What will Liz Truss’s government be like? We’re already starting to find out

Rushing to end the bankers’ bonus cap while household bills are soaring and trade unions are agitating for pay increases is politically tone deaf, writes Chris Blackhurst

It’s apparent that Truss is pursuing the ‘trickle down’ effect, the concept that says benefiting those at the top reaps gains below. Where the bankers’ bonuses are concerned, this is rubbish (PA Wire)

Already, we’re forming a picture of what the Liz Truss government will be like. And it’s not pretty.

Within a matter of days, we’ve been told that the Online Safety Bill is to be watered down to appease the tech giants, planned restrictions on unhealthy foods will not go ahead so pleasing the sugar lobby, some measures to make us greener are unlikely to get the go-ahead, and the cap on bankers’ bonuses will be lifted. This, while ministerial appointments have yet to be announced and the country is in mourning following the death of the Queen.

It says much about priorities and who pulls the levers of influence in the Conservative Party and in her administration that these items should emerge at the top of the “to do” list. Big business, big money, is clearly getting its way.

Even the announcement that energy bills were to be frozen carried an element of kicking and screaming to it, that Truss had to be persuaded, it appeared it was not something that she wholeheartedly supported.

What’s especially galling about the bonuses news is the accompanying disingenuity, that somehow Truss is working quickly to drive growth in the economy and this represents part of that strategy. Just as bad is how this claim is being swallowed by sections of the media. The BBC reported faithfully that the chancellor’s mooted lifting of the bonus cap will provide an economic “boost”.

No evidence was offered for this assertion. There was vague talk that some foreign banks have been put off coming to London by the need to pay high fixed salaries to their people because in the UK bonuses are limited to twice that amount. What they’d like is the flexibility to pay lower salaries and higher bonuses.

Who are these banks? The City vies with New York as the world’s leading financial centre. There is not a bank worth the name that is not currently located in London. The notion that there is some financial powerhouse poised, waiting for the bonus limit to be scrapped before it can set up in the UK, is simply laughable.

No, the truth is more prosaic, which is that the banks that are presently operating in London would like the freedom to award higher bonuses and they resent having to pay higher salaries. The effect on the economy will be tiny; to use the word “boost” is hyperbole, pure boosterism of the type we got all too used to with Boris Johnson and now it seems with Truss, in fact.

What much of this suggests is that Truss and Kwarteng have targeted the City for nurturing and advancement. In a sense, amen to that, as financial services represent a true British success story

There is a logical argument for the bar being removed. It restricts the ability of banks to move their staff around, that they might think twice about sending someone from New York, say, to London, if they must pay a higher salary to make up for the bonus being only two times. Equally, though, there is a logical argument as to why it was imposed in the first place.

The cap was introduced by David Cameron, a Conservative prime minister no less, after the crisis of 2008. That disaster was brought about by banks behaving recklessly and greedily, speculating wildly in the chase for ever bigger earnings.

Barely 14 years after the world was almost brought to its knees and after a fortune in taxpayers’ cash was consumed by bailing out the banks and public services were slashed to pay for it all, here we are again.

As well as boosting the economy, we’re told that dropping the cap is part of the “Brexit dividend”, that in the EU they keep a tight lid on bankers’ bonuses but that in the UK, that will no longer apply. A dividend for who? For a small number of City high rollers, that is all.

It’s apparent that Truss is pursuing the “trickle down” effect, the concept that says benefiting those at the top reaps gains below. Again, where the bankers’ bonuses are concerned, this is rubbish – they may find it easier to pay their school fees and to pay for the foreign villa, but quite where trickle down to the rest of us applies is hard to fathom.

Alarming, too, is the claim being made (and again, repeated ad nauseam by government supporters and an unquestioning press) that the chancellor is intent on a “Big Bang 2.0”, that other curbs the City does not like will also be relaxed. No detail is forthcoming. There is a case for some of those rules being eased, but it depends on what they are – equally, some of them were introduced for a sound reason and the danger is that in the rush to give the City what it desires, the rationale for their introduction will be forgotten.

What much of this suggests is that Truss and Kwarteng have targeted the City for nurturing and advancement. In a sense, amen to that, as financial services represent a true British success story. Anything that can be done to further that prosperity, while keeping it safe, is to be welcomed.

The City though is easy pickings and affects a few. It’s to be hoped they’re prepared to try and grow the economy by other means.

To be rushing to end the bankers’ bonus cap while household bills are soaring and trade unions are agitating for pay increases is politically tone deaf. This raises the worrying prospect that Truss, Kwarteng and their colleagues are in hock to donors and friends, pleased to receive plaudits from this small group, that they cannot see beyond to the wider picture. Certainly, to be doing this so soon, right now, does not augur well.