Comment: Bonuses capped | Mothercare in recovery

Martin Flanagan

Martin Flanagan

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NOT that it probably needed it, but the timing for Ukip of the European Court of Justice’s snub of Chancellor George Osborne on banker bonuses on the day of the key Rochester and Strood by-election couldn’t be better. Nigel Farage would probably be doing cartwheels if it weren’t for the pint in his hand.

An expert to the Luxembourg-based court ruled the European Union’s cap on the ratios of bonus to pay – 100 per cent of basic salary maximum, 200 per cent with shareholder approval – was “valid”.

It fits in with the claim from Ukip that Britain can challenge the power of Brussels, but that when push comes to shove true power currently resides across the Channel if we want to ­remain part of the single market.

The Chancellor has made the not unreasonable case, along with British banks and its trade body, the BBA, and even Bank of England governor Mark Carney, that the bonus cap was counter-productive in that it encouraged banks to increase the basic salary of high-flyers.

This both got round the spirit of the EU banking regulators’ aims, and also reduced the amount of recoverable deferred bonus pay from miscreants in the case of wrongdoing in the industry or unacceptable risk-taking.

But the European Court of Justice’s advocate general Niilo Jääskinen wasn’t having any of it. Although his ruling is not binding on the court, it seldom goes against him. The Treasury is currently studying the 32-page judgment in depth but, curiously, a central point is that the bonus cap move is not anti-competitive.

“As there is no legal limit to the basic salary that can be paid, there is no limit to the total level of pay,” the judgment says.

But the whole point of the EU’s bonus cap move seemed to be that bankers should not be rewarded for bad behaviour that nearly brought about a worldwide 1930s-style great depression.

If you are saying they can be rewarded with rocketing basic salaries and “allowances” instead, it is a punishment with no force in the real world. Odd.

I don’t buy the argument this is some sort of political ploy by Paris and Frankfurt to bring to heel an over-mighty City of London, where most of the bankers affected by the cap are based. The advocate general’s contention – that bonuses are an internal EU market issue because they relate to risk-taking that could affect ­pan-European financial stability – seems reasonable.

I think it looks more like a case of confused EU thinking on how to pragmatically address the problem rather than produce doctrinaire, half-baked solutions that cannot even hold water under the EU’s own stated principles.

It also does not bode well for Prime Minister David Cameron’s attempts to win concessions from the EU on a socially and politically much more significant topic of free movement of labour within the single market.

Mothercare takes baby steps to recovery

Retailer Mothercare has not had its problems to seek in recent years. Foreign business doing well, but the UK caught in a pincer movement ­between internet retailers like Amazon and major supermarkets such as Tesco eating into its core market.

(Incidentally, it is amazing how for the best part of a decade and more, the internet and big supermarkets ­diversifying into non-food have been like a Grim Reaper for so many of their high street competitors).

But Mothercare has posted a small chink of light with lower UK half-time losses and improving sales on its home turf, suggesting its turnaround may be more than an aspiration, if somewhat short of a reality at present.

The overall group, famous for its children and baby clothes and related products, unveiled a small rise in profit at the headline level.

It is still a case of closing unprofitable UK stores for Mothercare, improving the online offer and general merchandise. A step has been taken, even though it is a small one.

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