supporter of abolishing the bankers’ bonus cap was not the Chancellor but the shadow Chancellor. I hear what he says, and indeed those are some of the reasons we abolished it, because it was not working. If Labour is going to change its mind on that policy, may I ask—just to take a totally random example—when will it change its mind about the planned £28 billion of additional borrowing?