The Guardian - 07.09.2019

Section:GDN 1N PaGe:2 Edition Date:190907 Edition:01 Zone: Sent at 6/9/2019 18:10 cYanmaGentaYellowbla

• The Guardian Saturday 7 September 2019

News

Richard Partington

Economics correspondent

Bankers’ bonuses could be banned in

Britain in order to tackle high levels

of inequality across the country, John

McDonnell has said.

The shadow chancellor warned the

City of London that a culture of exces-

sive bonus payouts was still in place

a decade on from the fi nancial crisis

and said Labour would introduce new

rules to curtail such awards – includ-

ing a potential ban – if banks did n ot

take voluntary action fi rst.

“If it continues and the City hasn’t

learn ed its lesson, we will take action,

I’ll give them that warning now,” he

told the Financial Times. “If we have

to take action, we will. People are

off ended by bonuses.”

Saying that a crackdown on big

bonuses would be among his fi rst

acts as chancellor, McDonnell said

he would weigh up range of options

to limit them. A source close to the

shadow chancellor confi rmed to the

Guardian that an outright ban would

be considered.

Dominic Rushe

Dozens of US states are set to launch

antitrust and privacy investigations

into Facebook and Google as scrutiny

of the big tech companies increases.

The investigation into Alphabet’s

Google unit will examine its eff ect on

the digital advertising market and its

impact on consumers. In a separate but

overlapping investigation, the states’

leading law enforcers will investigate

Facebook’s privacy record and its

advertising model.

The news, fi rst reported by the

Wall Street Journal , was confi rmed

yesterday morning by the New York

attorney general, Letitia James. “Even

the largest social media platform in the

world must follow the law and respect

consumers,” said James in a statement.

She said the bipartisan coalition of

attorneys general was investigating

whether Facebook ha d stifl ed com-

petition and put users at risk.

The inquiry includes the attorneys

general of Colorado, Florida, Iowa,

Nebraska, North Carolina, Ohio, Ten-

nessee and the District of Columbia.

James said the investigation “focuses

on Facebook’s dominance in the

industry and the potential anticom-

petitive conduct stemming from that

dominance ”.

She said: “We will use every investi-

gative tool at our disposal to determine

whether Facebook’s actions may have

endangered consumer data, reduced

the quality of consumers’ choices or

increased the price of advertising .”

The tech businesses are coming

under increasing scrutiny in the US.

Facebook recently paid $5bn (£4bn)

to settle Federal Trade Commission

(FTC) claims that it deceived users

about their ability to keep personal

information private.

That fi ne came after a year-long

investigation into the Cambridge Ana-

lytica data breach , fi rst reported by the

Observer. The sum was dismissed by

many politicians as insignifi cant for a

company that had revenues of $55bn

in 2018. “Rather than accepting this

settlement, I believe we should have

initiated litigation against Facebook

and its CEO, Mark Zuckerberg,” said

Rebecca Kelly Slaughter , the Demo-

crat FTC commissioner.

European regulators have until

recently been far more aggressive

in their policing of these businesses

than their US counterparts. Facebook

is already the subject of an antitrust

investigation in Europe, where regula-

tors are also considering sanctions on

the company for breaking the region’s

strict privacy laws.

In Britain a parliamentary report

labelled Facebook and its executives

“ digital gangsters ” earlier this year

after an investigation found the com-

pany deliberately broke privacy and

competition law.

But the tech companies’ co sier rela-

tionship with Washington is fraying

as cross-party support for more reg-

ulation and scrutiny has mounted.

Federal privacy laws are being con-

sidered in the US and the companies

have attracted the ire of Donald Trump

who has called them “dishonest” and

“crooked” and said that “something is

going to be done ”.

According to fi gures released by the

European Banking Authority this year,

more than 3,500 bankers in the UK

were paid more than €1m (£900,000)

in 2017 , with total income of almost

€10bn between them. Their average

pay is €2m.

McDonnell’s warning comes as

Labour gears up for a potential election

showdown with Boris Johnson, with

the prime minister claiming his party

is ending austerity and committing to

a 4.1% public spending increase next

year. Johnson has previously branded

himself among the biggest defenders

of the City, saying he was a champion

of fi nancial services during his time as

London mayor.

The shadow chancellor said a big

bonus culture still pervaded the British

banking industry more than a decade

on from the 2008 crash. He told the FT:

“It’s become part of the culture and

it is so separate and distinct and iso-

lated from the rest of the real-world

economy and that’s why people are

so off ended by it. It’s a refl ection of

the grotesque levels of inequality that

people now fi nd so off ensive.”

Pay in Britain is rising faster than

average for people who are already

paid at least £1m , a trend that stands

to exacerbate inequality.

Earlier this year, the director of the

Institute for Fiscal Studies thinktank

suggested that the return of bumper

banking industry payouts unseen

since the fi nancial crisis could be fuel-

ling the trend.

McDonnell also said he wanted to

ban all share options as well as golden

goodbyes , which compensate axed

bankers, and golden handshakes,

which are designed to lure them to

new jobs.

City regulators already take a dim

view of such payouts, stipulating that

they should be extremely rare.

Earlier this year, the Spanish bank

Santander ran into trouble with its

planned payment to the investment

banker it had lined up to become its

chief executive, Andrea Orcel. Orcel

moved to sue the bank for €100m

after it withdrew its job off er , saying

it could not justify paying him a €50m

signing-on fee.

A City lobby group warned that

McDonnell’s proposals could threaten

investment in the fi nancial services

sector. Miles Celic, chief executive of

TheCityUK, said : “British based com-

panies are among the world leaders

in fi nancial services. They invest in

companies of all sizes and help people

save, buy homes and have comforta-

ble retirements.

“Any government should look to

preserve and promote the jobs, pros-

perity and opportunity this British

success story provides.”

Labour could ban bankers’

bonuses to fi ght inequality

▼ The pervasive bonus culture in

British banking refl ects ‘grotesque’

inequality, John McDonnell said

PHOTOGRAPH: ANDY HALL/THE OBSERVER

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Bankers in the UK paid more than

£900,000 in 2017, according to the

European Banking Authority

£50m

Signing-on fee off ered by Santander

to the banker it had lined up to be

chief executive. It withdrew the off er

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