Bankers’ Bonuses

Debate between Jon Trickett and Anum Qaisar

Tuesday 8th November 2022 Westminster Hall

[Jon Trickett]

I am grateful to my hon. Friend for that intervention. I agree with every point she made and I will develop some of those arguments as I speak.

First, I will address the question of where we are now with remuneration in the banking sector. We know quite a lot about it. The chief executive officer and chief financial officer of Britain’s largest bank, HSBC, were paid $2.2 million and $1.3 million, respectively, for 2021. The truth is that bankers’ bonuses have doubled in spite of the cap since the 2008 financial crash. According to the most recently available data, there are 3,500 bankers working in our country who made more than €1 million—£880,000—in a single year. That information comes from the European Banking Authority. Seven out of 10 of all the bankers who made more than €1 million in the whole of Europe are located in the United Kingdom. Meanwhile, 27 bankers in the UK were paid more than €10 million in a year. Two UK-based asset managers received between €38 million and €39 million in a year—I think that clearly makes the point referred to by my hon. Friend—and at the top of the pops, one merchant banker was paid €64.8 million in a single year, and almost all of that was a bonus.

Those are absolutely outrageous figures. They make me wonder why the Government feel it is necessary to lift the bonus cap at all, given the outrageous sums that are being paid.

That brings me to my second question, which was an attempt to discover who is actually pressing for a lifting of the cap on bonuses. Given the rates of remuneration I have just indicated, it would take a colossal amount of unrestricted greed for bosses in the banking sector to propose such a thing. However, according to The Guardian, sources in some of the City’s largest banks are saying, “Not me, guv. I didn’t ask for the cap to be raised.” Those bankers admitted that they were baffled by the then Chancellor’s plan, and I think that they are equally baffled by the current Chancellor’s decision to continue with the plan to lift the EU-imposed cap. The bankers said that they had not lobbied for the move, so it begins to look like this was an ideological move by the Conservative Government, who believe as a matter of faith in rewarding the super-rich with additional wealth.

[Ms Anum Qaisar (Airdrie and Shotts) (SNP)]

The hon. Member is making an excellent speech. In my constituency of Airdrie and Shotts, 68% of people are cutting back on their essential groceries, and 65% are worried about not being able to pay their energy bills. Is it not simply the case that under the Tories the poor get poorer and the rich get richer, whether they be bankers or oil giants not paying windfall tax? Does the hon. Gentleman agree that the UK Government would do well to adopt the Scottish Government’s approach of implementing policies designed to alleviate the cost of living crisis, such as freezing rent and rail fares, expanding access to free school meals and increasing the Scottish child payment to £25 a week, rather than looking after their rich banker friends?

[Jon Trickett]

The hon. Lady makes a number of important points, and I agree with most of them.

I was asking whether the Government are ideologically committed to this policy, since no banker is prepared to admit that they had lobbied for it. If that is the case, and it looks like it is, there is not a single shred of empirical evidence that money can trickle down from the most wealthy to the rest of society—quite the reverse. Beyond a certain point, it has been argued that the further growth of the finance sector hampers rather than supports the real economy. One study estimated that the excessive size of the UK’s financial sector may well have cost our economy £4.5 trillion in lost growth over a 20-year period.

Turning to my third question, there is no evidence to suggest that individualised reward systems for key decision makers are necessarily for the corporate good of the institution for which they work, let alone the common good of the country as a whole. An argument that the Government have developed is that if banks pay more bonuses, they will attract more bankers who will pay more tax. A better argument would be to pay those who are on the lowest pay more money because they will spend it in the local economy and contribute to income for the Treasury.

A Government who set out public policy to raise the incomes of the wealthiest while holding down the wages and salaries of working people are totally at variance with the values of the overwhelming majority of people in this country. How can they justify the multimillion remuneration packages for a handful of people at the top when the number of food banks for working communities is growing? In any event, it seems that avarice in the financial sector is simply piling up the material for the next crash, which will come if we do not change direction fast. The Government need to abandon this policy. That is just plain Yorkshire common sense.

I want to make one further point, and I will be careful how I express it—the House will understand why. The Code of Conduct for Members states:

“Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might influence them in the performance of their official duties.”

I quote that because 10% of all MPs have disclosed in the Register of Members’ Financial Interests that they have monetary ties with for-profit companies or individuals in the financial sector. The same is true of one fifth of all peers. I worry about how embedded the financial sector is in this very building. Financial institutions and individuals closely tied to the banking and finance sector donated a total of £15.3 million to political parties throughout 2020 and 2021.

Returning to bankers’ bonuses, the Government need to take three steps. First, they should immediately announce that they will not lift the cap on bonuses. Secondly, they should appoint an independent commission to examine the whole remuneration structure in the UK, starting with the financial sector. Thirdly, they should make an interim announcement that there will be a suspension of all bonus payments in the City during the current financial crisis, until the independent commission that I have recommended reports.