Osborne stands alone as EU backs bonus cap

 
George Osborne meets other European finance ministers George Osborne has found little support for his objections to the bonus cap in Brussels

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Chancellor George Osborne stood isolated after European Union finance ministers vowed to press on with proposals to curb bankers' bonuses.

He told a meeting of EU finance ministers that he could not back the plans, which he fears could damage London's financial centre.

The EU is proposing to cap bonuses to 100% of a banker's annual salary, or to 200% if shareholders approve.

There will be further talks, but all other countries backed the plan.

Those negotiations will take place over the next few weeks ahead of a a formal vote at the European Parliament in April, and the UK will hope to win some concessions as the details are finalised.

Supporters of the bonus cap need roughly a two-thirds majority to pass the legislation, however, meaning the new rules can come into force even with British opposition.

Speaking after the meeting, Mr Osborne said the UK already had the toughest regime in Europe for bankers' pay and bonuses and that a cap could "have a perverse effect".

Further talks

Analysis

This is an argument that the UK has basically lost.

The EU Commissioner for Financial Services, Michel Barnier, said it was "crystal clear" that the bonus cap would be imposed.

There will be further technical negotiations on some of the details: there will be a focus on a closer link between bonus schemes and long-term performance; and perhaps an increase in the amount of bonus that can be deferred and therefore discounted when the total pay-out is being calculated.

But EU officials say any alterations will have a pretty small impact on the amount of bonus that can be paid. Other countries want to find consensus with the UK - the German and Italian finance ministers said so explicitly.

But there is not much room for manoeuvre. It is almost unprecedented for a significant piece of financial legislation to pass in Europe without British backing - but that could be about to happen. And for some in the City, that is a worrying straw in the wind.

There were signs of support for the UK from Germany and Italy at Tuesday's meeting. German Finance Minister Wolfgang Schaeuble, for example, said "it would be better'' to reach consensus with the UK.

However, the UK chancellor can only really hope to tinker at the margins of the deal, BBC Brussels correspondent Chris Morris says.

EU officials say any alterations would have a pretty small impact on the total bonuses that can be paid.

Shadow chancellor Ed Balls said it was "no wonder" that George Osborne found himself outvoted 26-to-1 at Tuesday's meeting.

"He failed to engage with these sensible proposals to limit bonuses... until the very last minute," Mr Balls said.

"It shouldn't take the European Union to rein in excessive bonuses, but George Osborne has dragged his feet and refused to act in Britain."

The bonus proposals are part of wider measures requiring banks to strengthen their capital buffers in the hope of avoiding another financial crisis.

Michel Barnier, the EU commissioner for the single market, said high bonuses were behind excessive risk-taking by bankers. "Enough is enough. We've got to put a stop to that."

'Unintended consequences'

It is very unusual for a significant piece of financial legislation to pass without the backing of the UK, whose capital London is Europe's major financial centre.

The Mayor of London, Boris Johnson, has dismissed the bonus cap as "self-defeating". The City fears the rules will drive away talent and restrict growth.

Simon Lewis, chief executive of the lobby group the Association for Financial Markets in Europe, said the proposed measures were not just a threat to the City of London, but to Europe's competitive position in financial services.

He told the BBC: "If this goes ahead, you will see the law of unintended consequences. Salaries will go up, there will be less flexibility, and the banks will be less competitive."

Last week the Federation of European Employers questioned whether restrictions on bankers' pay exceeded EU powers.

There has been speculation that the UK may try to invoke a little-used "national interest" defence to block attempts to curb bonuses.

The so-called "Luxembourg Compromise" allows a member state to block a majority decision being taken if an issue is deemed to seriously affect "a very important national interest".

Some banks have reportedly taken legal advice on whether the EU's proposals are within the law, according to the Financial Times on Tuesday. One bank had already received legal opinion that the bonus measures contravened European law, the FT said.

Mr Lewis told the BBC that he "was sure" lawyers would be looking at whether the proposals were lawful, but added that "these are early days".

The European Commission has said that it is confident the proposals are legally watertight.

 

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  • rate this
    +7

    Comment number 20.

    I have no problem about the bonuses, but the share holders should be able to stop the board setting the bonues.

    At the moment it is very much nepotism on paying each other.

    ie they are suppose to be working for the share holders.

  • rate this
    +59

    Comment number 19.

    Everyone knows these poor, put-upon chaps will simply move to the bankers' sanctuary of Zurich. Hang on a minute ... the Swiss have just voted in a referendum to curb bankers' bonuses, so they'll have to go even farther afield. Better start packing their bags.

  • rate this
    +232

    Comment number 18.

    No-one is cannier with money than the Swiss.No-one has more successful banks.
    If the Swiss have decided to cap the ridiculous salaries, why don't we follow?

  • rate this
    -41

    Comment number 17.

    oh god , not another session on bankers bonuses...so boring

  • rate this
    +70

    Comment number 16.

    It sickens me to see the Prime Minster and Chancellor devoting so much energy to pretecting bankers bonuses. We know who pulls their strings but this too much.

  • rate this
    +120

    Comment number 15.

    Personally I don't have a problem with high bonuses as long as the market/industry can support it. If Banker A works hard, brings plenty of money into his company & that benefits the economy in terms of his spend, inward investment, corp tax, then fine. What I totally and utterly object to is the rewarding of failure, mediocrity & downright cowboy-like behaviour where accountability is also amiss

  • rate this
    -7

    Comment number 14.

    I have an idea!! Let's have a cap on what German automakers and French champagne growers earn! No? I thought not.
    What is the EU doing legislating on Britain's largest industry?

  • rate this
    +16

    Comment number 13.

    It will have nothing to do with him and his posh boys getting jobs in the city when they leave the government, everyone is fed up with the rich getting richer, and companys make huge profits from the less well off

  • rate this
    -1

    Comment number 12.

    Whether we want this cap or not just does not matter. We don't have the freedom to make decisions over what happens in our own country like our parents, and their parents did.

    More and more the stories from politicians are like the playground poser saying "I'll show you what I'll do to them...". They cant do anything. They signed our democracy away in 1973.

  • rate this
    +61

    Comment number 11.

    Not so much about driving away talent but more about upsetting his friends.

  • rate this
    -6

    Comment number 10.

    Only business owners have a say regarding employee wages (as long as its above min wage) otherwise it is none of their business.

  • rate this
    +5

    Comment number 9.

    I can think of at least three ways of getting round these proposed rules, so I wouldn't get too excited/outraged by this.

    Bonuses are a symptom of excessive risk-taking, not a cause. This move seems to have a lot to do with politics and very little to do with financial responsibility.

  • rate this
    -18

    Comment number 8.

    Ironically, it may be the greedy bankers issue that gives the UK enough loss of sovereignty to call for a referendum on Britain's EU membership

    Let's hope so as a showdown with the eurocrats and giving all British people their own say is now long over-due

  • rate this
    +97

    Comment number 7.

    "All in this togther".......


    .....yeah right Georgie boy.....


    ....you only care about making us poorer to make the already obscenely rich even richer........

  • rate this
    +266

    Comment number 6.

    Osborne fears driving away talent

    The talent to lose money? The talent to grab huge salaries and bonuses?

    We can do without that sort of talent.

  • rate this
    +152

    Comment number 5.

    Dear George,

    You are out of touch with the real world. Your actions have proven it. If the Swiss are willing to take the risk of capping bonuses, then why aren't you?

    Bankers should not be rewarded for losing billions. Or are you simply trying to look after the "boys"?

    Regards,
    Disgruntled

  • rate this
    +143

    Comment number 4.

    These caps are essential - we've seen what happens without them... bankers with noses in the trough as the country burns around them. It will also only work with concerted action throughout Europe. The US will follow suit, so if the bankers want to go live in Hong Kong, Singapore or Beijing, let them. We're better off without them.

  • rate this
    +107

    Comment number 3.

    This is not surprising. Osborne is only concerned about the very rich. Some bankers bonuses are totally obscene. Osborne's view is totally predictable. He always wants the very rich to have more and more money, and the poor to have less and less money.

  • rate this
    +137

    Comment number 2.

    This may drive away talent !!!!

    Are these the same talented people who got the world into the financial mess its in currently ?????

  • rate this
    +4

    Comment number 1.

    Can we have an apostrophe please Mr. Headline Writer?

 

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