Rachel Reeves defends decision not to restore bankers’ bonus cap

Published

4 months ago

February 1, 2024

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Rachel Reeves has defended her decision not to restore a cap on bankers’ bonuses, arguing businesses do not need “more chopping and changing”.

The shadow chancellor said that when the government scrapped the cap under Liz Truss, Labour did not “feel that was the right priority in that budget”.

But she said much stronger rules were now in place since the 2008 financial crash, when the cap was first introduced, and that it was no longer her priority to restore it.

“What I hear loud and clear from business is that what it will take to get them to invest in Britain is stability and the last thing they need is more chopping and changing,” she said.

“The chopping and changing has got to end if we’re going to give stability to business and that’s why we will not be bringing that back.”

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Addressing Labour’s business conference in central London this morning, Ms Reeves also announced she would not increase the headline rate of corporation tax of 25% during the first term of a Labour government but left the door open to changes in the rate in the future.

She said: “There have been 26 changes to our corporation tax arrangements in this parliament alone. We can’t go on like this.

“The next Labour government will make the pro-business choice and the pro-growth choice: We will cap the headline rate of corporation tax at its current rate of 25% for the next parliament.

“And should our competitiveness come under threat, if necessary we will act.”

Ms Reeves also said Labour would maintain full expensing and the annual investment allowance and would provide a “road map” for business taxation within the first six months of government.

Ms Reeves has sought to portray herself as pro-business during her time as shadow chancellor, in contrast to her predecessor John McDonnell, who led Labour’s economic policy when Jeremy Corbyn was the leader of the Opposition.

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However, the shadow chancellor is facing scrutiny over Labour’s pledge to spend £28bn a year on green projects until 2030 if the party comes into power.

In a Q&A following her speech, Ms Reeves failed to commit to the policy, which some in Labour want Sir Keir Starmer to drop because it allows the Conservatives to cast doubt on the party’s commitment to fiscal discipline.

Asked by Sky News’s political editor Beth Rigby whether the pledge had become “an albatross around your neck” that “threatens to unravel all the hard work you’ve done to be trusted with economic competence”, Ms Reeves said there were “big opportunities to invest alongside business in the jobs and the industries of the future”.

But she said it was “absolutely essential that all of our policies are consistent with our fiscal rules” and that the green prosperity plan “was no exception to that”.

The shadow chancellor said that after the next budget, the party will “set out our plans and ensure they are consistent with our fiscal rules because they will always take precedence to guarantee the economic security of family finances and of businesses as well”.

Tories attack Labour over bonus cap change

The cap on bankers’ bonuses was first introduced in the wake of the 2008 financial crisis to limit annual payouts to twice a banker’s salary, but it was scrapped by former chancellor Kwasi Kwarteng during Ms Truss’s short time as prime minister.

During Prime Minister’s Questions this week, Rishi Sunak seized on the issue to argue that voters “cannot trust a word he [Sir Keir Starmer] says”.

“I was genuinely surprised that, after recently and repeatedly attacking not just me but the government for lifting the bonus cap, the shadow chancellor has announced, just today, that she now supports the government’s policy on the bankers’ bonus cap.”

Ms Reeves and other senior Labour figures had been vocal critics of the government’s decision to axe the cap during a cost of living crisis, saying only three months ago that the decision to allow unlimited bonuses to be earned again “tells you everything you need to know about this government”.

The issue has caused some division within Labour, with Anas Sarwar, the party’s leader in Scotland, previously criticising Ms Truss as a “Thatcher tribute act” who would rather “boost bankers’ bonuses than help those in need”.

He told reporters in Westminster today that he stood by his previous words but added: “You have got to look at it in the balance. We have got to inspire confidence for them to make the strategic investments, but we can’t return to a situation where they get away with it.

“I’m not here to defend bankers’ bonuses, I’m not here to defend banks. That is something the UK Treasury has got to keep an eye on.”

Stephen Flynn, the SNP’s leader in Westminster and Labour’s main opponent in Scotland, sarcastically praised Mr Sunak for convincing the Labour Party to agree to a “bleak future”, saying it was a “great achievement” for the government.

Business

Ex-Post Office head of IT says Paula Vennells ‘hoped to avoid’ inquiry – and reveals she blocked her number

Published

2 days ago

May 16, 2024

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Ex-Post Office head of IT says Paula Vennells 'hoped to avoid' inquiry - and reveals she blocked her number

A former Post Office executive has said she was forced to block ex-boss Paula Vennells’ phone number after the ex-CEO called multiple times asking for help to avoid an independent inquiry into the Horizon IT scandal.

Lesley Sewell, previously the company’s head of IT, told the Post Office inquiry on Thursday that former CEO Ms Vennells had reached out to her four times between 2020 and 2021.

Ms Sewell said that she blocked Ms Vennells’ number due to discomfort with the contact.

In her witness statement to the probe, Ms Sewell said that one of Ms Vennells’ emails referenced the need to fill in memory gaps regarding Horizon and “Project Sparrow”, a committee addressing issues with forensic accountants who identified flaws in the accounting system.

“Paula contacted me on four occasions in total. I recall blocking her number after the last call as I did not feel comfortable with her contacting me,” Ms Sewell said.

“I had not spoken to Paula since I had left POL [Post Office Limited] in 2015.”

According to Ms Sewell’s testimony, former chief executive Ms Vennells said that she had “been asked at short notice” to appear before a parliamentary select committee on “all things Horizon/Sparrow and need to plug some memory gaps”.

Ms Sewell says Ms Vennells added: “My hope is this might help avoid an independent inquiry but to do so, I need to be well prepared.”

Ms Sewell, who struggled to contain her emotions and broke down in tears while giving her oath at the start of her inquiry evidence, was offered support and breaks as needed by chairman Sir Wyn Williams.

Sir Wyn told the former executive: “Ms Sewell, I appreciate this may be upsetting for you, Ms Price will ask you a number of questions in a proper and sensible manner, but if at any time you feel you need a break, just let me know, all right?”

The Post Office has faced significant scrutiny following the ITV drama Mr Bates Vs The Post Office which highlighted the Horizon IT scandal.

The faulty system led to the prosecution of more than 700 sub-postmasters between 1999 and 2015, with many still awaiting full compensation despite government announcements regarding payouts for those with quashed convictions.

Business

London City Airport lands FitzGerald as first female boss

Published

2 days ago

May 16, 2024

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London City Airport lands FitzGerald as first female boss

London City Airport will on Thursday name its first permanent female chief executive as it targets approval of an expansion plan that would create nearly 1,500 jobs.

Sky News understands that the Docklands airport has told staff that Alison FitzGerald, who has been co-CEO since January alongside finance chief Wilma Allan, has landed the role.

Ms FitzGerald has worked at City Airport – the capital’s fourth-busiest – for more than a decade, becoming chief information officer and then chief operating officer.

She replaces Robert Sinclair, who left in January after six years to become boss of the High Speed 1 rail link.

The airport is owned by a consortium of Canadian pension funds and Kuwait’s sovereign wealth fund, which have backed a plan to increase its annual passenger traffic from about 6.5m to 9m.

It is appealing against Newham Council’s rejection of a planning application that would see it extend operating hours at the site, which is popular with City commuters.

The airport’s proposals include no increase in the annual number of flights and, in what it claims is a first for a UK airport, a commitment that only cleaner, quieter, new generation aircraft will be allowed to fly in any extended periods.

The appeal is being reviewed by the Independent Planning Inspector.

Its change of leadership makes London City the second of the capital’s airports to name a new CEO in quick succession, following the arrival at Heathrow of Thomas Woldbye last year.

“London City delivers one of the best passenger experiences in the UK and I’m committed to building on this success even further,” Ms FitzGerald said.

Business

Thames Water investors to quit boards amid spectre of bailout

Published

3 days ago

May 15, 2024

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Thames Water investors to quit boards amid spectre of bailout

Representatives of Thames Water’s multinational syndicate of shareholders are poised to quit as directors of its corporate entities after refusing to inject the billions of pounds of funding required to bail it out.

Sky News has learnt that a number of board members at companies connected to Kemble Water Finance, Thames’s parent, are expected to resign in the coming days.

City sources described the move as “the logical next step” after the owners of Britain’s biggest water utility said they would not commit more than £3bn to help upgrade its ageing infrastructure and shore up its debt-laden balance sheet.

A default on part of Thames Water‘s holding company debts last month has raised the prospect that the company is heading towards special administration, a form of insolvency that would effectively leave the government liable for managing a utility firm which serves nearly a quarter of Britain’s population.

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Thames Water is owned by a group of sovereign wealth funds and pension funds from countries including Abu Dhabi, Australia, Britain, Canada and China.

A number of the investors are represented on boards which sit at various points in the group’s labyrinthine capital structure.

It was unclear on Wednesday whether Michael McNicholas, a representative of the giant Canadian pension fund Omers and who sits on the board of Thames Water Utilities Limited, was among those in the process of stepping down.

Along with the rest of the privately owned water industry, Thames Water faces a crucial moment next month when Ofwat, the industry regulator, publishes its draft determination on companies’ five-year business plans.

The draft rulings will be subject to negotiation before final versions are published in December.

Thames Water and a spokesman for Kemble declined to comment.