Large bonuses are a PR disaster for major banks as cost of living crisis grows - Greg Wright

Most workers can only dream of such largesse as they budget carefully to keep their homes warm and feed and clothe their families.

The Bank of England increased interest rates to 0.5% in early February, after a rise to 0.25% at its previous meeting in December, as it warned that inflation will peak at 7.25% in April, its highest level since August 1991.

When millions on low wages are facing straitened circumstances, how can the banks justify these eye-watering bonuses? When the average worker submits a pay claim to try and offset the rate of inflation, they are likely to receive short shrift.

Bank of England governor Andrew Bailey was widely condemned when he said workers should not ask for big pay rises to help keep inflation down.

Mr Bailey faced criticisms from trade unions, given his £575,538 pay package, because many workers deserve pay rises after being at the sharp end throughout the pandemic.

GMB general secretary Gary Smith invited Mr Bailey to spend a day shadowing low-paid care workers “upon whom ‘restraint’ has been imposed for too long”.

When he appeared before MPs, Mr Bailey also called on banks to use restraint on bonuses to help keep inflation down, although it is unclear if this plea will prove to be effective.

Dame Angela Eagle MP, on the Treasury Committee, also called on Mr Bailey to visit a care home, with workers in the sector being paid £9.01 an hour on average.

Mr Bailey said: “The same point holds about restraint for everybody.”

In a message for the banks, he said: “Please reflect on the situation that we’re in.”

“My big concern is that the least well off will come off worse in this process if we don’t have some process of thought and restraint.”

When questioned over the apparent insensitivity of his recent comments on worker wage restraint, Mr Bailey responded: “I’m not saying people should not take pay rises. It was in the context of large pay rises.

“If everybody tries to get ahead of the shock that we’ve had from outside, we’ll get the second round effects and it will get worse, that’s the problem.”

He said the level of bank bonuses unveiled in recent days “illustrates that the impact of this will fall unequally”.

In recent years, UK-based banking executives have had plenty of reasons to be cheerful.

The European Banking Authority regularly publishes aggregated data on executives earning 1 million euros or more per financial year. In 2019, the largest population of these high earners - a total of 3,519 executives - was located in the UK, according to the EBA. Britain accounted for around 70.90% of the total number of high earners within the EU.

The bankers might, of-course, argue that hefty profits inevitably lead to substantial rewards for those responsible for keeping investors happy. The war for talent in financial services means there is little prospect of a restraining hand being placed on their shoulders. Nobody wants to see their rising star walk out and join the competition.

But in PR terms, the scale of these bonuses is a disaster for the banks. The furious response to Mr Bailey’s comments shows the depths of anger about the cost of living crisis.

A report from The Trussell Trust revealed the extreme poverty faced by people referred to food banks just before the start of the pandemic. They had just £248 a month on average to survive on after housing costs. That money was needed to cover energy and water costs, council tax, food, and other essentials.

The soaring rate of inflation is likely to thrust more people into poverty. Something for the bankers to contemplate as they decide how to spend their latest bonuses.