War on bonuses hots up with Tory call for £2,000 ceiling

Politicians of all parties unite on bankers' pay after revelation that Lloyds plans £120m windfall for staff

Pressure on Britain's beleaguered banks to abandon bonuses for senior executives intensified yesterday asa senior minister declared that the managers at the top of the troubled institutions "shouldn't get a penny".

Tony McNulty, the Employment Minister, issued the starkest warning yet to bank bosses to curb bonuses this year, as the major political parties vied to attack payouts for employees whose banks have been bailed out by the taxpayer.

Mr McNulty said he would not deny bonuses to rank-and-file banking staff, but warned that "anyone having to do with the endorsement of the business model, the future business strategy, shouldn't get a penny. And I think that's absolutely clear".

Stephen Timms, the Financial Secretary to the Treasury, insisted there would be no "rewards for failure". He said: "We have made it very clear for all the banks that have benefited from public support over the last few months that they should not have bonus arrangements that amount to reward for failure.

"There is a reasonable case, for junior staff certainly, that they should be able to receive the reward they were promised but we will have to look very, very carefully at the proposals for bonus payments that Lloyds Banking Group brings forwards."

Government sources made it clear that ministers would take a hard line on high bonus payments at banks that have received taxpayer bailouts, although they stopped short of imposing a cap on payments.

There has been uproar over suggestions that senior bankers would receive bonuses for their work during 2008, a year when the banking system was brought to the edge of collapse.

There was speculation yesterday that the giant merged Lloyds Banking Group, which last week forecast losses of nearly £11bn, was planning to pay out £120m in bonuses to staff, although most staff would receive less than £1,000 each.

Last week, reports suggested that bonuses at RBS could reach £1bn. The Government has an effective veto over bonus payments at Lloyds and RBS, where it has major shareholdings. Both banks have to submit proposals for this year's pay and bonus packages for approval by UK Financial Investments, the Government-owned company set up to monitor taxpayer investments in the banks.

Yesterday, David Cameron entered the row, declaring cash bonuses in the state-backed banks RBS, Lloyds, Northern Rock and Bradford and Bingley should be capped at £2,000, and saying that institutions should refuse to honour contracts calling for large payouts. Mr Cameron told the BBC: "Where the taxpayer owns a large stake in a bank, we are saying that no employee should be paid a bonus of over £2,000.

"People who work hard are seeing billions of pounds of their tax money being paid out and are rightly angry ... Gordon Brown told Parliament that certain conditions would be put in place regarding bonuses in the banks that take taxpayers' money, and it's quite clear that that has not been done.

"Unfortunately the only action the Government has taken is to announce a review into bonuses which will not report until the end of the year," he said. "Because of this dithering we could see bonuses being paid out for a second year to executives in taxpayer-owned banks – which is unacceptable."

Vince Cable, the Liberal Democrat Treasury spokesman, said: "As a general policy position, no bonuses should be paid to banks that have failed and are dependent on the taxpayer.

"There's a longer-term question about how you have a bonus system and how you do create incentives and prevent people taking cash that creates excessive risk. But those big long-term reforms have to be kept separate from today's problems, which are not using taxpayers' money to pay out very large bonuses, for the most part to very highly paid people who have failed as business people."

Union leaders insisted that rank-and-file staff should not lose out because of the crisis at Lloyds. Wendy Dunsmore, national officer of the Unite union, said: "Staff at the new Lloyds Banking Group must not be made scapegoats in the debate around pay and bonuses. Front-line workers, many earning as little as £17,000 a year, are in no way responsible for [Lloyds'] financial difficulties."

A Lloyds spokesman said : "No decisions have been taken about bonus outcomes, and they will not be for some time."

Yesterday Lord Turner, chairman of the Financial Services Authority, refused to comment on the bonus row. He did reveal, however, that FSA chief executive Hector Sants would not be taking a bonus this year.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
footballShirt then goes on sale on Gumtree
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
Have you tried new the Independent Digital Edition apps?
ebookA unique anthology of reporting and analysis of a crucial period of history
A poster by Durham Constabulary
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Emily McDowell Card that reads:
artCancer survivor Emily McDowell kicks back at the clichés
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvBadalamenti on board for third series
Life and Style
Standing room only: the terraces at Villa Park in 1935
Ben Stokes celebrates with his team mates after bowling Brendon McCullum
sportEngland vs New Zealand report
Amal Clooney has joined the legal team defending 'The Hooden Men'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine