Three and a half years after receiving – and duly shelving – a report calling for an easing of Irish banker pay restrictions, Paschal Donohoe is preparing to act on a similar recommendation from a new report from his own officials – in what will be one of his last big acts as Minister for Finance.
Donohoe, who’s on track to swap jobs with Minister for Public Expenditure Michael McGrath next month, is set to ask Cabinet colleagues on Tuesday to allow bailed-out banks to pay performance-related bonuses of up to €20,000, as well as non-salary benefits like healthcare for the first time since the onset of the financial crisis in late 2008.
He also plans to scrap any future Government say in Bank of Ireland executive pay, after selling the State’s remaining shares in the bank in September – and to lift the continuing €500,000 pay caps on AIB and Permanent TSB when taxpayer stakes in both fall to what are being described as “appropriate levels”.
The restrictions may have been commercially untenable for some time, as the banks in which taxpayers have stakes have been at a competitive disadvantage trying to attract and retain staff in a tight market for certain skills, at a time when activity in the IFSC and Dublin’s tech sector has been expanding in recent years.
But there are also no votes in lift pay restrictions for bankers. While bonuses have been banned by the Government since 2009 – an effective prohibition on variable pay above €20,000 has been enshrined in law since 2011 when a prohibitive tax rate of 89 per cent was slapped on such payments in that year’s Finance Act.
There is no sunset clause on the bonus super tax. And it’s hard to see any Government going to the Oireachtas any time soon to have the law changed – not least when households are struggling with the cost-of-living crisis and borrowing rates are on the rise.
But with Bank of Ireland having returned to full private ownership in September, the Government currently pushing through stringent senior accountability rules for bankers, and the Central Bank of Ireland having completed its tracker-mortgage investigations into the banks, Donohoe has obviously decided that now is the time to move on pay. His proposals stretch what is within the Government’s gift.