Out-Law News 1 min. read
23 Sep 2022, 11:27 am
The cap, which was set by the EU in 2014, limits the bonuses of banking staff who are ‘material risk-takers’ to 100% of their fixed pay – or 200% with shareholder approval. Mark Shaw of Pinsent Masons said that, although banks had adapted to the bonus limit – typically by raising fixed salaries – there was still concern that the cap had caused “a banking skills drain to areas of the financial sector that were not subject to it,” including hedge funds, fintechs and digital asset firms.
“The key question now is whether scrapping the limit be enough to attract talent back to the UK when we still do not benefit from a ‘passport’ into the EU,” he added. His comments came after chancellor Kwasi Kwarteng unveiled a new ‘growth plan’, intended to support the British economy by tackling high energy costs and inflation and delivering higher productivity and wages.
According to the plan (42 pages / 1.35MB PDF), the Prudential Regulation Authority (PRA) will “scrap poorly designed EU rules” that “limit variable pay for senior bankers” and “undermine growth and hinder financial stability”. It added: “Pay in bonuses aligns the incentives of individuals with those of the bank, in turn supporting growth in the UK economy.”
The growth plan also includes a halt to the expected rise in corporation tax, which will stay at 19%, and a reversal of the 1.25% rise in national insurance contributions. The government said the measure would save 920,000 businesses almost £10,000 on average next year. Kwarteng also outlined a package of major cuts to stamp duty land tax, doubling the nil rate from £125,000 to £250,000, and allowing first time buyers to pay no stamp duty up to £425,000.
The growth plan will also "simplify" the UK tax system, bringing forward the planned cut to the basic rate of income tax to April 2023, and abolishing the additional rate of income tax. The government said the reforms would “ensure individuals keep more of what they earn, and make the UK a more attractive place to live and work.”
Meanwhile, Kwarteng confirmed that ministers are in discussions with 38 local and mayoral combined authority areas in England to set up ‘investment zones’ in specific sites as part of the growth plan. Areas with investment zones will receive tax incentives, planning liberalisation, and wider support for the local economy to “to drive growth and unlock housing”.