Cabinet office minister warns businesses giving bonuses and dividends to not expect government support
Struggling companies facing high gas prices could be refused a government bailout this winter if they have paid out big dividends and bonuses.
Cabinet office minister Steve Barclay told Times Radio that the Treasury would scrutinise whether any interventions represented “value for money”.
He said: “It’s right from a taxpayer point of view, mindful of the huge amount of support that has already been given to businesses, that we look at that in terms of what is value for money and what is proportionate. Have they recently paid dividends? Are they paying big bonuses? We’ll need to understand the detail rather than just knee-jerk to a taxpayer response. It’s about balance and engagement.”
The government has decided to step in and provide long-term loans to companies threatened with closures this winter due to soaring energy costs. The loans will only be repayable when the cost of wholesale gas returns to normal levels.
The total package provided to businesses is expected to cost hundreds of millions of pounds.
An announcement is expected later this week following clashes between business secretary Kwasi Kwarteng, who supported the idea of loans, and chancellor Rishi Sunak.
The Treasury has reportedly been more sceptical about the need to provide taxpayer assitance to deal with energy bills.
The High Pay Centre has lent its support to Mr Barclay’s comments.
The UK-based think tank told City PM that it is right for the government to aid struggling businesses, but that lines had to be drawn regarding dividends and bonuses.
Andrew Speke, head of communications and external relations, said: “It seems fair and appropriate for the government to lend support to businesses struggling due to the energy crisis, but this help should absolutely be conditional on these companies’ recent behaviour. It would not be right for the government to be handing public money to companies who’ve been paying out big dividends to shareholders or large bonuses to their directors.
Julian Jessop, economics fellow at the Institute of Economic Affairs, was more critical of both Barclay’s comments and the terms of the government loans.
Speaking to City PM, he said: “Large businesses which are heavy users of energy would usually be expected to insure themselves against higher bills, so it is right that any additional support from the taxpayer has strings attached. However, normal commercial terms should be sufficient. It is not obvious why previous dividends or bonus policies are relevant, as these relate to the past performance of the business.”
In his view, this was less to do with economics and more to do with political maneuvering.
He concluded: “There might be a stronger case for imposing a moratorium on future dividends and bonuses until any state loans have been repaid. There are precedents for such conditions in Covid loans to other sectors. But this is still more about optics than hard economics.”