Labour floats banning banker bonuses if it won the next General Election

Lianna Brinded
Head of Yahoo Finance UK
Labour leader Jeremy Corbyn, and Shadow Chancellor John McDonnell. Photo: Anthony Devlin/Getty Images

Britain’s main opposition Labour says it’s possible that it will ban financial services firms from awarding bonuses to staff, if it got into government.

Labour's second most powerful man — shadow chancellor John McDonnell — said in an interview with the Financial Times that he was warning the City of London that if it didn’t voluntarily curb bonuses in the meantime, then those companies could face an outright ban if Labour takes control of parliament.

"If it continues and the City hasn't learnt its lesson, we will take action, I'll give them that warning now. People are offended by bonuses. They are a reflection of the grotesque levels of inequality,” he said.

Under European Union rules (Capital Requirements Directives – CRD IV), bonuses cannot exceed 100% of someone’s fixed salary. So if someone earns £1m a year, they cannot earn more than £1m in bonuses. The limit can only be increased to 200% of the fixed salary if shareholders give its approval, by a qualified majority.

READ MORE: Snap general election will likely lead to another hung parliament

Bonus data, which always has a lag of over a year for reporting, shows that £46.4bn ($56.4bn) was paid in bonuses in 2017.

In the interview he reiterated that cracking down on banker bonuses would be one of his first actions as chancellor if Labour wins the next general election.

He would also launch a consultation into how corporate structures could be overhauled — such as increasing shareholder power while banning bonuses and huge one-off payouts when an executive enters or leaves a company.

MPs will vote again next week on whether the UK will have another general election. Earlier this week, politicians blocked UK prime minister Boris Johnson’s bid to call a snap election after he suffered a brutal defeat at the hands of members of parliament who tried to block a no-deal Brexit.

Current polls and analysis shows that another general election right now would mean another hung parliament.