David Cameron suffered deep embarrassment yesterday as two senior financial executives travelling with him on the British trade mission to China warned that their firms might quit the UK because of the planned crackdown on bankers' bonuses.
The Government ended up being drawn into a distracting spat with the bank chiefs. Vince Cable, the Business Secretary, who is in China with Mr Cameron, accused the men of using bully tactics.
The row began when the chairman of the Royal Bank of Scotland, Sir Philip Hampton, and the chief executive of Standard Chartered, Peter Sands, used the stage to warn that tighter rules and higher taxes would drive traders away from the City of London – and possibly to the Far East.
The Coalition has signalled its intention to curb bonuses, although it is yet to spell out details of how the restrictions would operate.
Sir Philip said: “There is absolutely the possibility that more markets will move outside London and outside Europe. Being the right place to do business is a whole pile of things, obviously, but it certainly includes regulation, it includes the ability to employ the right people.”
His intervention is particularly galling for the government as the state owns an 83 per cent stake of RBS following the financial meltdown two years ago. He signalled that the amount the bank gives in annual bonuses would be lower than the £1.3bn awarded in 2009.
Mr Sands pointed out that other countries had not done as much as Britain about bonuses and added: “We face an uneven playing-field in attracting talent and these markets are highly competitive.”
Ministers are braced for a fresh wave of public anger over the scale of the rewards that banks give their senior staff. Financial institutions are expected to begin announcing their bonuses for 2010 later this month, with an estimated £7bn in bonuses to be paid to employees – more than half of which will be handed over to the Treasury in tax.
Mr Cable sought to play down the bankers’ warning as “a familiar negotiating technique and clearly one has to listen to them - one has to take these things seriously”.
Mr Cable, who is known to disagree with Mr Osborne over the best way to reform the financial sector, said: “The banks must be moderate in the way they approach their bonus round. We expect the banks to behave responsibly and with moderation and the Government will respond to the situation as it needs.”
Mr Cameron, accompanied by four Cabinet ministers, assembled a delegation of 43 business leaders to promote British exports to China. He has set a target of doubling the value of trade between the two countries to $100bn (£62bn) a year by 2015.
Last night Rolls-Royce, the global power systems company, used the trip to announce that it had won an order worth $1.2bn (£750m) from China Eastern Airlines to supply Trent 700 engines for 16 Airbus A330 aircraft. The two companies also agreed to reduce CO2 emissions by 190,000 tonnes a year.
The Prime Minister began his visit to Beijing with a tour of a branch of Tesco, which is rapidly expanding across China, as well as attending a 600-year-old temple where the British Council is holding courses for social entrepreneurs.
* One thousand new Chinese language teachers are to be trained to work in English schools.
The initiative will increase 11-fold the number of qualified teachers from the current level of around 100 and is expected to provide enough teachers for every student who wants to learn the world’s most widely spoken language.
The teachers will be trained through a combination of short courses at a number of UK universities and a special summer training course at Beijing University.
The opium wars resume
The simple act of pinning a red poppy to the lapel prompted a diplomatic incident between London and Beijing.
David Cameron’s officials were stunned when the Chinese authorities let it be known that they would rather their guests did not wear the reminder of Britain’s war dead during their two-day visit.
A British official said: “The Chinese informed us it would not be appropriate to wear poppies. We informed them that we would be wearing them – and how much they mean to us. There was never any question we would not."
For the Chinese, the flower used to mark Remembrance Day across much of the western world has rather different militaristic connotations, reminding them of the two Opium Wars fought – and lost – against the British in the 19th century.
In the mid-19th century, disputes over the hugely lucrative business of smuggling opium twice escalated into military action between Britain and China.
The first opium war raged from 1839 to 1842: London came to the defence of British merchants smuggling the drug into China in defiance of the country’s ban on its use.
Simmering discontent between China and Britain in Far Eastern ports led to a fresh outbreak of war between 1856 and 1860.
China paid a heavy price for losing both conflicts. It was forced to accept the opium trade, to open more ports to foreign ships – and to cede Hong Kong to Britain for 100 years.
Yesterday, the stunned UK embassy hurriedly relayed the message to the Chinese that, while no offence was intended, under no circumstances would the paper flowers be ditched.
So Mr Cameron and four Cabinet ministers wore their poppies as they were greeted by Premier Wen Jiabao in an elaborate ceremony yesterday at the Great Hall of the People.
Almost to a man and woman, the officials accompanying them on the trade mission had a poppy in place. However, in an apparent effort not to offend Chinese sensibilities, business leaders refrained from wearing them.
So concerned were British officials that ministers might be seen without a poppy that the Government brought a large stock with them to China.
Mr Cameron will mark Rembrance Day tomorrow at a ceremony in South Korea ahead of a meeting of the G20 world leaders in Seoul.
In recent years it has become de rigeur for political leaders to be seen in public with a poppy in the run-up to November 11. Civil servants are encouraged to sport them and BBC presenters required to put them on, provoking complaints by Channel Four presenter Jon Snow of 'poppy fascism'. Others, including Match of the Day presenter Gary Linker, have been criticised for wearing the flowers to soon.
Last year's poppy appeal raised a record £35m and its organisers, the Royal British Legion, have set a target of £36m for 2010.Reuse content