David Cameron and Ed Miliband cross swords over bonuses

David Cameron and Ed Miliband clashed over bankers' bonuses in the House of Commons today, as the Labour leader accused the Prime Minister of applying "one rule for the banks and another for everybody else".

The Government is coming under intense pressure as the City bonus season approaches, with Labour demanding action to rein in payouts expected to total as much as £7 billion. Mr Miliband has called for the 50% tax on bonuses over £25,000 imposed by former chancellor Alistair Darling to be extended for a second year.

Chancellor George Osborne yesterday confirmed the Treasury was in talks with the banks on a settlement designed to deliver smaller bonuses, increased lending and greater transparency on pay. He warned banks of possible penalties if they fail to reach agreement within the next few weeks, insisting that "nothing is off the table".

Mr Cameron today told MPs at Prime Minister's Questions that the Government wants a settlement with banks where "their taxes go up, their lending goes up and their bonuses come down".

But Mr Miliband accused him of failing to deliver on a pre-election promise to restrict bonuses in largely state-owned banks like RBS to £2,000 and failing to implement Labour legislation which would force financial institutions to declare any bonuses over £1 million.

The Labour leader said Mr Cameron was effectively giving banks a tax cut by implementing a levy expected to raise £1.25 billion this year while refusing to extend the bonus tax, which brought in £3.5 billion in 2010.

"The country is getting fed up with the Prime Minister's pathetic excuses on the banks," said Mr Miliband. "Can he explain to the British people why he thinks it is fair and reasonable, at a time when he is raising taxes on everyone else, to be cutting taxes this year on the banks.

"On the banks, the Prime Minister has had eight months to hold them to account, when is he going to start?"

But Mr Cameron said he would not "take lectures" from Mr Miliband, who he said had done nothing to improve regulation of the banks when an adviser in the Treasury.

Mr Cameron insisted that the net yield from last year's bonus tax had been £2.3 billion, while the Conservatives' banking levy would raise £2.5 billion annually once it was fully up and running and £9 billion over the coming years.

And he said that the overall tax take from banks would be bigger this year than last year.

Mocking shadow chancellor Alan Johnson for a string of errors with figures he has recently made in interviews, Mr Cameron said: "I know the shadow chancellor can't really do the numbers, so there is no point Wallace asking Gromit about this one.

"Last year, the banks paid £18 billion in tax. This year they are going to be paying £20 billion. Their taxes are going up...

"We have ended up with a shadow chancellor who can't count and a Labour leader who doesn't count."

Mr Osborne yesterday told MPs that discussions were ongoing on a settlement under which "the banks pay smaller bonuses than they otherwise would have done; are more transparent about those they do pay; make a greater contribution to local communities and regional economies; treat customers more fairly; and above all lend materially and verifiably more than they were planning to lend to the businesses of Britain".

And he added: "If the banks cannot commit to that I've made it very clear to them that nothing is off the table."

But Barclays chief executive Bob Diamond - believed to be in line for an £8 million payout - told MPs that neither Mr Cameron nor Mr Osborne had ever asked him to limit his bonus.

Mr Diamond was denounced as "the poster boy for everything that is wrong about Britain today" by TUC general secretary Brendan Barber after the Barclays boss told the Commons Treasury Committee yesterday that the "period of remorse and apology" from banks needed to end.