Big businesses who borrow cash from the taxpayer will be banned from lining their pockets with bonuses and bumper payouts for shareholders until they've paid back the public purse, the Government has said.
Companies struggling to cope with the coronavirus have seen the amount of money they can borrow from Coronavirus Large Business Interruption Loan Scheme go up from £50m to £200m.
Firms who try to borrow more than £50m will face restrictions until the loan is repaid.
But they will not apply to firms who take on public cash as part of the furlough scheme, with officials claiming that keeping potentially vulnerable employees attached to their company through the financial disruption is their top priority.
The Bank of England will be in charge of the scheme - demanding details on the methods being taken to rein in remuneration for top bosses in writing.
Firms borrowing cash from the Bank's Covid Corporate Financing Facility (CCFF) beyond 19 May 2021 "will be expected to provide a letter addressed to HM Treasury that commits to showing restraint on the payment of dividends and other capital distributions and on senior pay"
The Bank said: "These commitments are intended to create incentives for, and promote the ability of, businesses to repay their borrowings."
It means bosses bonuses and shareholder payouts can only continue in three conditions - that they were announced before the loan was sought, that the reward is in line with trends inside the company ie no big increases, and if it will not affect the ability to pay the loan.
Companies will not be allowed to take on a loan in excess of 25% of their turnover.
Labour welcomed the move, but said more needed to be done to help Britain's major industrial firms.
Patrick McFadden MP, Labour’s Shadow Economic Secretary to the Treasury, said: “Labour has been pressing the Government to do more for major industrial companies who so far have been cut out of the Government backed lending schemes because they are not classed as 'investment grade'.
"These companies in sectors like steel and automotive are often the main employers in the towns and cities where they operate and are the backbone of our manufacturing sector.
“We welcome the Treasury lifting the CLBILS lending limit, after Labour pressure, but the largest industrial companies are burning through more than this as a result of the lockdown. We must do more to help companies large and small through this crisis and avoid a repeat of the mass unemployment we have seen in the past.”
The Treasury said that 86 large loans to big companies worth £590m have been approved under the Coronavirus Large Business Interruption Loan Scheme.
Treasury officials also confirmed that firms borrowing large amounts of taxpayer cash would be named in a bid to extend transparency from June 4.
Companies will be prohibited from share buyback, which can artificially inflate a companies worth but burn through cash that could be used more productively.
They said: "This change will make the scheme more transparent and enable participating businesses to demonstrate their access to the scheme."
The facility is designed for larger UK businesses, classed as those that "make a material contribution to the UK economy".
Announcing the change John Glen, the Economic Secretary to the Treasury, said: “We’re determined to support businesses of all sizes throughout this crisis and our loans and guarantees have already provided over £32 billion to thousands of firms.
“Today we’re increasing the maximum loan to £200 million to make sure companies get the help they need.”