FCA pay proposals are a cut by a different name. Here’s why that’s a big problem

The watchdog’s bonus scheme is being scrapped. But, as James Moore writes, Unite is concerned staff could end up 10 per cent worse off

FCA boss Nikhil Rathi is consulting on a new pay plan (Victoria Jones/PA)

The City watchdog’s new pay policy is proof positive that very clever people can do sometimes do very silly things.

With inflation set to top 5 per cent and labour shortages hitting the City of London almost as hard as they’re bashing companies which need lorry drivers or food processing workers, the Financial Conduct Authority (FCA) is proposing to impose a pay cut upon a substantial chunk of its staff.

This will be accomplished by slashing the bonus scheme and replacing it with “performance related pay”. Which is, that’s right, another bonus scheme. Just harder to get. And with a different name to make it look more palatable to outside observers.

About 90 per cent of the FCA’s staff currently receive a payment under the existing scheme. That number will be much less in a future in which staff will be competing for pieces of a much smaller pie.

Now, the FCA insists that no one’s basic pay is going to be cut. But if you basically get a bonus every year, and the scheme comes out of the overall remuneration budget, is it really a bonus at all? Or is it just another part of your salary, a top up which you get for not fouling up or spending your lunch hours investigating the local hostelries.

I would argue the latter. So would Unite, the union representing staff at the regulator, which is deeply unhappy with the situation.

It’s pleased that low paid staff are getting a much needed pay rise, which means about 800 people will be better off. However, it says that most staff will be worse off with the exception of some very senior people who, under changes to the organisation’s banding could stand to get more.

This doesn’t apply to CEO Nikhil Rathi and the masters of the FCA universe. But Mr Rathi admitted at a recent hearing of the Treasury Committee that he’s certainly not going to be hit with any sort of cut. Those at the very top don’t get bonuses at all. Given how much they’re paid, they scarcely need them. Mr Rathi gets £455,000 a year plus a 12 per cent pension.

To add insult to injury, it came out that the watchdog has paid nearly half a million to an external communications consultant to try and polish this up, well you know… It has also lately been calling upon lawyers and other pricey professionals to keep the show on the road given that it has around 500 vacancies to fill.

Yes, you read that right, the watchdog is proposing a pay cut while spending half a million to sell it while it is down 500 people in the middle of a labour shortage while the CEO pockets more than three times what the prime minister earns.

Now, I realise that the FCA isn’t much loved. What regulatory agency is?

It has made some notable missteps. Some of them have caused people considerable pain. Some of its bosses have done a less than stellar job.

But taking money out of the pockets of staff while you’re struggling to find people isn’t going to improve that. It won’t lead to the better consumer protection we need, or the better regulation that the economy needs. To the contrary.

The FCA insists that it is engaged in an “open consultation”. Whatever that means. But Mr Rathi mounted a defence of the plans before the Treasury Committee, so how open it actually is open to question.

I understand Unite, which is trying to secure recognition at the watchdog, is considering industrial action. No wonder.

One very effective option might be a work to rule, in which staff undertake only their contractual hours. Such a move, if widely observed, could paralyse the organisation.

Another big risk to the FCA is of people getting on the phone to their headhunters. Financial services outfits are usually quite keen on having an ex regulator or two working in their compliance departments. They also pay quite a bit better.

Mr Rathi needs to rethink this. He’s in grave danger of cutting off his nose to spite his face. Given how important the regulator’s job is, the face spiting could end up being shared quite widely.