The UK government’s challenge to the European Union’s cap on bankers’ bonuses has been throw out by the advocate general.
The UK government’s challenge to the European Union’s cap on bankers’ bonuses has been throw out by the advocate general.
The EU law limits a bonus to no more than a banker’s fixed pay or twice that level with shareholder approval.
Advocate general Niilo Jääskinen today ruled that EU legislation limiting bankers’ bonuses is valid.
Earlier this year the European Court of Justice announced that the UK had failed in its legal challenge to prevent 11 EU Member States – including France, Germany, Italy and Spain – introducing a Financial Transaction Tax across shares, bonds and derivatives.
A recent survey found that nearly half (49 per cent) of British bankers reported higher bonuses this year, compared with 47 per cent in the US and Hong Kong. The average bankers’ bonus globally was 29 per cent higher in 2014 than a year ago.
The government had previously claimed that restricting bankers’ bonuses would damage Britain’s competitiveness.
Responding to the advocate general’s ruling, Luke Hildyard of the High Pay Centre told Left Foot Forward:
“Many people will find it striking that the government was in court, spending taxpayers’ money to defend bankers’ seven figure bonuses in the immediate aftermath of yet another banking scandal, this time relating to foreign exchange markets. It sends totally the wrong message about priorities.
“Despite the banking industry’s bleating, there is little evidence that cutting bankers’ ludicrous pay packages will hurt them. The head of UK Finance and Investments, which manages the taxpayers’ stake in bailed-out banks, recently said that the bonus cap had had no material impact on competitiveness at RBS.”
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
10 Responses to “EU rejects Osborne’s bank bonus cap challenge”
Guest
No surprise you’re for unlimited bonuses.
YOU don’t care about the welfare state, it’s pretty clear.
Guest
You seem to be denying the treaties the UK is voluntarily a part of, as a sovereign country.
Mike Stallard
Don’t feed the trolls.
Brendan Caffrey
Pay Inequality: What to do?
Bank bonuses can now be a maximum of 100% of annual pay, or
200% if shareholders agree. The
Chancellor of the Exchequer’s attempt to have this European Union regulation
set aside has just failed. There is now an attempt to simply increase annual
salaries of directors, with “allowances”. These “allowances” are paid in
addition to basic salary and bonuses. The European Union has just ruled that these “allowances” are in
breach of the bonus size regulation. This is no surprise!
The simplest way to get around these regulations would be to
increase basic salaries. But this would make pay “packages” simpler to
understand, as there would be no bonuses and no “allowances”. Further, the
distance between the lowest paid bank workers and the highest paid directors
would become more transparent. All this might increase popular and political
objections to the exorbitant pay levels of those at the top of the banking
industry.
In 1997 chief executives in the FTSE 100 were paid 47 times
their average employee. In 2012 this rose to 133 times the average employee.
Given the average wage is now around £25,000.00; this produces a figure of over £3.3 million per annum for the chief
executives. How can this distance of 133 from the top pay to the bottom be
reduced?
Some relationship between pay increases at the top, and
those at the bottom, needs to be introduced. This could take many possible forms.
Say a figure of 5% was an annual increase at the top; then a similar 5% should
be added to the bottom. This might stabilise the 133 relationship between the
top and the bottom. Pay increases at the bottom of 5% would, however, be well
above inflation and very welcome. But the distance from top to bottom would not
change very much.
A more effective possibility would be where companies award
directors a bonus of 200% of basic salary, with shareholders support, then those
at the bottom should get double their previous increase. If the previous
increase was say 5% , then it would rise to 10% of basic pay. The previous stable
relationship of 133 to1would now be lost. This might create a fear of inflation
as well. But there might be an increase in the perception of this system as more
fair.
More radical options include pay freezes. Pay freezes for
all; or pay freezes only at the top, to allow the 133 to 1 relation to progressively
fall over time. Or where bonuses of some sort still exist, replace percentage
rises with sums of money. These sums could be defined variously as related to length
of service; to between 3 and 6 months pay; to one’s position in a company
hierarchy; to be being set by a remuneration committee for all employees, with
union representation on all such committees.
None of the above schemes radically reduces the figure of
133. Indeed, 133 could rise. Further, none have any chance of implementation
without popular support, and political will. A final objection is that those on
low pay and zero hour contracts would become even more attractive to companies.
Please see my web site at:
whyworktoday2967.wordpress.com
Guest
Don’t stop eating over this, it’s not worth it over internet postings!