Kwasi Kwarteng defends Liz Truss's changing political views
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Kwasi Kwarteng is seeking to scrap the UK’s cap on bankers’ bonuses, a report in the Financial Times has claimed. The Brexit-backing Chancellor of the Exchequer, who entered Number 11 after Liz Truss replaced Boris Johnson as Prime Minister, argued such a move would make London a more attractive destination post-Brexit.
Mr Kwarteng told executives in the City last week: “We need to be decisive and do things differently.”
However, Mr Johnson appeared to shy away from lifting the bonus cap amid concerns it could lead to a backlash.
Mr Kwarteng, who entered Parliament as the MP for Spelthorne in 2010, has not made a final decision on whether to scrap the cap.
The cap was introduced by European Union legislation in 2014 and limits year-end payouts to twice a banker’s salary.
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People in the City suggested the cap could force workers to head to Wall Street where they can get paid larger performance-related packages.
Labour leader Sir Keir Starmer, who campaigned for the UK to hold a second referendum on EU membership while serving as Jeremy Corbyn’s Shadow Brexit Secretary, previously described such a proposal as “pay rises for bankers, pay cuts for district nurses” when it was mooted in June.
According to the Financial Times, the Chancellor is keen on giving London’s competitiveness a boost against New York, Frankfurt, Hong Kong and Paris, which is offering tax incentives to attract top bankers.
A financial executive described scrapping the cap as a “clear Brexit dividend”.
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Goldman Sachs, which last week was reported to be preparing to sign a decade-long lease on office space in Birmingham, also voiced concern about the bonus cap.
The bank’s international operations head Richard Gnodde said eliminating the bonus cap would make “London a more attractive place for sure”.
However, European banks would still be subject to the bonus cap.
A senior London-based executive at an EU firm told the Financial Times: “If it is changed, it isn’t life and death, but it will make it even harder for us to compete in London and with US banks overall.
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“Banks don’t pay people more because there is no cap, but in a bad year we have less flexibility to cut expenses on the downside . . . it makes things trickier.”
They added: “It is fascinating . . . It is not a vote winner, I am surprised it is being talked about.”
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