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Kwasi Kwarteng’s bonus plan may not even please bankers

·1-min read
Chancellor of the Exchequer Kwasi Kwarteng (Kirsty O’Connor/PA) (PA Wire)
Chancellor of the Exchequer Kwasi Kwarteng (Kirsty O’Connor/PA) (PA Wire)

Kwasi Kwarteng presumably imagines that, whatever anyone else thinks, bankers will surely welcome his plan to scrap the cap on their bonuses.

The Chancellor believes this move will boost the City, part of his and Liz Truss’s drive for growth.

There has already been resistance to the bonus idea from surprising sources. Sir Win Bischoff, the City grandee and former chair of Lloyds, called the move “symbolic”.

It doesn’t make London more competitive, he says, concluding: “This isn’t necessary.”

So it may not work as a policy, and there’s also a chance some of the presumed beneficiaries might not be wild about it.

When the cap came in post 2008, one effect was to boost fixed pay, what the rest of us call salaries.

So for the bankers, their total take-home may not have shifted much. More of it was guaranteed rather than reliant on what trade they drummed up.

If their contracts are now adjusted to be bonus-dependent, that means they have got to ace it again. At the moment, investment bank revenue is on the slide as clients sit on their hands.

Bonuses this year will be much thinner than last. So Kwarteng is pushing a go-go policy in a distinctly slow-slow environment.

Goldman Sachs has already said it will fire 5% of staff at the end of the year.

Fewer bankers, however they are paid, mean less money to the tax coffers the new Government imagines it can boost by unleashing the City.

This one may not go the way Kwarteng and co would like.

@SimonEngStand