City veterans warn that controversial plan to remove shackles on bank bonuses amid cost-of-living crisis is ‘insensitive’ to struggling households
Sir Philip: Timing is ‘unfortunate’
City veterans have warned that a controversial plan to remove shackles on bank bonuses amid a cost-of-living crisis is ‘insensitive’ to households struggling with bills.
The Treasury is weighing the move to boost the City’s growth prospects and attract global talent.
Sir Philip Hampton, former chairman of Royal Bank of Scotland, said the timing of the plan ‘could hardly be more unfortunate’.
He added: ‘I think many people will see it as very insensitive at a time when lots of ordinary families, and reasonably well-off households, are finding new struggles. That’s the political challenge of it.’
Sir Philip chaired RBS for six years in the aftermath of the financial crash, during which time he turned down a £1.4million bonus and argued that bankers’ pay had become too high.
Former Marks & Spencer chairman Lord Rose, who now holds the same position at Asda, which caters for lower income families, said: ‘I don’t think this is an appropriate time. There are other more important things to do and it sends the wrong message.’
The sentiments suggest there could be a backlash should Chancellor Kwasi Kwarteng push ahead with proposals to remove strict bonus limits, introduced after the 2008 financial crisis.
The current bonus cap limits year-end payouts to twice a banker’s salary. It was introduced after excessive bonuses led to the risky practices that spawned the credit crunch.
British households are under financial pressure from soaring inflation caused by spiralling household bills.
Sir Philip said that he was in favour of removing constraints on pay provided the kind of risky behaviour that led to the crisis is prevented and ‘doesn’t imperil individual banks and the system as a whole’. He added: ‘Market forces should determine pay.
‘In banking you can get an unhealthy relationship between bonuses and bad behaviour that imperils the bank. We need to be mindful of that. But the direction of travel will be towards market forces playing out.’
A final decision has yet to be made on whether to go ahead with dropping the cap.
But the Chancellor has made clear that he is unafraid to make decisions deemed unpopular in the SIR PHILIP: Timing is ‘unfortunate’ short term.