Northern Rock staff to share £8.8m bonus pool

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Northern Rock's staff are to share £8.8m in bonuses this week. Most employees at the nationalised bank will get 10 per cent of their salaries, or about £2,000 each, under an agreement approved by the Treasury last year.

Union leaders defended the move yesterday, saying the stricken bank's staff had earned the bonuses. Rob MacGregor, national officer at Unite, said: "Unite members and staff have experienced the loss of friends and colleagues through compulsory redundancy, yet have continued working solidly with dedication and commitment."

Northern Rock was bailed out by the Government after a run on the bank in 2007. It has shrunk its mortgage book to pay back the Bank of England, resulting in about 2,000 job losses.

Vince Cable, the Liberal Democrat Treasury spokesman, fiercely criticised the payouts: "This is an extraordinary action from a state-owned bank which still owes billions to taxpayers. When millions of people are facing pay cuts or even unemployment, this is indefensible."

Asked if Gordon Brown approved of the bonuses, the Prime Minister's spokesman said: "Northern Rock, as I think is well known, has repaid its debts to the Government at a rate faster than originally planned for. Operational decisions such as this are a matter for Northern Rock."

The bank is paying out large salaries to its directors, including Gary Hoffman, its new chief executive, who will earn nearly £2m over two years. The bank's finance director, Ann Godbehere, will leave at the end of February, having earned £900,000 in a year.

The Government announced plans on Monday to halt the wind-down of Northern Rock's mortgage book, and gave it longer to pay back its loans to the Bank of England. The decision, which reversed an earlier drive to unload customers, is designed to increase mortgage capacity in the market.