Credit: Policy Exchange

Is Steve Hilton right about capping bankers' bonuses?

David Cameron's former policy chief believes public sector salaries are the price firms that are 'too big to fail' must pay for state support.

by Adam Gale
Last Updated: 21 Jul 2015

When a former member of the Prime Minister’s inner circle says the country’s ruled by a self-serving elite, people tend to listen. One-time Tory policy chief Steve Hilton has criticised the control exerted by ‘an insular ruling class’, of company bosses, MPs, journalists (insular, moi? – Ed.) and authors who share the same dinner parties, schools and values. He should know, Hilton says – he’s part of that elite.

No quasi-Marxist elite-bashing would be complete of course without having a go at everyone’s favourite whipping boy, the overpaid banker. Firms that would need to be bailed out in the event of a collapse, a la RBS and Lloyds circa 2008, should pay salaries at civil service levels, argues Hilton, who left politics in 2012 to go to California.

Chief executives taking what would roughly amount to a 90-95% pay cut would face a ‘powerful incentive’ to reform, he told the BBC while on the publicity trail for his new book, More Human. No kidding. Hilton didn’t stop at banks, either. Tesco, he argues, is also ‘too big to fail’ because for some people it’s the only supermarket they have access to, so it too should cap its pay. Dave Lewis will be delighted...

Though Hilton says he’s pro-business, he’s essentially ignoring the fact that businesses are not islands. Punishing banks too much could drive them abroad (here’s looking at you, HSBC), or discourage talented, driven people from going into the sector in the first place.

Indeed, who would take a pay cut for a director-level job at Tesco, and for that matter who decides whether a firm is too big to fail? Such a policy could lead to the state setting salaries for all sorts of businesses.

The objective as far as banks go, Hilton says, is to ‘create a much more secure financial system where you don't have these giant companies that pose a threat to the whole economy’, and that’s not one many would disagree with. But as he admits, those giant companies drive the whole economy too, and they can only be pushed so far.   

Hilton, of course, doesn’t have his hands quite as firmly on the levers of power any more. Indeed, some are saying he's spent too much time in the California sun. His time is split between academia at Stanford University and running political startup Crowdpac, though he recently announced he'll be a visiting scholar at UK think tank Policy Exchange.

He is, however, another voice calling for reform, and an influential one at that - he’s still married to Rachel Whetstone, who’s leaving the top role at Google for Uber, and he’s still friends with David Cameron.

The challenge Hilton presents to business is one of image. Rightly or wrongly, some people are raging against ‘giant corporations manipulating regulation, lobbing for tax breaks, trying to protect themselves from competition by the hiring the best lawyers and the best lobbyists’, like Hilton is. Even with a pro-business government in power, that’s not something business can afford to ignore.

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