Fresh crackdown on fat cat bonuses

FIRMS that borrow emergency taxpayerbacked loans will have to rein in executive bonuses and cancel dividend payouts in a crackdown on fat cat pay.

The Treasury has announced changes to the two lending schemes aimed at supporting larger businesses, which will increase the amount that firms can borrow but attach more constraints to the loans.

The Government’s Coronavirus Large Business Interruption Loan Scheme (CLBILS), which previously handed out loans of up to £50m to major businesses, will now lend up to £200m.

But any company wanting to borrow over £50m will be asked to cancel dividends and ‘exercise restraint on senior pay’.

The move shows Downing Street’s desire to avoid a scandal similar to the aftermath of the 2008 financial crisis, where bailed-out banks still found millions to award to their top brass in bonuses.

Lord Mann, former chairman of the Treasury Committee, said: ‘This is a very welcome and timely development.

‘The taxpayer should not be subsidising executive pay or banker bonuses.’

Since the launch of CLBILS on April 20, banks have lent out a relatively small £359m under the scheme, even though the Government will cover 80pc of any losses they suffer from loans turning sour.

Companies which have already borrowed less than £50m in CBILS loans, including Hotel Chocolat, bowling company Hollywood Bowl, Watches of Switzerland and JD

Williams owner NBrown, will be exempt from the rules unless they ask for more.

But the restrictions on executive pay and dividends will also apply to borrowers who opt for the Bank of England’s Coronavirus Corporate Funding Facility (CCFF), and need to extend their loans. The CCFF allows large firms to borrow short-term debt from the central bank for up to 12 months.

Much more has been lent under this scheme already, at £18.7bn, with pub group Young’s, British Airways owner IAG, and coach company National Express among those to take advantage.

And several more companies have confirmed they may access it, including Wetherspoon, Greggs and Marks & Spencer.

But any firm which takes out a loan under the CCFF, and needs to extend it beyond 12 months, will now have to cancel dividends and tighten bosses’ pay.

Luke Hildyard, executive director of thinktank the High Pay Centre, said: ‘This is a wise move, which improves transparency and will help to improve public trust in the response of public bodies to the crisis.

‘The detailed conditions of the loans must ensure companies receiving Government support are prudent with their finances and aren’t seen to be wasting the money.’