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


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

    Comment number 1380.

    @ 1368 Joe Yellow
    It's you that is pre-occupied with money as a measure of success. Most people do not care about other's earnings until it begins to damage them personally, or the common good. The City of London is an economic cancer, not a powerhouse. Anger is not envy!

  • rate this

    Comment number 1379.

    There is only one sound argument against capping bonuses - that the best minds MIGHT go elsewhere for the high salaries. It's a possibility, but this is the same "talent" that has contributed to the current financial crisis. Let them go. We'll just have to make do with the "talent" the nauseatingly inflated salaries will continue to attract - "talent" without the "incentive" to take stupid risks.

  • rate this

    Comment number 1378.

    Come on Lancecard!

    You said "most of bonus goes in Tax & NI". I've shown it isn't - where's your answer and figures?

    Of was that just hyperbolic guesswork? Or claims without foundation?

    You said "the cost is picked up by shareholders" whereas in fact the cost is offset against income and shareholders get the profits afterwards.

    You say "Massive net gain for UK" - got any FACTS to back that up?

  • rate this

    Comment number 1377.

    Some claim capping bonuses may deter the best managers. Paying more money doesn't guarentee the best people. Then some say introducing a cap will be bad for the UK, but the cap will apply across Europe too. This just gives me the impression Banks are there to grab all they can while they can.

  • rate this

    Comment number 1376.

    Osborne is again out of touch with many of the electorate and his fellow EU chancellors. I'd be happy, as would many others who feel the same, to be able to get a bonus equal to one years salary!

  • rate this

    Comment number 1375.

    I long thought that Chavez would experience some misfortune after repatriating his country's gold from the banking elite - interesting to hear the comment from his replacement to the effect that he was "killed by the enemy". For more info check GATA.

    Until today I would have said "google GATA" but Google is hosting adverts for ivory so I've changed my search engine.

  • rate this

    Comment number 1374.

    As Ken Loach said on last week's 'Question Time', it's amazing how the very well paid need further incentives to work well, while those who have less financially rewarding jobs and need welfare because their pay is so low find their purchasing power diminishing and necessities like fuel rising exponentially. They didn't cause the problem but feel the full weight of the recession, unlike bonusees!

  • rate this

    Comment number 1373.


    Not rabid or a dog! I just asked you a straight forward set of questions & if you can't answer them because you obviously have no understanding of economics. I have a basic understanding of what caused the mess in the 1st place seeing as I have an MA in Risk Management (gained after the crash). It was the SIVs that caused most of the mayhem & weren't regulated by whom, I wonder?

  • rate this

    Comment number 1372.

    This would never have come about had the bankers shown just a little bit of humility. They've brought this on themselves by rewarding themselves with massive bonuses for failure. I'm not against rewarding people for success but these people spit in your face and laugh at you while they do it.

  • rate this

    Comment number 1371.

    The UK does not stand alone. The Tory party stand alone. The rest of the UK recognise that something has to be done to curb the excesses of the banking industry and to narrow the pay gap between the highest and lowest earners.
    The Tories just want to keep the gravy train going for their mates in the city who will give them jobs when the lose the next election.

  • rate this

    Comment number 1370.



    Not quite £200 billion, you're only £137,000,000,000 out. Have you considered becoming a banker, think you'd be quite good at it. Any other lies you want to peddle?

  • rate this

    Comment number 1369.

    Can you imagine the outcry from the Tories and industry if we had a major trade union holding the government to ransom over pay levels? It's not just bankers' bonuses, executive pay levels generally have risen too far and too fast in many of our major companies. They clearly have no intention of restraining themselves, so it's time that we imposed some reasonable restrictions. Why are we waiting?

  • rate this

    Comment number 1368.

    @1342 - you've just proven my point perfectly - if not everyone is motivated by money, why are these same people so obsessed with bankers high salaries, because surely it would be irrelevant?

    Perhaps these people are not motivated by money, but don't realise they are still obsessed with it - or more like obsessed with other people's.

  • rate this

    Comment number 1367.

    Osborne is rightly isolated. His stance is indefensible.The same principle should be extended to all - not just the finance sector. The Swiss lead the way. Bankers in the UK shoulkd leave if they don't like it. They are not irreplaceable.

  • rate this

    Comment number 1366.

    As a retired senior financial services executive, it is complete nonsense to say that restricting bonuses to reasonable levels will drive abroad the best talent. It might lose some so called "whizz kids" who do not know the meaning of really grafting to earn a living - another word for them is "spivs". It is no wonder the vast majority of decent citizens despise their culture/greed. I am a tory.

  • rate this

    Comment number 1365.

    I'm not against reward for a job well done - but sheer greed, soft targets and mutual backscratching by remuneration committees mean that something must be done to curb this excess. The UK should play fair and not seek to gain a commercial advantage by refusing to rein in bankers' and executives' bonuses.

  • rate this

    Comment number 1364.


    Is envy really the best you can come up with against those who have seen the financial "industry" for what it is: an emperor that has lost his clothes; an entity that is bankrupt and leeches upon the poor and vulnerable to bail it out.

    We've seen through your greed and more and more of us are saying no to it. Momentum is gathering, and doesn't that scare you!

    PS You're ignorant too

  • rate this

    Comment number 1363.

    The financial industry contributes £200 bn per year, and employs over 2 million employees.

  • rate this

    Comment number 1362.

    That's it! I'm going to see my Union Rep. Just because we lost a few billion last year they're saying I can only have a bonus equivalent to 12 months pay.....it's a bleedin' liberty, that's what it is - where's Arthur, me and the lads aren't havin' this!

    Just imagine if ordinary working people behaved like these pompous pin striped gluttons....

  • rate this

    Comment number 1361.

    What is necessary is for the the major income and employment market in this country to be free to do what is necessary to win business in a global world. For those countries which have little at stake, the political symbolism of bashing the bankers is an easy vote winning headline, but his is not the case in the UK. We work in a market much larger then the EU and we have to take that into account.


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