The likelihood of the banker bonus cap being removed making a tangible difference, in and of itself, to London’s competitiveness is relatively minimal. But as a signal of a willingness to back the City, it’s not bad at all.
It’s worth reminding ourself of how the bonus cap came into being. A political reaction to the financial crisis, it was designed exclusively to sate the populist urges of a public who blamed “bankers” for their ills. It had little practical use; any remotely imaginative firm simply found other ways to reward their most highly-performing executives.
But in the aftermath of our departure from the European Union, ditching the EU-derived cap still makes a difference. It’s politically difficult, in some ways, but it makes economic sense. We lambast politicians for taking the easy way out; they deserve praise when stepping in to do something that guarantees a phalanx of twitter angst.
The question is what follows it. Solvency II changes remain in flux. Regulators are criticised en masse by corporate CEOs for moving too slowly to put competitiveness at the heart of their rulebooks. Regulators themselves quietly complain that other regulators, or the Treasury, are moving too slowly themselves, holding them back from pushing ahead with real innovation.
Meanwhile, our international competition – in Singapore and Dubai and Riyadh, not Frankfurt and Dublin – have no such qualms. Progress is faster; changes stick. That manifests itself in uncertainty about the capital’s future; that in turn leaves investors nervous of piling in; and that leaves companies on our markets undervalued and vulnerable to takeovers.
In short, we need more signals. More moves to enhance competitiveness in the City, which in its collective ecosystem has more world-leading businesses and talent than anywhere else in Europe, and more willingness to put politics to the side and genuinely back innovation. We shall hold our breath – a possibly unwise move in the white heat of a coming election campaign.