George Osborne: “Guaranteed bonuses will become the exception and not the rule”
Liberal Democrat Treasury spokesman Lord Oakeshott has said the coalition government is still “very much fighting” to restrict bank bonuses.
He said Business Secretary Vince Cable had personally demanded Barclays chief Bob Diamond take a reduced bonus.
Prime Minister David Cameron has called on banks to pay smaller bonuses but said they should not be “micromanaged”.
On Tuesday, Chancellor George Osborne warned banks no measure “was off the table” if annual bonuses were not cut.
The comments come amid reports that payments for leading bankers will total £7bn this year.
Reports that Stephen Hester, boss of the Royal Bank of Scotland which is 84% taxpayer-owned, is in line for a bonus of up to £2.5m have caused anger among many MPs and led to call for ministers to take action.
Downing Street has denied they had “thrown in the towel” in attempts to curb banker bonuses and argued that the imposition of a permanent bank levy would bring in £2.5bn a year by the end of this parliament.
But Labour is urging ministers to extend its one-off bankers’ bonus tax, which was in place last year and, it is argued, raised £3.5bn.
Asked if Mr Cable was still fighting to impose limits on bank bonuses, Lord Oakeshott told the BBC Newsnight: “It’s not just Vince it’s the Liberal Democrats as a whole: it’s an important issue for us. We’re not going to go back on it.”
He defended the government over claims it had been weak after promising to limit the bonuses, saying there was an argument going on in the cabinet and there still could be action.
“People will be appalled to learn that for all the tough rhetoric, the government has never asked the Barclays chief executive to reduce his bonus”
Brendan Barber TUC general secretary‘No bail-outs’ says Barclays bossRobert Peston on the bonus row
“This is going on. This is very topical. We are still very much fighting,” he said.
But he said a meeting between Mr Cable and Mr Diamond and another senior executive at Barclays a few weeks ago had been an “arid discussion”, saying there was “very little meeting of minds in that conversation”.
Mr Diamond, who will reportedly get as much as £8m, was questioned by the Treasury select committee on Tuesday over whether he would take his bonus this year.
He said he was “paid for performance, not for failure” and he would discuss the issue with his family before deciding what to do and was determined to act “responsibly”, adding that the government had not urged him to curb the amounts given out.
The total annual payments to bank staff this year are expected to reach £7bn, down from £7.3bn last year.
BBC business editor Robert Peston said banks such as Barclays, which did not receive direct UK financial support in 2008, would continue to pay bonuses because they believed it was essential for them to continue to attract the best staff and thrive in the global marketplace.
The real controversy, he added, surrounded banks such as RBS and Lloyds Banking Group which were bailed out by the government in the wake of the financial crisis.
The TUC said ministers had “unconditionally surrendered” over the issue.
“People will be appalled to learn that for all the tough rhetoric, the government has never asked the Barclays chief executive to reduce his bonus,” its secretary general Brendan Barber said.
On Tuesday, shadow chancellor Mr Johnson put an urgent Commons question to Mr Osborne about the government’s actions to curb bonuses.
In a noisy chamber, he said: “In just seven months this coalition government has gone from the scent of the rose garden to the stench of broken promises.
“The chancellor, who said we are all in this together, bows to the rich and powerful… His sneering arrogance won’t get him out of this one.”
Mr Osborne told MPs the previous Labour government had agreed a “something-for-nothing” deal with the banks, which saw large bailouts and little regulation. This had “rightly brought the British people to a state of anger”.
On RBS bonuses, he added: “We are having to deal with the thoroughly inadequate contract negotiated by the previous cabinet… which encourages RBS to pay bonuses at the market rate.”
Mr Osborne said the government was talking to banks about bonuses, adding: “We will make sure Britain is a world centre of a properly regulated and successful industry… If they [the banks] aren’t able to meet our requirements, then nothing is off the table.”
Mr Johnson conceded in an interview with BBC News that Labour had signed a deal to ensure market-rate bonuses at RBS and other institutions because “we cannot disadvantage those banks which the public has a share in”.
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