Inside Politics: Bonus territory

Hello there, I’m Matt Mathers and welcome to The Independent’s Inside Politics newsletter.

The new chancellor has floated a controversial plan to lift the cap on bankers’ bonuses. Will it actually happen, and how will it go down? Thousands of mourners are queuing up to pay their respects to the Queen.

Parliament is not sitting

There hasn’t been a whole lot of politics going on over the past few days due to the Queen’s death, but the little that has happened gives us an insight into how Liz Truss’s new government – still just over a week old – is going to operate once normal service resumes on Tuesday.

During the Tory leadership contest, Westminster watchers questioned whether Truss and Kwasi Kwarteng might become less ideological and tack more towards the centre once in Downing Street. A story in the Financial Times today saying that the chancellor wants to scrap bankers’ bonuses suggests perhaps not.

The EU-era cap was introduced following the 2008 financial crash and limits bonuses to two times a banker’s salary. Kwarteng argues the move would raise more taxes, make London a more attractive prospect for global talent and boost the UK’s financial sector in what the chancellor’s team wants to sell as a “Big Bang 2.0” approach – a nod to the late Margaret Thatcher’s deregulation of the markets in the late 80s.

But will it happen, and how would it go down if so? Those “close to the chancellor’s thinking” insist that no final decisions have been made. This means he and his team are floating the idea in the media to gauge opinion ahead of next week’s mini-budget when we can also expect further details on the energy bills freeze plan and tax cuts.

And therein lies one of the main problems with the policy. Critics will frame it as a handout to the wealthy at a time when the government is already due to scrap corporation tax and refusing to extend the levy on oil and gas giants. The policy might play well with some of the small constituency of voters who put Truss in No 10, but almost certainly go down like a bucket of cold sick just about everywhere else (banking is still one of the most disliked occupations), with millions of people across the country struggling to pay for their food, gas and electricity bills. Some analysts also argue that it was excessive bonuses that encouraged the type of risk-taking that resulted in the 2008 meltdown.

Former PM Boris Johnson also tried to undo the cap but ultimately caved to political pressure. It remains to be seen whether Kwarteng – keen to be viewed as someone who will get rid of red tape and regulation – will fold too, but pressing ahead feels like it would be a gift to the Labour Party.

open image in gallery

Thousands of mourners are this morning queuing to pay their respects to the Queen, who is lying in state at Westminster Hall, where she will remain until Monday’s funeral. Led by the King and other senior royals, the coffin arrived there at 3pm yesterday and a short service conducted by the Archbishop of Canterbury followed.

At the time of writing, the queue to see Her Majesty was approximately two miles long and snaked its way along the Southbank of the Thames, stretching all the way from Lambeth to Blackfriars Bridge. The warnings about wait times have been well documented and officials confirmed yesterday that access will be temporarily suspended if the queue becomes longer than 10 miles.

King Charles returned to his Highgrove home in Gloucestershire on Wednesday and he will have a private day of reflection today and is not expected to attend any public events.

Former head of the civil service Lord Wilson on sacking of top Treasury official.

“The sad fact is that in sacking Sir Tom Scholar, one of the ablest civil servants of his generation, the prime minister and chancellor have sent a clear message to the civil service that they are not interested in impartial advice and intend to surround themselves with `yes’ men and women.That is a sure route to bad decision-making and weak government. It is also another small step on the road to politicising the civil service.”

Sky News politics editor Beth Rigby on Kwarteng plan to boost bank bonuses.

“What’s the logic? Scrap cap intro’d via EU 2014, as part of wider deregulatory reforms. Aim = make City more attractive place for biz. That grows economy, helps Exchequer. BUT, the political risk at a time when people struggling & pub services deteriorating, HUGE political risk.”

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