Liz Truss has today warned that not all her policies will be “popular” as she refuses to rule out scrapping the bankers’ bonus cap.
The Prime Minister told journalists in New York that “what is important to me, what is important to the chancellor, is that people have more opportunities, there is more investment, there are jobs with higher wages”.
It was reported last week that chancellor Kwasi Kwarteng is putting together plans to scrap the EU’s cap on banker bonuses post-Brexit, despite concerns of the political fallout.
The cap, which was introduced by Brussels after the 2008 financial crash, sees bankers’ bonuses limited to no more than 100 per cent of their fixed pay or double that with explicit shareholder approval.
Removing the cap, it is argued, could strengthen London’s competitiveness in the global finance industry by allowing City banks to lure the sector’s best talent by offering better remuneration.
The Prime Minister is in the US for this year’s United Nations General Assembly and will deliver her speech tomorrow, where she will reinforce her support for Ukraine in its war against Russia.
Truss today refused to rule out scrapping the cap on banker bonuses when asked about last week’s speculation.
“We are on the side of delivering a higher wage economy, that’s what we need to do,” she said.
“Not every measure will be popular and there are always vested interests, people who oppose measures that increase economic growth.
“But what is important to me, what is important to the chancellor, is that people have more opportunities, there is more investment, there are jobs with higher wages. And we are prepared to make that argument. This is about growing the size of the pie.”
Pundits have already said that following through with the change would be difficult politically for the government, particularly as the country faces stagflation.
Critics also say it may trigger a return of the high risk behaviour that sparked the global financial crisis.
The Bank of England last week said it was never in favour of the bankers’ bonus cap and that there were better ways to manage risk in the financial services sector.