Rejoice! At last the British establishment has identified a 100% cast-iron Brexit bonus. This week, financial watchdogs agreed there need be no more limits on the bonuses paid to City bankers. The Bank of England found that “a bonus cap is not routinely imposed in other leading international financial centres outside the EU”. The cap will go at the end of this month – which, in case you need reminding, is also Halloween. From Bishopsgate to Canary Wharf, there will be no tricks this year, just treats.
Rather than all that waffle about money for the NHS, Boris Johnson really ought to have slapped that on his big red Brexit bus: “Bigger bonuses for bankers”. As parliament was prorogued, the supermarket shelves emptied of food and HGV lorries went without drivers, the entire country could have gritted its teeth and reminded itself of why all the privation was worth it: so that City folk could take home more cash at the end of another hard year. And whether in the referendum’s 48% or 52%, everyone could have rallied around the idea that it was a modest sacrifice for a great national reward.
In reality, the politics of this move are not so cheery. This week, it was estimated that nearly 4 million Britons are living in destitution, getting by on one meal a day or relying on food banks. Many of those in such dire straits will have had their misery compounded by the austerity of the past 13 years, and cuts to benefits and public services made in the wake of the giant crash of 2008 – caused by the same class of bankers, now enjoying limitless bonuses. All this is happening under a fabulously wealthy prime minister who was formerly an investment banker. What political analysts call “the optics” are truly terrible on this one.
Financially, the policy is not the giveaway it appears. Since the cap was introduced in 2014, banks have compensated for the loss of their employees’ bonuses by pushing up their salaries. The institutions’ fixed costs have shot up. Now world markets are going through a rocky time, many banks want to cut their costs – and the removal of the cap enables them to flatten staff pay while holding on to their biggest earners. City institutions have been preparing for months to do just this. Yet what the financial lobbyists identify as their biggest problem in recruitment is not pay at all – it’s the reluctance of European bankers to move to post-Brexit London.
For too long, the banking sector has taken up too much space in our ministers’ minds. Whether Gordon Brown and his pilgrimages to the City, or David Cameron storming out of Brussels summits over restrictions to financiers’ conduct, or Kwasi Kwarteng itching to axe the cap, a tiny section of our workforce has had excessive political attention and wielded too much influence at Westminster. Taxes, regulations, lobbying: too much has gone all their way. Meanwhile, the country outside the Square Mile has often languished. This was part of what fuelled the vote for Brexit and for Mr Johnson’s levelling up. It is high time the British economy and its politics were rebalanced away from the interests of financiers and reshaped to serve the rest of us, whether in public services or manufacturing or any number of other sectors.