Remuneration returned to the top of the political agenda as the Royal Bank of Scotland chairman, Sir Philip Hampton, admitted bankers' salaries were "astonishingly high". His remark on BBC Radio 4's Today programme came hours before a leaked report by PricewaterhouseCoopers claimed a shake-up of banking regulation could tip the economy into double-dip recession.
Despite his comment, Sir Philip said RBS could not attract the best staff without paying high wages. "If we don't pay our top people, they leave very quickly," he added. "They are very much in demand."
The PwC report, which is not yet complete, suggests that measures to force banks to hold more capital and increase liquidity could shave 2 percentage points from Britain's economic growth. Forecasts vary on how the economy will perform this year but the National Institute of Economic and Social Research has forecast growth of just 1 per cent in 2010 and 2 per cent in 2011.
The leak of the report prompted a furious response from the Liberal Democrat Treasury spokesman, Vince Cable. "Given the scale of the bailout the financial sector has received from the taxpayer, this kind of scaremongering from the City is simply whingeing," he said.
Mr Cable said the requirement to hold more capital had not prevented banks from paying out massive bonuses to their employees.Reuse content