David Cameron: 'RBS should be bonus back-marker'

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Indy Politics

Royal Bank of Scotland should not be "leading the way" when it came to bankers' bonuses, the Prime Minister said today.

But David Cameron warned against "banker-bashing", saying that it was too easy to make banks the "scapegoats" for the recession.

Mr Cameron's comments came after it was reported RBS chief executive Stephen Hester will take home an estimated £6.8 million in bonuses, salary and other payments this year.

Today Mr Cameron said the details of Hester's pay packet was "pure speculation" but warned RBS should not be paying out massive bonuses.

He told the BBC's Andrew Marr Show: "On the general, I want to see the bonus pool smaller than last year, on the specific, Royal Bank of Scotland, as you rightly say, is owned by the Government.

"They should not be leading the way on bonuses, they should be a back-marker."

Mr Cameron said he understood the public's anger over bankers' bonuses. He said: "I feel it because frankly the whole country has suffered from irresponsible lending practices, irresponsible behaviour.

"But we need to recognise though that there were a lot of people to blame for the mess we are in and that we shouldn't just think it's an easy scapegoat to pick one in view.

"Governments made mistakes, regulators made mistakes, politicians made mistakes, everyone was involved. Opposition made mistakes, dare I say it."

Mr Cameron said banks needed to be more "socially responsible", adding the Financial Services Authority had "set out a very tough set of rules on bonuses", which now applied to 2,500 companies.

He added: "Do we still need the banks to do more to demonstrate their social responsibility? Yes we do. But we as a Government and a country have got to get a settlement where we recognise that a successful banking sector is part of a successful market economy.

"What I want to see is socially responsible banks, behaving responsibly, lower bonus pools than last year's, responsible levels of remuneration and proper agreements on levels of lending to businesses large and small and being good citizens in the community."

Mr Cameron said Labour's plan to increase employers' National Insurance contributions was "very, very perverse" at a time of recession as it was a tax on jobs.

But he implied VAT was set to stay at 20% while he hoped the 50p tax rate for top earners might be scrapped in future.

He said: "We are dealing with a structural budget deficit. What that means is that even when the economy grows, this deficit, this pile of debt, isn't dealt with.

"That's structural, that isn't going to go away because of the growth so that means the changes we are making have to be pretty permanent too."

He added: "I think everybody knows that high rates of marginal income tax discourage people from working here, discourage people from living here, discourage people from getting on, so I don't think any party in this country want it to be permanent.

"I think the first bit of work to do, having come in to Government, is to look at whether this thing is raising a lot of money and I think that is a piece of work that needs to be done.

"When the high rates of income tax were cut back in the 1980s, what we found was not only did the richest 10% pay more tax, they actually paid a greater percentage of the tax."

He said the Government was "determined" that the richest should pay the most not only in cash terms but also as a share of their income.

Mr Cameron issued a warning to trade unions that they could not "push anyone around" amid warnings of mass protests and industrial action.

Last month he invited union leaders to Downing Street for talks - the first official meeting between a Tory Prime Minister and the movement in 25 years.

The Government was ready to talk about the impact of cuts, he indicated, but would not be forced into changing tack.

"Striking is not going to achieve anything and the trade unions need to know they are not going to be able to push anyone around by holding this strike or that strike or even a whole lot of strikes together - they can forget it," he said.

"This is a very strong Government, it has got a strong majority, I believe the public is right behind the approach that we are taking and people need to know that we will not change course because one union or another union wants to kick off.

"We will talk to them. We are very reasonable people. All of the previous Government's mechanisms for talking to the unions about issues in the public sector are all there.

"But if they think they can push around by striking - think again."

There were no plans at present to strengthen strike and other union laws, he said, which were "pretty good and robust".

The Prime Minister said persistently high inflation was "worrying" but that it was solely the job of the Bank of England to find ways to reduce it to target levels.

"There is no doubt inflation is extremely harmful - it destroys people's savings. We don't want to go back to having inflation problems as we had in the past," he said.

The Bank had "by and large" done a good job since being handed responsibility for interest rates, he said, and backed the record of Governor Mervyn King.

Today Sky said it was "unlikely" Mr Hester would receive a cash bonus for 2010. Sources at the bank described Cameron's comments today as "helpful" saying that bonuses had previously been paid out in shares spread over three years.

Shadow Chancellor Alan Johnson said the Government had failed to live up to the promise of the Coalition Agreement of dealing with the issue of bankers' bonuses.

The Government had legislation on the statute books which would allow it to force the banks to publish pay-outs of more than £1 million in bonuses but it had failed to do so, he said.

Mr Johnson told Sky News' Murnaghan programme: "On transparency they won't act on a law that is already there and on bonuses themselves Nick Clegg said they would not stand 'idly by'. It looks like they are standing 'idly by'.

"This is not retribution to the bankers but I think people understand that the global financial crisis was largely caused in the financial services sector, if not completely caused there, so they should be paying a contribution to this."