Cut fat cat pay or no bailout, firms ordered

ViTAL businesses that require coronavirus bailouts from the Government will be told to slash fat cat pay and cut their carbon emissions, the Chancellor has warned.

As part of Project Birch, officials at the Treasury are in discussions with ‘strategically important’ firms that are in trouble but do not meet the requirements for other rescue schemes.

Celsa steel became the first business to win support last week, securing a £30m loan to safeguard some 1,000 jobs in south Wales.

And car maker Jaguar Land rover (JLr) is reportedly among the other firms which are seeking support.

But Chancellor rishi sunak told MPs that firms coming cap in hand to the taxpayer would be made to follow strict conditions on pay and other issues.

He said: ‘it is right that we impose conditions on those businesses. Without going into the details, such interventions will come with conditions: around executive pay, protecting employment, climate change, how supply chain and small businesses are treated and obligations around tax.

‘Those are all commitments and conditions that the taxpayer would expect us to do in those situations.

‘That is what we have done in the one instance where support has been provided thus far and is what we will do for any future support.’

Project Birch – now rechristened the Last resort Business interventions Process – was set up to help important UK businesses that do not qualify for other financial support schemes.

The Treasury is said to have held ‘advanced’ discussions with six companies seeking support, including Celsa steel and JLr, according to the Financial Times.

However it is understood that businesses that get bailouts will face similar conditions to those imposed on others who have used the Coronavirus Large Business interruption Loan scheme.

Those firms using that scheme face curbs on paying dividends and share buybacks but can still pay bonuses or increase salaries of executives if they were arranged before taking the loan.

However companies must prove that paying bonuses will not have a material negative impact on their ability to repay the loan.

Celsa steel bosses are understood to have accepted cuts to pay as part of a bailout.

rescued firms will also be asked to reduce carbon emissions to ‘ net zero’ by 2050, a policy the Government is signed up to, and must be compliant with tax rules.

The strict measures come after Gordon Brown’s Labour government was humiliated in the wake of the 2008 financial crisis, when banks such as royal Bank of scotland still handed out huge bonuses after receiving taxpayer-funded bailouts.