UK Politics

Labour plans to extend bankers' bonus clawback to 10 years

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Media captionShadow chancellor Ed Balls: "If people do the wrong thing... they should pay the money back"

Bankers who are guilty of misconduct would have to pay back bonuses received up to 10 years ago, under banking reforms outlined by the Labour Party.

The current "clawback" period for bankers' bonuses is currently seven years, but shadow chancellor Ed Balls said that was "too weak".

Extending the period would ensure bankers who were guilty of misconduct would "pay a price", he added.

The Tories dismissed the plans, saying nobody will trust a word Mr Balls says.

The proposal was outlined ahead of the publication of Labour's banking reform paper, which will set out its economic plan and the measures a future Labour government would take.

'Misbehaviour and misconduct'

Under previous rules, bankers' bonuses were often deferred for a period of three to five years, during which time the bonus could be clawed back if necessary.

However, the Bank of England extended the period to seven years at the beginning of the year, saying misconduct such as the rigging interest rates or reckless risk-taking can take longer to emerge.

But Mr Balls said Labour wanted to extend the clawback period further.

He said recent allegations around HSBC's Swiss banking arm about clients being help to avoid paying tax showed that "wrongdoing can take years to uncover".

"When people have done the wrong thing in banking - we agree with the governor of the Bank of England - that the bonuses should be repaid, in fact we're saying that clawback should go back 10 years," he added.

"We will ensure people involved in misbehaviour and misconduct would have to give back their bonuses for at least a decade after they have been paid out."

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Image caption The Bank of England's current "clawback" period is seven years - but Labour wants to extend it to 10 years

He said UK banks still required "major reforms and long-term cultural change".

Labour said it would also introduce a one-off tax on bankers' bonuses to help young people who have been out of work for 12 months or more.

The party would also raise the levy on banks to increase childcare for working parents.

Mr Balls said a Labour government would use the proceeds of a planned increase in the licence fees for the mobile phone spectrum - estimated at up to £1bn over the next parliament - to finance a British investment bank, providing funds for small and medium businesses.

However, the Conservatives dismissed the proposals, saying that the Bank of England was already consulting on extending the clawback period to 10 years.

"A banking reform plan written by Ed Balls is like a fireworks safety guide written by Guy Fawkes - nobody will trust a word he says," a spokesman said.

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