Government rejects call to cap every bank bonus
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Independent Minds
BBC/PA
The Chancellor Alistair Darling and shadow Chancellor George Osborne on The Andrew Marr Show
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The Government will reject calls to impose a rigid cap on bank executives' bonuses, as proposed in the United States by Barack Obama, despite growing clamour for a clampdown from opposition parties and on its own benches. Ministers said they would seek to use the Government's stake in the Royal Bank of Scotland (RBS) and the Lloyds Banking Group to ensure bank bosses did not receive "rewards for failure" if they had been responsible for mistakes which contributed to the financial crisis.
They claimed efforts to turn round the ailing banks would be hampered if bonuses were capped. "These banks would simply not attract the best people, who would just go elsewhere," one senior government source said. "Of course the banks must be mindful of the public reaction to pay and bonuses; but they shouldn't shoot themselves in the foot by losing the people they need."
The refusal to take action has been criticised by, among others, the former deputy prime minister John Prescott. Now Britain's business community has launched a damning critique of the Government's handling of the credit crunch. Richard Lambert, head of the Confederation of British Industry, said a "lack of clarity" by the Government would result in more lost jobs.
The Federation of Small Businesses added that a survey of thousands of its members had found that government measures to boost lending and the economy, including its 2.5 per cent cut in VAT, were having "no impact".
The Chancellor, Alistair Darling, said the Government would use its stake in RBS "to ensure no one associated with these large losses should be allowed to walk away with large cash bonuses". But he accepted that "contractual problems" and the right of other staff to be rewarded would rule out a total ban.
Treasury officials will "encourage" all banks to pay bonuses in shares rather than cash but are wary about intervention to ensure that happens. The Treasury is also including conditions on pay in deals with banks wanting to use its banking insurance scheme, launched last month.
Some ministers expressed scepticism about Mr Obama's $500,000 (£340,000) salary cap for bankers whose institutions received support. "It's a good headline, but might well be harder to impose in practice," one said. "We have got to do what's right to get the banking industry back on its feet."
But ministers admit privately they face a difficult task to convince the public that bonuses should continue. Nick Ainger, a Labour member of the Treasury Select Committee, backed a bonus cap. "People struggling because of mistakes made by the banks will not understand why senior staff receive huge six-, seven- and in some cases eight-figure bonuses," he said. "It cannot go on. In a shrinking industry, the idea that if bonuses are not paid then good bankers will go elsewhere is ludicrous. They have nowhere to go. Times have changed from when their contracts were signed. It is perfectly reasonable in these circumstances to change them. It happens day-in and day-out in industry."
The Government's final decision on a cap will depend on the findings of an independent review into the management of banks, to be headed by Sir David Walker, a former executive director at the Bank of England.
The Liberal Democrat leader Nick Clegg called the Government's response "pathetic", adding that executives in banks which have public support should not be paid bonuses at all. He also called on the former head of RBS, Sir Fred Goodwin, to hand back the £2.8m bonus he received for 2007.
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Comments
Just when will these New Labour cretins wake up and realise that this is a con, an idle threat? Or does it really mean, that when they lose their seats, "the best people" will be at the banks waiting to dish out some non-executive directorships and consultancies as the quid pro quo?
It looks as if the damned bankers have got Gordon and Co over a barrel and know exactly where they are going to shove all the toxic debt they have created!!!
I am afraid that I still do not believe that the financial community in London and New York have really taken in what has happened and what is going to happen. The horde of banking spivs conned their clients with the dotcom boom and they did it again with the sub-prime packaging. Now all those involved, including those who preferred not to know, are desperately hoping that printing money (by one means or another) will lead to a third boom party or, at the very least, give them enough breathing space to get out with bonuses and pension plan intact before we all wake up to find the family silver has gone???
Instead, if YOUR bank pays its people these unearned and undeserved perks, move your account(s) elsewhere. Where? I believe the Nationwide Building Society offers a very good current account, and it is owned by its members, not shareholders. Another bank worth checking on is the Co-operative Bank, which prides itself on ethical banking. Who knows, we might even reduce the old "Big Four" to the little also rans.
Give me a break...The Best Thief.
These overbearing / underperforming jerks with C/A diplomas
How dare they remove their bottle glass eyeglasses and think they deserved the salaries tsken.
I can assure you that I personally can slip into any one of the vacancies and do a hell of a lot better job than the majority of CEOs and you would find Integrity,something that has been missing for 20 years.
You GET THE BEST by searching out the Best,,not by having a friend in a high place...
If the Best is a Thief,,do you continue to employee a thief....wake up people
Walks like a duck, talks like a duck, it has to be a duck
I think you middle aged men who are in power temporarily,,,are having PMS and need to retire...with no bonuses.....
Accountants and Financial planners need to go back to school and learn how to add 1 plus 1,,,rather than 2 for me and 1 for you.
Accountants / Banking Cons, talk with fork tongue..
The problem is that the bonuses have become excessive and there is no clawback provision for when things go wrong. This can only encourage excessive risk taking and it did.
The second problem is that the large institutional shareholders have refused to attack the excessive compensation at financial institutions. But as they are part of the industry, that would not be in their best interests.
They, the thieving incompetent banks and the government between them have ruined my standard of living (as a pensioner) couple and zillions of others like us. This administration obviously has a death wish and it continuing with it's scorched earth policy to leave for the Tories clean their filthy stables.
It is not good enough for politicians to say as they did with the Insurance Industry scandal, lessons must be learned and it will all be different going forward.
If all banks who have received a government bail-out apply the same rule, then there will be no brain-drain.
We tax payers have had to bail them out, and will have to continue to do so at enormous financial and social cost for many many years to come.
The bankers and politicians need to wake up and realise that we will no longer tolerate the rewarding of failure in any walk of life.
As for getting the best people by promising bonuses, it doesn't seem to have worked thus far, does it?
We need a change of attitude amoung these people now!, no more bonuses- no more greed- no MORE FRAUD- and wake up government!
Les Mitchell, Crewkerne
If the Government hadn't bailed out the Banks then the banks would have "gone down" in which case the 'fat cats' 'leeches' or whatever you want to call them would have been out of a job anyway and they wouldn't have got anything!!!
The people responsible for this have already "resigned", the rest were footsoldiers. So please get over the jealousy and blame culture, and maybe we can get this economy back on track.
And I'm hoping that any recipients of bonuses blow them unwisely by spending the lot on products and services that keep the economy flowing.
For the record, I'm taking a pay cut.
When the screw turns the other way, whilst pay should be maintained to attract the right people into the right job (if you pay people peanuts then they will seek alternative jobs) if targets are not met or losses/severe mistakes are made which have a detrimental effect on the business or the local/national economy then bonuses also should be reduced or with-held altogether as appropriate. It is NOT acceptable nor reasonable to reward failure! There are many hard-working clerical staff in the banks who do a decent day's work in the branches and behind the scenes and receive little or no bonus for the work they do - they should not be penalised for the much publicised shortcomings of their executives and senior managment.
is diabolicall misuse of public money
these bank people are so removed from the real world people that they better be carefull and remember the french once took peoples heads for less
NO NO NO to bonuses or the people who are near to breaking point wont take many more of these slap us in the face stories from the im al right jack attitude odf these money men
When will the banks they realise their business model has failed (as they often advise customers) and they must adapt to them being service providers i.e. taking deposits and making low risk loans with moderately paid staff.
In my Job I would probably loose my Pension.
There maybe a New World Order on its way but lets make it the peoples not theirs, start with out of europe!\ you will never realise how important that is............
One question - does Alistair Darling always look totally clueless or does the press go through their files and pick out the shots where he looks particularly dopey? Couldn't someone give him a large dose of smart drinks moments before he has his picture taken?
"Owners of capital will stimulate the working class to buy more and more expensive goods, and houses , pushing them to take more and more expensive credits, until debt becomes unbearable.
The unpaid debt will lead to the bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to Communism. "
Karl Marx, 1867. DAS KAPITAL.