London Mayor Boris Johnson stepped up the pressure on David Cameron over Europe yesterday, after Britain suffered a bruising defeat in talks to cap bankers’ bonuses.
The Prime Minister said he would “look carefully” at the agreement struck at overnight talks in Brussels which limits bonus payments across the EU to, at most, twice bankers’ annual salaries.
He insisted that it must be implemented in a way which took account of the special position of the City of London as a global financial centre.
However, the plan was vehemently denounced by Mr Johnson, who warned it would play into the hands of London’s overseas rivals while undermining support in Britain for the EU.
“People will wonder why we stay in the EU if it persists in such transparently self-defeating policies,” he said.
“Brussels cannot control the global market for banking talent. Brussels cannot set pay for bankers around the world.
“The most this measure can hope to achieve is a boost for Zurich and Singapore and New York at the expense of a struggling EU.
“This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman Empire.”
The new regulations – agreed by MEPs, the European Commission and EU ambassadors – will come into force at the start of next year, unless they are blocked by the member states.
Bankers’ bonuses will be limited to a maximum of one year’s base salary, or twice the salary if a large majority of shareholders agree.
The cap is part of a sweeping financial reform package – including the introduction of higher capital requirements for banks – intended to prevent a repeat of the 2008 crash.
The UK has been battling to stop the “Basel III” accord, fearing it would undermine the competitiveness of the City and drive business abroad.
The deal will now be considered by EU finance ministers (Ecofin) meeting next week in Brussels, although Britain will be unable to use its veto.
Mr Cameron, attending a summit of northern European states in Latvia, said the government would now consider what action to take at those talks.
“We have major international banks that are based in the UK but have branches and activities all over all the world,” he said. “We need to make sure that legislation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding while being located in the UK.
“So we will look carefully at what the outcome of the negotiations was before working out the approach we will take at Ecofin next week.”
Conservative MEP Vicky Ford, one of the European Parliament’s lead negotiators from the Conservatives and Reformists group, insisted there were “many positive elements” in the package.
“Overall, it is a good deal for almost everyone in the UK, despite the caps on a few bankers’ bonuses,” she said.
“If the bonus cap is shown to cause bankers to begin relocating outside the EU, then we will have the ability to swiftly look again at the provisions in place through an early review.”
Labour MEP Arlene McCarthy said: “It’s a shame that the UK government has sought to defend the broken bankers’ bonus culture by acting as the trade union for a minority of highly paid traders.”