Labour Would ‘Champion’ UK Finance Sector If Elected, Reeves Says

(Bloomberg) — Rachel Reeves said her opposition Labour Party would not reinstate a cap on bonuses scrapped by the government last year, as she pledged to “unashamedly champion” the UK’s financial services sector if the party wins the next election.

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Labour’s proposals for Britain’s finance sector include becoming a “global standard-setter” for the use of artificial intelligence in the field, making the UK a hub for green finance and bolstering regional centers beyond London and Edinburgh, according to the plan seen by Bloomberg.

“Too often in the last decade British politicians have sounded embarrassed about the sectors we excel in,” Reeves, Labour’s shadow chancellor, said in a statement. “That will change under Labour.”

Speaking to the BBC, she said: “The cap on bankers’ bonuses was bought in in the aftermath of the global financial crisis and that was the right thing to do to rebuild the public finances.”

“But that has gone now and we don’t have any intention of bringing that back.”

Labour later confirmed her remarks.

The maximum bonus of 200% of salary was inherited from the European Union in 2014 as part of the bloc’s financial reforms after the economic devastation wrought by the 2008 financial crisis.

The Conservative-led coalition government of the time and former Bank of England Governor Mark Carney were opposed to policy, which resulted in higher fixed pay and other salary innovations to get around the limit.

UK regulators had a separate plan that kept fixed pay low and had a larger variable element which paid out over a number of years. Bonuses could be recovered through “clawbacks” and “maluses” if short-term profitable trades led to long-term losses.

The plan to scrap the bonus cap, an example of post-Brexit regulatory freedoms, was first announced by Kwasi Kwarteng in his short-lived period as Chancellor of the Exchequer in 2022. Prime Minister Rishi Sunak confirmed the plan last October.

Labour’s broader financial services blueprint includes commitments to explore expanding longer-term fixed-rate mortgages and regulating the buy now, pay later sector.

It has been drawn up following a review by shadow City minister Tulip Siddiq alongside an independent advisory panel. Advisers on the panel included Abrdn Plc Chairman Douglas Flint, Legal & General Group Plc Chairman John Kingman and Prudential Plc Chair Shriti Vadera.

Under the plan, Labour said it wants to adopt a “more pragmatic and cooperative approach to working with the EU” and build upon the government’s Edinburgh Reforms, which sought to boost investment in infrastructure and make the City more competitive.

Labour has been setting out how it will foster a close relationship with business and the City this week. It has pledged to make policy more predictable and improve coordination across government to address concerns among business that a lack of clarity deters investment.

The party will also host a major business conference Thursday, which 400 senior business leaders from companies including Alphabet Inc.’s Google, Shell Plc, pharma giant AstraZeneca Plc and Airbus SE are due to attend.

Scrutiny is growing around Labour’s plans for government given their commanding poll lead over Sunak’s Conservative Party ahead of a general election expected later this year.

Reeves’s friendly pitch for the City is the latest example of the stark break from the former Labour leadership of Jeremy Corbyn, whose anti-business stance alienated executives.

(Updates with Labour will not reinstate cap on bankers’ bonuses in first paragraph.)

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