Official statistics reveal that, in the financial year to April, City workers took home £16bn, almost exactly the same as in 2007. The period covers the Northern Rock nationalisation and the UK employees hit by the Bear Stearns implosion. During the period, banks across the world were forced to make huge writedowns on investments linked to US subprime mortgages.
Bonus payments in the UK financial sector have more than trebled in just over five years, from £5bn in 2003, according to the Office for National Statistics (ONS). This is shared among just over one million employees in the sector, but that is heavily skewed towards the high-powered executives, who are routinely handed seven-figure packages.
Last year, Bob Diamond, the president and head of investment banking at Barclays whose base salary was £250,000, was paid £18m after bonuses and options were taken into account.
The remuneration figures were released only days after Gordon Brown vowed to wage war on the "irresponsible" bonus culture that had helped cause the financial crisis gripping Britain. Financial sector payments made up about two-thirds of the bonuses across the entire British economy. Total bonus payments last year hit £28bn, which has doubled over the past eight years.
Last night politicians and union officials said it was deeply concerning that such large bonuses were still being paid even when the financial markets were clearly deteriorating.
Vince Cable, the Liberal Democrat Treasury spokesman, said: "It is deeply alarming that, after what has happened in financial markets, no lessons have been learnt. The bonus culture was deeply destabilising and contributed to the crisis."
Derek Simpson, the joint general secretary for the Unite trade union, added: "This is evidence that the City bonus system is rotten to the core. These bankers are being rewarded for failures which have had devastating consequences for our economy." He called on the authorities to tackle the problem head on, saying: "It is time for the Government and the Financial Services Authority to get really tough and stamp out the bonus culture in the City."
Yesterday provided some slight relief for the battered UK markets. The week had seen staggering losses across the globe, with London's blue chip index slumping to its lowest point in five years as fears of a worldwide recession intensified. Yesterday the FTSE 100 rose 2 per cent with investor confidence returning in the banks as well as the oil companies, after the oil price bounced back to more than $70 a barrel.
The mining companies continued to suffer as metal prices fell further on fears of slowing demand from China. It was further hit by hedge funds forced into selling to cover losses elsewhere. There was bad news for the French bank Caisse d'Epargne, however, which admitted shock losses of €600m (£470m) from derivatives trading.
The inflation-busting bonus numbers emerged on the day that Josef Ackermann, chief executive of Germany's biggest financial services group, Deutsche Bank, pledged to relinquish his bonus, which would have run into "millions of euros".
He told the German newspaper Bild am Sonntag: "I told the Deutsche Bank supervisory board that I am renouncing my bonus in this difficult year in favour of hard-working staff that need the money more than I do." The three other senior board members agreed, who received a combined payment of £4.3m.
Mr Cable welcomed the move and called on the financial services sector in the UK to take a page out of Mr Ackermann's book. He said that, as banks' remuneration committees prepare to decide next year's bonuses, "until regulation is put in place it would be good to see some self-restraint from those who work in the financial services".
The Government's official bonus numbers are compiled from those paid during bonus season – the period from December 2007 to April 2008. The latest figures show no decline in rewards, despite the City being at least six months into the credit crunch when the payments started.
The issue of bonuses has become a huge political issue this year, with investors furious over bankers taking rewards in a year that many banks have declined or even collapsed.
Following the Government's £37bn rescue package for Royal Bank of Scotland, HBOS and Lloyds TSB this month, the Prime Minister said he wanted to "bring an end to rewards for failure". He said: "The guiding idea is fair reward for hard work, effort and enterprise, not incentives for irresponsibility or excessive risk-taking for which the rest of us have paid."
A critical problem of the bonuses, as highlighted by Mr Brown and Mr Cable, was their promotion of huge risks for a short-term gain. Bonuses should be paid in shares, which could not be sold for several years to track the performance of a company over the long term, Mr Cable added.
The FSA, the City watchdog, has begun to scrutinise the issue of bonuses, and sent a letter to bank chief executives, calling for bonuses to be aligned with "sound risk-management practices and controls". So far the FSA is yet to impose regulations, but said it would demand more regulatory capital for those that do not heed its warning on risk.
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