Liz Truss faces a backlash over plans to lift the cap on bankers’ bonuses
Good morning. Politics has ground to a halt this week not only because the government and opposition parties have suspended almost all advertising, but because they are largely not even discussing political matters out of respect for the Queen’s mourning period . But from the Treasury, where officials are hard at work on next week’s emergency budget, and drawing up a mechanism to implement the energy price guarantee, some news appears to be trickling out. Earlier this week we learned that Kwasi Kwarteng, the new chancellor, has told officials to focus “totally on growth.” And today the Financial Times reveals it wants to lift the cap on bankers’ bonuses.
My colleague Kalyeena Makortoff has it covered on the live business blog.
The idea has already caused a negative reaction. Andrew Sentance, who was a member of the Bank of England’s monetary policy committee during the financial crisis, told the Today program this morning. He said:
I think it sends quite a confusing signal when people are squeezed by the cost of living and the government is trying to encourage wage moderation in the public sector. So to appear to allow bankers to have bigger bonuses at the same time doesn’t seem quite right.
There may be some long-term arguments for pursuing this policy, but I think the timing would be very bad if they did it now.
And in a Twitter thread starting here, Mick McAteer, a former board member of the Financial Conduct Authority, says this is a “bad idea” that will encourage aggressive risk-taking.
Interesting debate on @BBCr4today about scrapping the government’s bankers’ bonus cap. There are several reasons why this is a bad idea. It will encourage the kind of socially useless and aggressive market behavior that we really don’t need. 1/
— Mick McAteer (@MickMcAteer) September 15, 2022
The cap on bankers’ bonuses was introduced as an EU rule after the bonus culture in banking was seen as contributing to the risk-taking that triggered the financial crash. George Osborne and the Tory chancellors who followed him never liked it in principle, but after Brexit they shied away from committing to getting rid of it because they realized that, regardless of the economic arguments, the politics of such a move it would be terrible.
But Liz Truss is a more ideological prime minister than any of her immediate predecessors. HuffPost UK’s Kevin Schofield thinks populism can now go out the window.
I try to monitor the comments below the line (BTL) but it is impossible to read them all. If you have a direct question, include “Andrew” somewhere and I’ll be more likely to find it. I try to answer questions, and if they’re of general interest, I’ll post the question and answer above the line (ATL), though I can’t promise to do that for everyone.
If you want to get my attention quickly, it’s probably best to use Twitter. I’m on @AndrewSparrow.
Alternatively, you can email me at andrew.sparrow@theguardian.com
Updated at 09.54 BST
Key events
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Downing Street has confirmed that Liz Truss will hold meetings at the weekend with a small number of world leaders who will attend the Queen’s funeral on Monday. They are likely to take place at Number 10 and Chevening, the house of grace and favor that Truss used when she was Foreign Secretary. As Prime Minister, she now has use of Chequers, but is unavailable due to routine maintenance work being carried out.
These talks are not described as formal bilateral meetings. No 10 is not expected to publish readings afterwards and No 10 said much of the discussion would likely involve reflecting on the Queen.
MPs and peers under Beijing sanctions protest the Chinese government’s invitation to Queen’s funeral
A group of MPs and peers under China’s sanctions have expressed serious concerns about the Chinese government being invited to the Queen’s funeral, PA Media reports. Senior Tory MPs Tim Loughton and Sir Iain Duncan Smith wrote to the Commons spokesman this week saying it was “extraordinary” that Chinese representatives had received an invitation. The letter, also signed by father Lord Alton and Labour’s Lady Kennedy, said:
We are very concerned to learn that the government of China has been invited to attend the state funeral next week, although other countries Russia, Belarus and Myanmar are excluded.
Given that the UK parliament has voted to recognize the genocide committed by the Chinese government against the Uyghur people, it is extraordinary that the perpetrators of this genocide are treated more favorably than the countries that have been banned.
The Chinese government is considering sending a delegation to Monday’s funeral at Westminster Abbey, but President Xi Jinping is not expected to attend.
In the letter, MPs also express concern that Chinese officials could be allowed into the Palace of Westminster on the day of the funeral. They say:
It is also particularly inappropriate given that seven MPs, including us, remain sanctioned by the Chinese government and you along with the Lord Speaker have rightly banned the Chinese ambassador from attending the Palace of Westminster while these unjustified sanctions remain in place.
As part of the arrangements for foreign dignitaries attending a state funeral, facilities at the Palace of Westminster may be available to them before or after attending the service at Westminster Abbey.
I am sure you will agree that it would be totally inappropriate for any representative of the Chinese government to come to the Palace of Westminster and you can assure us that this will not happen.
Updated at 1.31pm BST
The view of the convention at Westminster is that, regardless of the economic case for lifting the cap on bankers’ bonuses, politically it is a huge risk. But in his Inside Politics briefing for the Financial Times, Stephen Bush says he’s not sure. Here is an excerpt:
Nor am I convinced that the political consensus is correct on this issue. Yes, anything that can be described as an increase in how much bankers earn (although restricting bonuses isn’t as simple as that, in any case) brings back to the fore all the perceptions that bankers have voters about what the Conservative party is like. of the rich But it also worries us that Labor is a party of higher taxes for everyone, and that Labour’s definition of ‘rich’ includes pretty much everyone…
Ultimately, the biggest political problem for the Conservatives is not whether they are seen as the party of the rich, a ship that has not yet sailed, arrived in the new world, wiped out much of the indigenous population and established a superpower worldwide; that the UK public sphere is in a terrible state.
Millions face long waits for health care or must pay out-of-pocket for private alternatives. Outside of murder and speeding, most crimes go unpunished. Schools are facing huge staffing and cost pressures. It is, frankly, more important that Truss and Kwarteng find the extra revenue and reforms needed to fix public services than any of the national political squabbles they should have over bankers’ bonuses or any other avenues they take to boost growth and , therefore, taxes. income
According to a report by Oliver Wright in the Times, next week’s emergency “budget” is expected on Friday. Wright says:
New health secretary Thérèse Coffey is expected to make a statement on the NHS on Thursday and then, most likely on Friday, new chancellor Kwasi Kwarteng will unveil what the government describes as a “fiscal event”, which is likely to include plans to reverse the increase in national insurance in April and freeze corporation tax.
Parliament was not due to meet that day as it was supposed to break up on Thursday night for the party conference recess. However, he is now likely to sit down on Friday to make time for Kwarteng’s statement. MPs are also expected to return to Westminster earlier than planned.
The United Kingdom will unilaterally continue the suspension of border controls in Northern Ireland
In its response to legal proceedings launched by the EU over the Northern Ireland Protocol (see 11.54am), the UK government has said it has decided unilaterally to continue suspending border controls on agricultural products and other goods entering NOT from Britain, my colleague Lisa O’Carroll reports.
EU receives UK response to court proceedings over breach of Northern Ireland protocol
The European Union is considering its next steps after receiving the UK’s response to legal threats over Northern Ireland’s breach of the post-Brexit protocol, PA Media reports. PA says:
While business as usual was halted as the nation mourned the Queen’s death, the government responded to the action ahead of today’s deadline.
The blog had asked for a response to its series of infringement proceedings over the UK’s failure to comply with the rules before the end of the day.
European Commission spokesman Daniel Ferrie said: “I can confirm that we have received a response from the UK. We will now analyze the response before deciding on the next steps.”
What the UK’s response contained was unclear, but the government was expected to explain how it believes there is no need for operational changes to how the protocol works.
European Commission President Ursula von der Leyen will be in Westminster on Monday for the Queen’s funeral.
It is unclear whether he will meet Liz Truss while in London, although Truss is expected to hold some talks with political leaders during her visits.
Sir Philip Augar, a…