City pays £14bn bonuses despite Project Merlin

Banks and other financial companies paid out an unchanged £14bn in bonuses last year despite the Government's Project Merlin deal with the big banks to show restraint on the payouts.

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Financial and insurance bonuses made up 40 per cent of the total £35bn paid in UK bonuses in 2010-11, Office for National Statistics figures showed.

The average financial-sector bonus was £12,500, compared with £1,670 for the whole private sector and just £180 for public-sector workers.

The financial-sector total is more than the £12bn paid at the height of the crisis in 2008-09 but below the £19bn at the market peak in 2007-08.

Financial-sector bonuses remained 58 per cent higher than a decade ago and double the total paid out in 2002-03 as the market moved from the dot.com crash to the debt boom.

Bonuses in the financial industry have held up even as the Government has announced public-sector job cuts and ordinary workers in the private sector have seen their living standards eroded by rising prices and static wages.

Brendan Barber, the general secretary of the TUC, said: "The Chancellor's austerity message has failed to reach the City, where a small clique of super-rich bankers has grabbed 40 per cent of all bonuses paid out in the UK. City bonuses are still far too high and the incentives for risky and damaging decisions far too great, especially when bankers know that taxpayers will have to pick up the tab."

HSBC, Barclays, Royal Bank of Scotland and Lloyds Banking Group struck their Project Merlin deal with the Government in February. The banks pledged to pay less in bonuses, disclose payments to top earners and lend more to small and medium companies.

Barclays paid Bob Diamond, its chief executive, a bonus of £6.5m for 2010. Under the terms of Project Merlin, Mr Diamond's investment banking lieutenants, Rich Ricci and Jerry del Missier, were the top disclosed UK bank earners and each got about £10.9m in salary and bonus.

Total bonuses in the economy were unchanged at £35bn. Payouts outside the financial sector were £21bn, down from £23bn at their peak in 2007-08.

Excluding financial services, the public sector makes up 22 per cent of UK employment, but its share of the bonus pool was just 1.5 per cent.

City companies have increased salaries since the financial crisis to offset bonus reductions and reduce the impact of the last government's bonus tax on senior bankers.