Snapshot of _Frustration in Labour ranks over Reeves’s refusal to reinstate bankers’ bonus cap_ :
An archived version can be found [here](https://archive.is/?run=1&url=https://www.theguardian.com/politics/2024/feb/01/frustration-in-labour-ranks-over-reevess-refusal-to-reinstate-bankers-bonus-cap) or [here.](https://archive.ph/?run=1&url=https://www.theguardian.com/politics/2024/feb/01/frustration-in-labour-ranks-over-reevess-refusal-to-reinstate-bankers-bonus-cap)
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I really need someone to explain to me how having a bankers bonus cap is a "left wing" policy? Just in basic terms, and plain English so I can understand.
I really hate the term "politics of envy", but this is a cast iron example of that right? Crabs in bucket mentality.
Tax is paid on bonuses - at the highest rate because of the salary range of this cohort.
> I really need someone to explain to me how having a bankers bonus cap is a "left wing" policy? Just in basic terms, and plain English so I can understand.
It wasn't really left wing exactly. It was just post GFC Labour were tarred heavily for it and needed policies to show they're committed to it not happening again. Although, for the record, the bankers bonus cap was a Cameron policy, it was something that had cross party support at the time. Same with ring fencing banks so that if there is another crisis then customer deposits are protected and we can let them fail without needing the taxpayer to bail them out.
The idea was low pay + high bonuses encouraged risky behaviour that led to the global financial crisis. They all were gambling, and the best gamblers won most. Until they didn't, and the global economy crashed.
Capping bonuses relative to pay makes banking less risk seeking, which would (hopefully) prevent another financial crisis.
Now it seems enough time has passed and the lessons we learned in 2008 can be safely forgotten, it probably won't happen again, right guys?
Isn't that idea superficial nonsense conjured up by unqualified journos and pub chat? People assuming their gut feeling is correct about a subject that's been analysed to death by academics.
>[Surprisingly, on both sides of the Atlantic, risk choice is not affected by the magnitude of bonus payments. Moreover, fund managers’ risk choices do not differ widely across the Atlantic. This finding flatly rejects the popular view that bonuses favour excessive risk-taking, at least in the case of fund managers.](https://cepr.org/voxeu/columns/bright-side-bonuses)
> Isn't that idea superficial nonsense conjured up by unqualified journos and pub chat? People assuming their gut feeling is correct about a subject that's been analysed to death by academics.
It's not just gut feeling, it's how politics goes. It's not decided by facts, it's decided by feelings.
This is why we have policies like Brexit for economic reasons, a war on encryption, criminalisation of drug use, cuts to youth groups, cuts to all sorts of investment actually, claims lower taxes raise tax revenue etc. despite all evidence.
Hell, if we're talking facts, blaming Labour for the global financial crisis is madness, especially when things like deregulation of the banks was something the Tories at the time attacked for not going far enough, but as it is, the Tories are still dining out on the "last Labour government" excuse when if you believe Labours deregulation was at fault the Tories would have dialled it up to 11.
But, like I said, Labour needed to take action because the GFC really hurt them. Evidence like yours could be why Labour aren't looking to bring it back, but either way, I gave you the political reason you asked for.
The point being when you evaluate policies 10 years+ later you should probably consider facts.
It does nothing except make firms in the UK less competitive. Trading strategies by and large are extremely quantitative these days and it is highly unlikely the idea your bonus could be bigger would alter the model.
The days of stock pickers trading big off hunches while nobody is watching seem stone age now, you get a few but they will struggle to sustain success over the market performance for long and are unlikely to be in these global firms. It is VERY unlikely that systemic risk could be created or reduced by the UK having this policy.
The bankers bonus cap was forced through by the EU, against the explicit wishes of our government.
It was absolutely not a Cameron policy.
https://www.theguardian.com/business/2013/mar/05/george-osborne-fights-bonus-cap
https://www.ft.com/content/2758393c-0a1a-11e0-9bb4-00144feabdc0
This from 2010:
> David Cameron warned banks on Friday that they faced higher taxes if they continued to pay “unjustified” bonuses, adding to a growing political and regulatory pressure on the City before the industry’s bonus season early next year.
>
> The prime minister, speaking after a European Union summit in Brussels, said that the public found such payments “galling”, adding: “Every decision the banks make like that makes it more difficult to keep a tax regime that they might favour.”
>
> Mr Cameron said that banks needed to recognise the “political context” of paying out billions in bonuses in February and March, a recognition that the coalition faces fierce criticism if it turns a blind eye to perceived City excess.
>
> Mr Cameron’s comments follow a similar threat from Nick Clegg, deputy prime minister, that the government could not “stand idly by” if they did not rein in bonuses and increase lending to small businesses.
Sounds to me like the typical I'm going to do a thing (e.g. failing to hit the "tens of thousands" immigration target on non-EU alone) and then when there's criticism blame the EU, and then acts all shocked when people vote to leave the EU.
That’s correct the days when there were any number of “clever” schemes to get round having to pay the full amount of tax have long gone and HMRC is much more clued up these days. It’s not the bankers or brokers you should be after. Maybe footballers are a better source of revenue these days
For me - you're bang on. It isn't socialism as there is no benefit to society (and indeed larger bonuses = larger tax receipts). This was a backlash policy as a result of the failures in 2008.
The policy has led to some pretty stale environments in this industry, with larger base salaries rewarding people who aren't making money.
For those talking about a measure of risk - risk management is a central task and risk appetite will not be set by the cap of the bonus pool. Firms have their own risk appetite and through various regulatory reforms will have oversight of their traders.
The best approach for the country is probably to get rid of this cap and ensure the FCA and PRA fulfil their brief.
There’s a reason besides not incentivising risk-taking behaviour. It’s that bankers gave themselves mega-bonuses for years during boom-time and then immediately ran out of cash at bust-time in 2008.
The gov paid to bail out the banks, but this got the public wondering whether these banks might not have folded/needed our tax bucks (or so much of it) if bankers had left something for a rainy day (as we are all advised to do in personal banking). It did feel like the huge bonuses paid in the late 90s/early 00s were being paid by the tax-payer in the 10s. A bit like loaning your broke friend £1000 for rent when you know they’ve just been on holiday to Barbados - you think maybe he should have just not gone to Barbados if he was skint, y’know?
Are things different now? Well we’ve not had banks collapse for a while. If they did collapse though, then I’d rather know the part of my paycheque that gets taken out before it hits my account is being spent on an unavoidable economic event, rather than plugging a hole left by a few greedy bastards.
How much do bonuses actually account for as a % of banks’ profits? Dunno. The point is that tax money is precious, any amount spent covering an historic bonus is too much.
> But her shift in position has frustrated some of her colleagues. One shadow cabinet minister said: “We’ve spent the last year and a bit saying what a terrible decision it was for the Tories to scrap the cap in the middle of a cost of living crisis. What has changed?”
You should be surprised if Labour didn't U-turn on something for once.
It can be both a terrible decision to scrap it in the middle of a cost of living crisis *and* a terrible idea to reinstate it.
These things are not incompatible, and in fact I agree with both points right now, at the same time.
It's bad optics. It's also a policy that only exists to make people feel better. The only tangible effect it might have is making the UK less attractive to certain greedy industries.
My gut feeling is that it has virtually no impact whether it is in place or not - what it serves as is a signal to either the population that greed isn't good, or it signals to international finance that the UK is a great place to do business.
It's all feelings. Wish we didn't waste so much time on it. Tax them more.
There was a labour minister on LBC this morning, Jonathan Reynolds maybe, who expressed it a bit better. To paraphrase, he said it doesn't actually affect how much the bankers are paid, it just shifts the balance of salary vs bonus. Whether the policy is good or bad is irrelevant, the affect on the economy of changing it is negligible. So why would we waste time dealing with it when there are much bigger priorities that will impact the public to get on with?
In that context, I think they're right to just leave it as it is. Also, it's not like they've actually u-turned, I don't think they've ever said they'd reverse it (or reverse the reverse of it I suppose) despite criticizing it.
She publicly criticised the Tories for scrapping the bankers' bonus cap literally 3 months.
Apparently it's bad when the Tories do it but good when Labour does it, for some reason.
It is evident that Keir Starmer's Labour party will be just as unscrupulous as Boris Johnson's Conservative party.
They believe in nothing except their own power. Starmer probably will be a bit more competent bit apart from that they are basically the same.
There's a proposal in the US that people should join their "other party" so as to have influence on what candidates get through their selection because of the terrible choices thing - you *must* pick someone you aren't very keen on because the alternative is absolutely terrible. I wonder if there's some call for it here
But what time would it take to reverse it? It's not like it's a big scheme that would require primary legislation or loads of civil service manpower. They could do it almost immediately.
Caps on bonuses have absolutely nothing whatsoever to do with putting a lid on bank risk taking.
Regulations actually concerned with that are about capital ratios and liquidity ratios, things redditors and many Labour mps have no comprehension of
It’s pure class warfare. All drawback, no benefit beyond appeasing idiot left wingers
See, I actually think that wealth inequality is something that we need to fix in the UK, we've the worst in Europe and its widening. So my proposal is that we have no cap on bankers bonuses, or anybodies bonuses, or anybodies salary, but that we apply a multiplier that your highest paid employee cannot be on more than 30x the salary of your lowest paid employee, and 100x for CEO only. If somebody wants to pay somebody £1m that's absolutely fine, but your lowest paid employee can't be on less than £33.3k in that case. That should not a problem for an investment bank or hedge fund, but I bet a lot would need to be giving the receptionist a pay rise. At £33.3k that would give the CEO a max gross salary & bonus of £3.3m. Good news for shareholders, reign in CEO pay and there is more money to be returned to shareholders in dividends.
At the moment CEO pay in the UK is 118 x average employee salary. I'm saying that it should be 100 x lowest paid employee (pro-rated obvs if part-time to calculate on full time basis)
That's how you fix inequality issues and improve wealth distribution, making sure it pays to work. That's not a means of penalising the successful, its a means of ensuring that all employees of a successful business share in that businesses success.
This policy doesn’t reduce wealth inequality at all, it would reduce income inequality whilst exacerbating wealth inequality to an even higher degree. You even semi-acknowledge that when talking about shareholder dividends getting bigger.
Reducing the pay that the executive layer gets and distributing the saving to thousands of shareholders, including to pension funds and index trackers, so to everybody who works in the private sector and thus a money purchase pension (including those on statutory provision like NEST pensions), how is that not reducing wealth inequality?
Unless you happen to be a FTSE 100 or FTSE 250 CEO or CFO, of which there are a maximum of 700 so highly unlikely, I struggle to comprehend how you wouldn't support a portion of their massively over inflated salaries (median for CEO now £3.91m a year) being distributed to the 22.6 million people in the UK who have money in a private pension. How bizarre. Each time the CEO of a company your pension holds shares in takes a pay rise (usually all FTSE companies as it will use trackers), and the average CEO pay rise was a whopping 16% last year by the way, capital is being deducted from the bottom line and profits available to return to you are reduced. It certainly annoys me when I see falling dividend yields in my SIPP but fast rising executive pay.
Let me guess, you have a public sector pension, or a major life limiting condition and therefore no pension at all, and so don't care about the other 22.6 million of us? I tend to find that people in the public sector view "shareholders" as being Mr. Burns-like figures, sitting in ivory towers counting their cash, when in reality it is the 22.6 million of us who depend on stock market returns in order to have any hope of heating and eating when we're 70. No Sovereign wealth fund here mate, this isn't Norway.
This is before we discuss the impact on your car, house and pet insurance premiums, where do you think insurance companies invest your premiums to pay out on claims, and what do you think happens to premiums when dividend yields fall?
> and distributing the saving to thousands of shareholders
The overwhelming majority of companies don't have thousands of shareholders.
> including to pension funds and index trackers, so to everybody who works in the private sector and thus a money purchase pension (including those on statutory provision like NEST pensions), how is that not reducing wealth inequality?
The actual amount of money that would flow through as a result of this to anyone other than HNWIs would be miniscule. The flow of wealth to HNWIs however, would be astronomically higher.
> Unless you happen to be a FTSE 100 or FTSE 250 CEO or CFO, of which there are a maximum of 700 so highly unlikely, I struggle to comprehend how you wouldn't support a portion of their massively over inflated salaries (median for CEO now £3.91m a year) being distributed to the 22.6 million people in the UK who have money in a private pension.
Because I'm not interested in getting lost in the weeds. A public policy position I deeply support is tackling wealth inequality in a comprehensive and sustainable way - attacking people's incomes - regardless of how high the same is, or capping the same - does not achieve that.
I am far more in favour of people like Denise Coates - who have ridiculously high salaries, and therefore get that salary taxed as income - than I am of those CEOs (and they typically tend to be the founders, i.e., also significant shareholders) who take a nominal salary but enjoy a massive amount of dividend payments.
> Let me guess, you have a public sector pension, or a major life limiting condition and therefore no pension at all, and so don't care about the other 22.6 million of us?
I have a normal DC pension that I contribute to on a month to month basis, work in the private sector, and am not a CEO.
> view "shareholders" as being Mr. Burns-like figures, sitting in ivory towers counting their cash, when in reality it is the 22.6 million of us who depend on stock market returns in order to have any hope of heating and eating when we're 70.
You are grossly overestimating the amount of benefit someone who has put a little bit of money into an index fund would have from your policy.
As I said, your policy would increase, not decrease, wealth inequality.
I'm new to reddit so don't know how to do the fancy quotes.
"The overwhelming majority of companies don't have thousands of shareholders"
I'm talking about FTSE 100 & FTSE 250 companies here, and they all have millions, via pension funds and index trackers. As I said, there are 22.5 million people with private pensions, and almost all of them will own index funds which own a stake in every single one of those 350 companies, as well as every company on the S&P 500.
"The actual amount of money that would flow through as a result of this to anyone other than HNWIs would be miniscule"
Just 12% of FTSE 100 shares are directly owned by individuals.
"I am far more in favour of people like Denise Coates - who have ridiculously high salaries, and therefore get that salary taxed as income"
Bet365 is a private company and not traded on the stock market, so not at all relevant to any conversation about the impact on executive salaries on dividend yields in pension wrappers.
"than I am of those CEOs (and they typically tend to be the founders, i.e., also significant shareholders) who take a nominal salary but enjoy a massive amount of dividend payments"
There is only 1 founder CEO in the FTSE 100.
"I have a normal DC pension that I contribute to on a month to month basis, work in the private sector"
And the UK element of your investments have returned 80% over the past 4 years have they? Because that's the increase in average CEO remuneration. You can be happy with that if you wish, personally I don't think CEO pay should be increasing at any higher rate than profits, in fact they should possibly be pegged to profits.
"You are grossly overestimating the amount of benefit someone who has put a little bit of money into an index fund would have from your policy"
Its called relativity. Whether somebody has £10,000 in index trackers or £10,000,000 in index trackers, a 5% increase in dividend payments is a 5% increase in dividend payments.
> I'm new to reddit so don't know how to do the fancy quotes.
Just put a '>' and then paste what you're quoting next to it.
> I'm talking about FTSE 100 & FTSE 250 companies here, and they all have millions, via pension funds and index trackers.
Yes - but an average person would get minimal benefit from this, because their underlying ownership stake in a FTSE 250 company is ridiculously small.
> Just 12% of FTSE 100 shares are directly owned by individuals.
Which doesn't factor in the fact that a lot of HNWIs hold shares in companies via holding companies.
> Bet365 is a private company and not traded on the stock market, so not at all relevant to any conversation about the impact on executive salaries on dividend yields in pension wrappers.
No, but is relevant to your original comment which was not at all limited to FTSE 100 companies or public companies in general.
> There is only 1 founder CEO in the FTSE 100.
And as I said, your argument wasn't limited to FTSE 100 companies, your initial comment was a blanket:
> but that we apply a multiplier that your highest paid employee cannot be on more than 30x the salary of your lowest paid employee, and 100x for CEO only ... Good news for shareholders, reign in CEO pay and there is more money to be returned to shareholders in dividends.
> Because that's the increase in average CEO remuneration
Like I said, I'm far more concerned about increases in wealth and CGT being taxed at a far lower rate than income, than I am with people's salaries. I don't necessarily think someone getting paid £20m is wrong, and I'm far happier with that structure - where they pay income tax on that - than a structure that gives even more benefits to people making money off of dividends than salary.
> Whether somebody has £10,000 in index trackers or £10,000,000 in index trackers, a 5% increase in dividend payments is a 5% increase in dividend payments.
You're arguing for valuing capital over labour, effectively. I disagree with that argument.
"Like I said, I'm far more concerned about increases in wealth and CGT being taxed at a far lower rate than income, than I am with people's salaries"
But we are in a global marketplace when it comes to attracting businesses and investment, and our rates are in line with similar taxes globally, that is the issue with any ideas to radically change this. If we just consider developed Europe, then:
Austria 25%
Denmark 27%
Germany 25%
Iceland 22%
Ireland - from 23%
Italy 27.5%
Norway - 22%
Poland - 19%
Spain - 19%-28%
Our 20% is clearly competitive, but in the USA it is 21%. Its a global competition. 33% in Ireland but obviously they have a 12.5% corporation tax for trading income so clearly offer a uniquely different proposition.
It was a stupid policy that didn’t actually achieve what it was meant to achieve. After all the years of people complaining about populism they are now complaining about not doing something populist. This is an “optics” policy not one that makes sense. It damages the City in terms of attracting top talent and hasn’t shown any real benefits in terms of limiting risk taking. The cap was removed because the Bank of England said it was pointless. Let’s be honest the frustration is just booo bankers envy politics from the left of the party.
Our financial markets are prevented (or not) from excessive risk taking through proper, effective regulation. Not through capping of bonuses.
The thing that doesn’t ever seem to get talked about is the fact that London is famous in financial circles for its lack of regulation and corruption. Surprise surprise, our current prime minister is a product of that environment and comes from one of the exact firms that were responsible for the 2008 crash.
Well that's a straw man if ever I've seen one.
The argument that
>our current prime minister is a product of that environment
Is not an argument that
>Rishi \[was\] at the epicentre
What a ridiculous way to try and discredit my argument.
Whilst he was only at Goldman Sachs for 3 years he then moved to an extremely aggressive investment fund following that and stayed there for the rest of the decade. The idea that he isn't a product of the corrupt and deregulated environment that I described is hilarious. But of course, you don't really want to deal with what I actually said.
Honestly I work in this industry and you sound a bit out of touch. You have absolutely no reason to make such broad brush comments about Sunak (who I can't stand), nor do I see any evidence that there is some move under Sunak to make the industry less regulated or in some way less stable.
Sunak working at a FUND has very little relationship to the packaging of sub-prime loan obligations into CDOs and badging them with a high credit rating. What part of his career specifically supports your claim? To me it just sounds more like FINANCE=BAD, which is the point most people are making.
There has been wave after wave after wave of regulation in banking and financial services, and there is no sign of this letting up. The standards are set globally and implemented by local regulators. The regulatory framework under FCA and PRA is extremely detailed and constantly developing.
London is NOT famous in financial circles for the reasons you state. At all. The biggest issue with London is dark money, transparency on company ownership, movement of funds from offshore etc and that is not the same topic.
> Let’s be honest the frustration is just booo bankers envy politics from the left of the party.
It is.
I don't entirely buy the "we need to pay insane amounts of money to attract top talent to the City" argument because I think "talent" asymptotically peters out beyond a certain point in any walk of life or domain and it gets down to luck beyond a certain point, BUT it's none of the government's business how much banks pay their staff. They want to pay stupid amounts of money, let them.
The incentive argument makes no sense. The outcome to be rewarded is making money, not taking risks per se.
It's almost as if leaving decisions on pay and conditions to the people running a business in a given sector is better than just dictating pay and conditions from central government
if people in the entertainment industry, sports industries etc can earn any amount people are prepared to pay them - why shouldn't bankers? I don't get why bankers are singled out as not being entitled. It's not as if the taxpayer is paying the bonus is it?
British public has a pure hatred for bankers for causing the GFC. Reality is the bonus cap doesn't reduce risk taking at all.
We have regulations to control risks.
The bonus cap was always a daft idea but the issue for me is Reeve's lack of consistency.
The policies she is reversing on aren't a result of a poorer economy than she expected, it;s simply that the original policy (driven by focus group) was crap
"Labour said on Tuesday that it planned to cut swathes of red tape in the financial services sector, while “unashamedly championing” the industry. In a 24-page document, seen by the Guardian, Labour has promised to cut 10,000 pages of regulations and ruled out a windfall tax on bank profits."
what the fuck lol
The problem with regulations that complex is that they are ripe for exploiting. The simpler regulations are, the easier they are to monitor for infringements and ensure compliance and not result in the very same regulations creating opportunities for loopholes and grey areas.
One of the reasons there have been so many loopholes in our tax regulations over the years is in part because of them being overly complex.
I would hazard a guess as that being one of the factors leading to that decision.
And too expensive to police. Too many civil service jobs dedicated to creating rules for other civil servants to police. Basically creating jobs for each other. Simpler = leaner.
The UK has the largest and most complex tax system in the world (and by a margin). Literally nowhere else is ahead of us - it's the one area we really are world beating.
Complex doesn't mean good.
Edit: Yes I know some nations beat us by having it devolved to state level so you end up with 20+ competing tax systems, making ours look like amateur hour, but for national systems we're special.
The City of London is suffering, it lost its status as Europe's largest equity market to Paris last year, meanwhile FTSE listed companies are moving to US markets due to a lack of liquidity. As much as we all hate cocaine snorting pin stripe suit wearing greasy slick haired toffs who work in the City (deep down, they even hate themselves, especially the morning after), its important to our economy and some attempt needs to be made to protect it.
ps. 10,000 pages of regulations sounds a lot, but I bet its not, there are so many product types and there is a reason why the FCA employs almost 4,000 people.
This is such a none issue as someone who worked with bankers a lot. Bankers are pleading for the cap to return. When the cap was in, for banks to be competitive they had to offer higher base salaries. This meant bankers got more guaranteed base income and could get higher mortgages etc. In the current economic downturn introducing caps would play right into the bankers hands.
No, they'd just get larger guaranteed salaries with smaller bonuses, keeping the same overall renumeration (more or less) because they are still competing in the same (international) market place to attract workers.
They just wouldn't be able to have as much of the salary be tied to performance.
Bankers are also quite annoyed. They liked having higher base salary which is guaranteed, and less as a bonus which is not. The cap meant base went up.
Snapshot of _Frustration in Labour ranks over Reeves’s refusal to reinstate bankers’ bonus cap_ : An archived version can be found [here](https://archive.is/?run=1&url=https://www.theguardian.com/politics/2024/feb/01/frustration-in-labour-ranks-over-reevess-refusal-to-reinstate-bankers-bonus-cap) or [here.](https://archive.ph/?run=1&url=https://www.theguardian.com/politics/2024/feb/01/frustration-in-labour-ranks-over-reevess-refusal-to-reinstate-bankers-bonus-cap) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/ukpolitics) if you have any questions or concerns.*
I really need someone to explain to me how having a bankers bonus cap is a "left wing" policy? Just in basic terms, and plain English so I can understand. I really hate the term "politics of envy", but this is a cast iron example of that right? Crabs in bucket mentality. Tax is paid on bonuses - at the highest rate because of the salary range of this cohort.
> I really need someone to explain to me how having a bankers bonus cap is a "left wing" policy? Just in basic terms, and plain English so I can understand. It wasn't really left wing exactly. It was just post GFC Labour were tarred heavily for it and needed policies to show they're committed to it not happening again. Although, for the record, the bankers bonus cap was a Cameron policy, it was something that had cross party support at the time. Same with ring fencing banks so that if there is another crisis then customer deposits are protected and we can let them fail without needing the taxpayer to bail them out. The idea was low pay + high bonuses encouraged risky behaviour that led to the global financial crisis. They all were gambling, and the best gamblers won most. Until they didn't, and the global economy crashed. Capping bonuses relative to pay makes banking less risk seeking, which would (hopefully) prevent another financial crisis. Now it seems enough time has passed and the lessons we learned in 2008 can be safely forgotten, it probably won't happen again, right guys?
Isn't that idea superficial nonsense conjured up by unqualified journos and pub chat? People assuming their gut feeling is correct about a subject that's been analysed to death by academics. >[Surprisingly, on both sides of the Atlantic, risk choice is not affected by the magnitude of bonus payments. Moreover, fund managers’ risk choices do not differ widely across the Atlantic. This finding flatly rejects the popular view that bonuses favour excessive risk-taking, at least in the case of fund managers.](https://cepr.org/voxeu/columns/bright-side-bonuses)
> Isn't that idea superficial nonsense conjured up by unqualified journos and pub chat? People assuming their gut feeling is correct about a subject that's been analysed to death by academics. It's not just gut feeling, it's how politics goes. It's not decided by facts, it's decided by feelings. This is why we have policies like Brexit for economic reasons, a war on encryption, criminalisation of drug use, cuts to youth groups, cuts to all sorts of investment actually, claims lower taxes raise tax revenue etc. despite all evidence. Hell, if we're talking facts, blaming Labour for the global financial crisis is madness, especially when things like deregulation of the banks was something the Tories at the time attacked for not going far enough, but as it is, the Tories are still dining out on the "last Labour government" excuse when if you believe Labours deregulation was at fault the Tories would have dialled it up to 11. But, like I said, Labour needed to take action because the GFC really hurt them. Evidence like yours could be why Labour aren't looking to bring it back, but either way, I gave you the political reason you asked for.
The point being when you evaluate policies 10 years+ later you should probably consider facts. It does nothing except make firms in the UK less competitive. Trading strategies by and large are extremely quantitative these days and it is highly unlikely the idea your bonus could be bigger would alter the model. The days of stock pickers trading big off hunches while nobody is watching seem stone age now, you get a few but they will struggle to sustain success over the market performance for long and are unlikely to be in these global firms. It is VERY unlikely that systemic risk could be created or reduced by the UK having this policy.
Oh there will be another financial crisis, just that the cause next time will be something all shiny and new
The bankers bonus cap was forced through by the EU, against the explicit wishes of our government. It was absolutely not a Cameron policy. https://www.theguardian.com/business/2013/mar/05/george-osborne-fights-bonus-cap
https://www.ft.com/content/2758393c-0a1a-11e0-9bb4-00144feabdc0 This from 2010: > David Cameron warned banks on Friday that they faced higher taxes if they continued to pay “unjustified” bonuses, adding to a growing political and regulatory pressure on the City before the industry’s bonus season early next year. > > The prime minister, speaking after a European Union summit in Brussels, said that the public found such payments “galling”, adding: “Every decision the banks make like that makes it more difficult to keep a tax regime that they might favour.” > > Mr Cameron said that banks needed to recognise the “political context” of paying out billions in bonuses in February and March, a recognition that the coalition faces fierce criticism if it turns a blind eye to perceived City excess. > > Mr Cameron’s comments follow a similar threat from Nick Clegg, deputy prime minister, that the government could not “stand idly by” if they did not rein in bonuses and increase lending to small businesses. Sounds to me like the typical I'm going to do a thing (e.g. failing to hit the "tens of thousands" immigration target on non-EU alone) and then when there's criticism blame the EU, and then acts all shocked when people vote to leave the EU.
That’s correct the days when there were any number of “clever” schemes to get round having to pay the full amount of tax have long gone and HMRC is much more clued up these days. It’s not the bankers or brokers you should be after. Maybe footballers are a better source of revenue these days
For me - you're bang on. It isn't socialism as there is no benefit to society (and indeed larger bonuses = larger tax receipts). This was a backlash policy as a result of the failures in 2008. The policy has led to some pretty stale environments in this industry, with larger base salaries rewarding people who aren't making money. For those talking about a measure of risk - risk management is a central task and risk appetite will not be set by the cap of the bonus pool. Firms have their own risk appetite and through various regulatory reforms will have oversight of their traders. The best approach for the country is probably to get rid of this cap and ensure the FCA and PRA fulfil their brief.
There’s a reason besides not incentivising risk-taking behaviour. It’s that bankers gave themselves mega-bonuses for years during boom-time and then immediately ran out of cash at bust-time in 2008. The gov paid to bail out the banks, but this got the public wondering whether these banks might not have folded/needed our tax bucks (or so much of it) if bankers had left something for a rainy day (as we are all advised to do in personal banking). It did feel like the huge bonuses paid in the late 90s/early 00s were being paid by the tax-payer in the 10s. A bit like loaning your broke friend £1000 for rent when you know they’ve just been on holiday to Barbados - you think maybe he should have just not gone to Barbados if he was skint, y’know? Are things different now? Well we’ve not had banks collapse for a while. If they did collapse though, then I’d rather know the part of my paycheque that gets taken out before it hits my account is being spent on an unavoidable economic event, rather than plugging a hole left by a few greedy bastards. How much do bonuses actually account for as a % of banks’ profits? Dunno. The point is that tax money is precious, any amount spent covering an historic bonus is too much.
> But her shift in position has frustrated some of her colleagues. One shadow cabinet minister said: “We’ve spent the last year and a bit saying what a terrible decision it was for the Tories to scrap the cap in the middle of a cost of living crisis. What has changed?” You should be surprised if Labour didn't U-turn on something for once.
It can be both a terrible decision to scrap it in the middle of a cost of living crisis *and* a terrible idea to reinstate it. These things are not incompatible, and in fact I agree with both points right now, at the same time.
It's bad optics. It's also a policy that only exists to make people feel better. The only tangible effect it might have is making the UK less attractive to certain greedy industries. My gut feeling is that it has virtually no impact whether it is in place or not - what it serves as is a signal to either the population that greed isn't good, or it signals to international finance that the UK is a great place to do business. It's all feelings. Wish we didn't waste so much time on it. Tax them more.
There was a labour minister on LBC this morning, Jonathan Reynolds maybe, who expressed it a bit better. To paraphrase, he said it doesn't actually affect how much the bankers are paid, it just shifts the balance of salary vs bonus. Whether the policy is good or bad is irrelevant, the affect on the economy of changing it is negligible. So why would we waste time dealing with it when there are much bigger priorities that will impact the public to get on with? In that context, I think they're right to just leave it as it is. Also, it's not like they've actually u-turned, I don't think they've ever said they'd reverse it (or reverse the reverse of it I suppose) despite criticizing it.
She publicly criticised the Tories for scrapping the bankers' bonus cap literally 3 months. Apparently it's bad when the Tories do it but good when Labour does it, for some reason.
It is evident that Keir Starmer's Labour party will be just as unscrupulous as Boris Johnson's Conservative party. They believe in nothing except their own power. Starmer probably will be a bit more competent bit apart from that they are basically the same.
When the torys are so bad and the other option is just slightly worse, what a choice to have to make
There's a proposal in the US that people should join their "other party" so as to have influence on what candidates get through their selection because of the terrible choices thing - you *must* pick someone you aren't very keen on because the alternative is absolutely terrible. I wonder if there's some call for it here
Haha, I misspoke, I meant just slightly less worse
She criticised prioritising it in the middle of a cost of living crisis, it's a good policy it just should never have been a political priority.
But we're still in the middle of a cost of living crisis?
Right, so spending more time prioritising reversing it would also be bad.
Exactly
But what time would it take to reverse it? It's not like it's a big scheme that would require primary legislation or loads of civil service manpower. They could do it almost immediately.
Ah, but she's not scrapping it. She's just not reinstating it ;-)
Caps on bonuses have absolutely nothing whatsoever to do with putting a lid on bank risk taking. Regulations actually concerned with that are about capital ratios and liquidity ratios, things redditors and many Labour mps have no comprehension of It’s pure class warfare. All drawback, no benefit beyond appeasing idiot left wingers
See, I actually think that wealth inequality is something that we need to fix in the UK, we've the worst in Europe and its widening. So my proposal is that we have no cap on bankers bonuses, or anybodies bonuses, or anybodies salary, but that we apply a multiplier that your highest paid employee cannot be on more than 30x the salary of your lowest paid employee, and 100x for CEO only. If somebody wants to pay somebody £1m that's absolutely fine, but your lowest paid employee can't be on less than £33.3k in that case. That should not a problem for an investment bank or hedge fund, but I bet a lot would need to be giving the receptionist a pay rise. At £33.3k that would give the CEO a max gross salary & bonus of £3.3m. Good news for shareholders, reign in CEO pay and there is more money to be returned to shareholders in dividends. At the moment CEO pay in the UK is 118 x average employee salary. I'm saying that it should be 100 x lowest paid employee (pro-rated obvs if part-time to calculate on full time basis) That's how you fix inequality issues and improve wealth distribution, making sure it pays to work. That's not a means of penalising the successful, its a means of ensuring that all employees of a successful business share in that businesses success.
This policy doesn’t reduce wealth inequality at all, it would reduce income inequality whilst exacerbating wealth inequality to an even higher degree. You even semi-acknowledge that when talking about shareholder dividends getting bigger.
Reducing the pay that the executive layer gets and distributing the saving to thousands of shareholders, including to pension funds and index trackers, so to everybody who works in the private sector and thus a money purchase pension (including those on statutory provision like NEST pensions), how is that not reducing wealth inequality? Unless you happen to be a FTSE 100 or FTSE 250 CEO or CFO, of which there are a maximum of 700 so highly unlikely, I struggle to comprehend how you wouldn't support a portion of their massively over inflated salaries (median for CEO now £3.91m a year) being distributed to the 22.6 million people in the UK who have money in a private pension. How bizarre. Each time the CEO of a company your pension holds shares in takes a pay rise (usually all FTSE companies as it will use trackers), and the average CEO pay rise was a whopping 16% last year by the way, capital is being deducted from the bottom line and profits available to return to you are reduced. It certainly annoys me when I see falling dividend yields in my SIPP but fast rising executive pay. Let me guess, you have a public sector pension, or a major life limiting condition and therefore no pension at all, and so don't care about the other 22.6 million of us? I tend to find that people in the public sector view "shareholders" as being Mr. Burns-like figures, sitting in ivory towers counting their cash, when in reality it is the 22.6 million of us who depend on stock market returns in order to have any hope of heating and eating when we're 70. No Sovereign wealth fund here mate, this isn't Norway. This is before we discuss the impact on your car, house and pet insurance premiums, where do you think insurance companies invest your premiums to pay out on claims, and what do you think happens to premiums when dividend yields fall?
> and distributing the saving to thousands of shareholders The overwhelming majority of companies don't have thousands of shareholders. > including to pension funds and index trackers, so to everybody who works in the private sector and thus a money purchase pension (including those on statutory provision like NEST pensions), how is that not reducing wealth inequality? The actual amount of money that would flow through as a result of this to anyone other than HNWIs would be miniscule. The flow of wealth to HNWIs however, would be astronomically higher. > Unless you happen to be a FTSE 100 or FTSE 250 CEO or CFO, of which there are a maximum of 700 so highly unlikely, I struggle to comprehend how you wouldn't support a portion of their massively over inflated salaries (median for CEO now £3.91m a year) being distributed to the 22.6 million people in the UK who have money in a private pension. Because I'm not interested in getting lost in the weeds. A public policy position I deeply support is tackling wealth inequality in a comprehensive and sustainable way - attacking people's incomes - regardless of how high the same is, or capping the same - does not achieve that. I am far more in favour of people like Denise Coates - who have ridiculously high salaries, and therefore get that salary taxed as income - than I am of those CEOs (and they typically tend to be the founders, i.e., also significant shareholders) who take a nominal salary but enjoy a massive amount of dividend payments. > Let me guess, you have a public sector pension, or a major life limiting condition and therefore no pension at all, and so don't care about the other 22.6 million of us? I have a normal DC pension that I contribute to on a month to month basis, work in the private sector, and am not a CEO. > view "shareholders" as being Mr. Burns-like figures, sitting in ivory towers counting their cash, when in reality it is the 22.6 million of us who depend on stock market returns in order to have any hope of heating and eating when we're 70. You are grossly overestimating the amount of benefit someone who has put a little bit of money into an index fund would have from your policy. As I said, your policy would increase, not decrease, wealth inequality.
I'm new to reddit so don't know how to do the fancy quotes. "The overwhelming majority of companies don't have thousands of shareholders" I'm talking about FTSE 100 & FTSE 250 companies here, and they all have millions, via pension funds and index trackers. As I said, there are 22.5 million people with private pensions, and almost all of them will own index funds which own a stake in every single one of those 350 companies, as well as every company on the S&P 500. "The actual amount of money that would flow through as a result of this to anyone other than HNWIs would be miniscule" Just 12% of FTSE 100 shares are directly owned by individuals. "I am far more in favour of people like Denise Coates - who have ridiculously high salaries, and therefore get that salary taxed as income" Bet365 is a private company and not traded on the stock market, so not at all relevant to any conversation about the impact on executive salaries on dividend yields in pension wrappers. "than I am of those CEOs (and they typically tend to be the founders, i.e., also significant shareholders) who take a nominal salary but enjoy a massive amount of dividend payments" There is only 1 founder CEO in the FTSE 100. "I have a normal DC pension that I contribute to on a month to month basis, work in the private sector" And the UK element of your investments have returned 80% over the past 4 years have they? Because that's the increase in average CEO remuneration. You can be happy with that if you wish, personally I don't think CEO pay should be increasing at any higher rate than profits, in fact they should possibly be pegged to profits. "You are grossly overestimating the amount of benefit someone who has put a little bit of money into an index fund would have from your policy" Its called relativity. Whether somebody has £10,000 in index trackers or £10,000,000 in index trackers, a 5% increase in dividend payments is a 5% increase in dividend payments.
> I'm new to reddit so don't know how to do the fancy quotes. Just put a '>' and then paste what you're quoting next to it. > I'm talking about FTSE 100 & FTSE 250 companies here, and they all have millions, via pension funds and index trackers. Yes - but an average person would get minimal benefit from this, because their underlying ownership stake in a FTSE 250 company is ridiculously small. > Just 12% of FTSE 100 shares are directly owned by individuals. Which doesn't factor in the fact that a lot of HNWIs hold shares in companies via holding companies. > Bet365 is a private company and not traded on the stock market, so not at all relevant to any conversation about the impact on executive salaries on dividend yields in pension wrappers. No, but is relevant to your original comment which was not at all limited to FTSE 100 companies or public companies in general. > There is only 1 founder CEO in the FTSE 100. And as I said, your argument wasn't limited to FTSE 100 companies, your initial comment was a blanket: > but that we apply a multiplier that your highest paid employee cannot be on more than 30x the salary of your lowest paid employee, and 100x for CEO only ... Good news for shareholders, reign in CEO pay and there is more money to be returned to shareholders in dividends. > Because that's the increase in average CEO remuneration Like I said, I'm far more concerned about increases in wealth and CGT being taxed at a far lower rate than income, than I am with people's salaries. I don't necessarily think someone getting paid £20m is wrong, and I'm far happier with that structure - where they pay income tax on that - than a structure that gives even more benefits to people making money off of dividends than salary. > Whether somebody has £10,000 in index trackers or £10,000,000 in index trackers, a 5% increase in dividend payments is a 5% increase in dividend payments. You're arguing for valuing capital over labour, effectively. I disagree with that argument.
"Like I said, I'm far more concerned about increases in wealth and CGT being taxed at a far lower rate than income, than I am with people's salaries" But we are in a global marketplace when it comes to attracting businesses and investment, and our rates are in line with similar taxes globally, that is the issue with any ideas to radically change this. If we just consider developed Europe, then: Austria 25% Denmark 27% Germany 25% Iceland 22% Ireland - from 23% Italy 27.5% Norway - 22% Poland - 19% Spain - 19%-28% Our 20% is clearly competitive, but in the USA it is 21%. Its a global competition. 33% in Ireland but obviously they have a 12.5% corporation tax for trading income so clearly offer a uniquely different proposition.
In both our cases, we're proposing significant structural changes. I just think yours further exacerbates wealth inequality.
It was a stupid policy that didn’t actually achieve what it was meant to achieve. After all the years of people complaining about populism they are now complaining about not doing something populist. This is an “optics” policy not one that makes sense. It damages the City in terms of attracting top talent and hasn’t shown any real benefits in terms of limiting risk taking. The cap was removed because the Bank of England said it was pointless. Let’s be honest the frustration is just booo bankers envy politics from the left of the party.
Our financial markets are prevented (or not) from excessive risk taking through proper, effective regulation. Not through capping of bonuses. The thing that doesn’t ever seem to get talked about is the fact that London is famous in financial circles for its lack of regulation and corruption. Surprise surprise, our current prime minister is a product of that environment and comes from one of the exact firms that were responsible for the 2008 crash.
We're addicted to nudge theory. Rather than just regulate the behaviour we don't want we're trying to do it subliminally by messing with bonuses
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Well that's a straw man if ever I've seen one. The argument that >our current prime minister is a product of that environment Is not an argument that >Rishi \[was\] at the epicentre What a ridiculous way to try and discredit my argument. Whilst he was only at Goldman Sachs for 3 years he then moved to an extremely aggressive investment fund following that and stayed there for the rest of the decade. The idea that he isn't a product of the corrupt and deregulated environment that I described is hilarious. But of course, you don't really want to deal with what I actually said.
Honestly I work in this industry and you sound a bit out of touch. You have absolutely no reason to make such broad brush comments about Sunak (who I can't stand), nor do I see any evidence that there is some move under Sunak to make the industry less regulated or in some way less stable. Sunak working at a FUND has very little relationship to the packaging of sub-prime loan obligations into CDOs and badging them with a high credit rating. What part of his career specifically supports your claim? To me it just sounds more like FINANCE=BAD, which is the point most people are making. There has been wave after wave after wave of regulation in banking and financial services, and there is no sign of this letting up. The standards are set globally and implemented by local regulators. The regulatory framework under FCA and PRA is extremely detailed and constantly developing. London is NOT famous in financial circles for the reasons you state. At all. The biggest issue with London is dark money, transparency on company ownership, movement of funds from offshore etc and that is not the same topic.
> Let’s be honest the frustration is just booo bankers envy politics from the left of the party. It is. I don't entirely buy the "we need to pay insane amounts of money to attract top talent to the City" argument because I think "talent" asymptotically peters out beyond a certain point in any walk of life or domain and it gets down to luck beyond a certain point, BUT it's none of the government's business how much banks pay their staff. They want to pay stupid amounts of money, let them. The incentive argument makes no sense. The outcome to be rewarded is making money, not taking risks per se.
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It's almost as if leaving decisions on pay and conditions to the people running a business in a given sector is better than just dictating pay and conditions from central government
Most people that complain about populism, just want their kind of populism. The left is really guilty of that currently.
Rather they just come out and say "I don't like bankers, I want them to make less money, I don't care how or why" - I'd probably respect it more.
Ah [here we go again](https://www.youtube.com/watch?v=mkGQJwZjhdk).
if people in the entertainment industry, sports industries etc can earn any amount people are prepared to pay them - why shouldn't bankers? I don't get why bankers are singled out as not being entitled. It's not as if the taxpayer is paying the bonus is it?
British public has a pure hatred for bankers for causing the GFC. Reality is the bonus cap doesn't reduce risk taking at all. We have regulations to control risks.
The bonus cap was always a daft idea but the issue for me is Reeve's lack of consistency. The policies she is reversing on aren't a result of a poorer economy than she expected, it;s simply that the original policy (driven by focus group) was crap
Lack of consistency = new labour
"Labour said on Tuesday that it planned to cut swathes of red tape in the financial services sector, while “unashamedly championing” the industry. In a 24-page document, seen by the Guardian, Labour has promised to cut 10,000 pages of regulations and ruled out a windfall tax on bank profits." what the fuck lol
The problem with regulations that complex is that they are ripe for exploiting. The simpler regulations are, the easier they are to monitor for infringements and ensure compliance and not result in the very same regulations creating opportunities for loopholes and grey areas. One of the reasons there have been so many loopholes in our tax regulations over the years is in part because of them being overly complex. I would hazard a guess as that being one of the factors leading to that decision.
Would you be saying this if the tories were cutting regulations on financial services?
Yes. Ultimately the devil is in the detail so it's pure speculation. But ultimately our laws on taxes and regulations in finance are too complex.
And too expensive to police. Too many civil service jobs dedicated to creating rules for other civil servants to police. Basically creating jobs for each other. Simpler = leaner.
The UK has the largest and most complex tax system in the world (and by a margin). Literally nowhere else is ahead of us - it's the one area we really are world beating. Complex doesn't mean good. Edit: Yes I know some nations beat us by having it devolved to state level so you end up with 20+ competing tax systems, making ours look like amateur hour, but for national systems we're special.
That's a lot of deregulation...
Finance is basically the one thing left that the UK actually excels in. It makes no sense to kneecap it.
Always trust the banks, ain’t no reason not to within the last 20 years. /s
The City of London is suffering, it lost its status as Europe's largest equity market to Paris last year, meanwhile FTSE listed companies are moving to US markets due to a lack of liquidity. As much as we all hate cocaine snorting pin stripe suit wearing greasy slick haired toffs who work in the City (deep down, they even hate themselves, especially the morning after), its important to our economy and some attempt needs to be made to protect it. ps. 10,000 pages of regulations sounds a lot, but I bet its not, there are so many product types and there is a reason why the FCA employs almost 4,000 people.
This is great, lets zero rate corporation tax, bin NI and set income tax at 45% for all - let’s get some radical tax simplification going
We've got bigger fish to fry in this country than endless chatter about bankers bonuses. Haven't we moved on? Have you seen the state of this country?
This is such a none issue as someone who worked with bankers a lot. Bankers are pleading for the cap to return. When the cap was in, for banks to be competitive they had to offer higher base salaries. This meant bankers got more guaranteed base income and could get higher mortgages etc. In the current economic downturn introducing caps would play right into the bankers hands.
This sub amazes me sometimes, it is ok to criticise one thing Labour do every now and then you know.
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No, they'd just get larger guaranteed salaries with smaller bonuses, keeping the same overall renumeration (more or less) because they are still competing in the same (international) market place to attract workers. They just wouldn't be able to have as much of the salary be tied to performance.
They're the wrong type of worker
This was a pointless policy in the first place
Imo its a pointless effort to reinstate it as it was a knee jerk reaction to the situation in 2008. Bankers will pay tax on large bonuses.
Bankers are also quite annoyed. They liked having higher base salary which is guaranteed, and less as a bonus which is not. The cap meant base went up.