James Moore: Daniels gives up bonus but where's UKFI?

Outlook: UKFI was given a brief to behave like a City institution, but politicians appear incapable of keeping their noses out
Click to follow

So Eric Daniels has given up his bonus even though he deserved the full amount for what his boss, Lloyds Banking Group chairman Win Bischoff (who's no stranger to the odd bonus or two himself), described as a "significant individual contribution and the group's overall performance in 2009".

This really is an astonishing statement. Just remember, 2009 was the year in which the bank launched what was a record rights issue for London and required a further £5.7bn from the taxpayer just to get it away on top of the billions in state funds that have already been pumped in to keep the black horse out of the knackers' yard.

One might ask just how big a hole Lloyds has to get into before Mr Daniels doesn't deserve a bonus. And what criteria the bank's remuneration committee used to determine that a seven figure payment was warranted for last year's performance.

In reality, Mr Daniels and RBS chief executive Stephen Hester (who fell into line on Sunday) had very little choice but to forgo their payments. When Barclays chief executive John Varley and president Bob Diamond gave up their cream despite a record profit of £11.6bn, the die was cast. If either Messrs Daniels or Hester needed any more encouragement, Lord Mandelson made quite clear (in so many words) what was expected when doing the rounds on Sunday.

Which raises an interesting question: where is UK Financial Investments in all this? There has been a deafening silence from the Government body which was set up to manage the taxpayers' investment in the banking system.

When it was created, UKFI was given a brief to behave like a City institution – the rationale being that if the Government wanted to secure a return on said investment, that was the best way of going about it. Politics would be kept out of the process and the City would feel confident about buying in when the time finally came to offload the taxpayers' stakes.

Except that the politicians appear incapable of keeping their noses out. In the meantime, there has been silence from UKFI.

Under the principles of "stewardship" and "responsible engagement" that the Government is so keen on City institutions adopting, there would appear to be nothing wrong with UKFI commenting on the bonuses and making clear its feelings on what the bosses of Lloyds and RBS should do.

This is exactly what Keith Skeoch, the chief executive of Standard Life Investments, did on Friday. If he can do it, why not UKFI, which, after all, theoretically represents us? At the moment, it is increasingly looking like an irrelevance and a worthy casualty of the austerity drive that will follow the next election.