Bankers’ Bonuses

Debate between Judith Cummins and Jon Trickett

Tuesday 8th November 2022 Westminster Hall

[Judith Cummins (in the Chair)]

I will call Jon Trickett to move the motion, and then the Minister to respond. There will not be an opportunity for the Member in charge to wind up, as is the convention for 30-minute debates.

[Jon Trickett (Hemsworth) (Lab)]

I beg to move,

That this House has considered the Government policy on bankers’ bonuses.

It is a pleasure to serve under your chairpersonship, Mrs Cummins. It is good to hear somebody from the old West Riding, as we would call it, in charge of the sitting this afternoon. I look forward to fair but firm chairpersonship.

It was the great German playwright Bertolt Brecht who once said that, to make money from banking, set up a bank rather than rob one. People make more money that way. It is clear that there needs to be a wider debate about the role of the financial sector in the British economy, but it is good to start with the remuneration structures in the finance sector. That is what this debate is about.

The previous Chancellor’s deplorable mini-Budget, as I would insist it is called, contained a series of clearly mistaken policy shifts. Following the change in Chancellor and then in Prime Minister, almost the whole of that mini-Budget disappeared, except for one thing: the idea that we should lift or remove the cap on bankers’ bonuses. I hope that the Minister will be able to change Government policy this afternoon, following my persuasion, but we will see what he says.

We have been here before on the question of bankers’ bonuses. I want quickly to recall what happened in the 2008 banking crash. As it happened, I was working in Downing Street at the time and saw clearly that we were on an economic precipice, in part because bankers’ remuneration had been allowed to let rip. The crash almost brought down our whole economic system.

When it came time to review how the crash happened, a significant part of it was attributed to the reckless culture of greed in the banking sector, which had exposed the banks to unacceptable levels of risk. Adair Turner, the then chair of the Financial Services Authority, said that

“inappropriate incentive structures played a role in encouraging behaviour which contributed to the financial crisis”.

He is hardly a man of the left, and therefore I think his words might be regarded as authoritative.

In 2009, the all-party Treasury Committee returned to the question of remuneration. It said that remuneration in the banking industry had played a role in causing the banking crisis. It questioned whether Turner’s response was strong enough and whether

“the Financial Services Authority has attached sufficient priority to tackling remuneration in the City.”

As we know, although bankers played a major role in bringing the system to its knees, in the immediate aftermath of the crash no banker was charged with any offence, in spite of their reckless behaviour. Many people in the country, in my constituency and elsewhere—perhaps in yours, Mrs Cummins—thought that at least some of them should have served time at Her Majesty’s pleasure.

It was the European Union that eventually instituted control of bankers’ bonuses. The EU said that no banker should receive a bonus of more than 100% of their salary—though where that figure came from I do not know—or 200% if shareholders had voted in agreement. It is that cap that the Government appear to now be intent on removing.

I want to use this short debate to ask three questions. First, how much is remuneration for bankers now, 14 years after the crash? Secondly, who is suggesting that the bankers’ cap be removed and why? Thirdly, how do we justify an ethos of greed as a determining factor guiding so many decision makers in a strategically important sector of the British economy?

--- Later in debate ---

[Jon Trickett]

My hon. Friend has caught my next point. In the interest of social justice, the country feels that a 2% cap on the salaries of public sector employees and the lifting of the cap on already over-remunerated bankers is the wrong way for the Government to go. I agree with the statement made last week by the former deputy governor of the Bank of England, who my hon. Friend has just referred to. He said:

“The British government should raid the banks for tens of billions of pounds to fill a black hole in the public finances”.

He argued that the combination of rising interest rates and the money printed as part of quantitative easing has handed banks windfall profits. Those profits are going towards increased bonuses, which is totally unacceptable. Surely the banks and the financial sector should work for the common good, rather than for the private interests of a handful of very wealthy people. I will now make way for the Minister, and I look forward to him attempting to defend the indefensible.

[Judith Cummins (in the Chair)]

Just so Members are aware, the debate will finish by 4.40 pm.