Andrew Grice: How bonuses became a headache for Brown

Share
Related Topics

"We are not going to chase headlines on bank bonuses," one Cabinet minister assured me on Sunday. "This is a highly complicated issue and we will do what is right, not what gets the right headline."

Twenty four hours later, after more bad headlines for the Government about its inability to halt huge bonuses for bankers, it seems that Gordon Brown was chasing good headlines after all. After saying they would not "do an Obama" – a reference to the United States President's £340,000 salary cap for bankers whose firms have taxpayers' support – British ministers are now trying to repeat his trick.

The Treasury is believed to be leaning heavily on Royal Bank of Scotland (RBS), which is reportedly planning to pay out £1bn in bonuses, to impose a voluntary cap of £25,000 on individual bonuses, with the rest paid in share options. Ministers hope such a ceiling will be announced today when the new regime at RBS gives evidence to the Commons Treasury Select Committee.

Mr Brown has made clear he is "very angry" about the bonuses being proposed by the banks. On another issue, an expression of prime ministerial anger might take some of the heat off Downing Street. But not when the public might feel even more angry than Mr Brown on the grounds that their money is lining the pockets of people responsible for getting us into the financial crisis.

The truth, as ever, is more complicated. Mr Brown is adamant he will not allow those bankers who failed to be rewarded. But perceptions – and headlines – matter and he knows it.

Ministers groan that bankers' bonuses are one of the most complex issues they have dealt with. Should any curbs apply only to the past, and not the future? Should they be for directors or executives too? Should they apply to staff for whom bonuses are part of the normal conditions of employment? Would the Government jump into a legal quagmire if it tried to outlaw bonuses? Could any ceilings be imposed on banks, such as Barclays, in which the Government does not have a stake if they take advantage of its insurance scheme for their bad debts?

No wonder ministers are desperate to see the banks impose restraint on themselves, which would take some of the pressure off the Government.

Some ministers admit privately that they have some sympathy for the new broom of bankers trying to turn round the stricken banks. Stephen Hester, the new chief executive brought in to shake up RBS, has impressed government officials. Ministers said he could not be "expected to work for peanuts" and that the banks would not attract or retain the good people they need if they did not pay the going rate – including bonuses.

Ministers are reluctant to impose a cap on bonuses at banks in which taxpayers do not have a direct stake. "They are private companies; we cannot micro-manage their salary structures," one said.

But raw politics is now overtaking such arguments. The fire over bank bonuses is one of the biggest to blow up in the recession and the Government needs to put it out.

Opposition parties scent blood. The Tories say a bonus cap is an option, without formally committing themselves to one. The Liberal Democrats say the major banks should be nationalised and all bonuses scrapped.

Labour MPs are also on the march. John McDonnell, the MP for Hayes and Harlington, said: "Gordon Brown needs to get a grip and take decisive action now to cap bonuses."

President Obama's huge fiscal stimulus will help Mr Brown but his headline-grabbing salary cap for bankers has done the opposite.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Software Developer - Newcastle - £30,000 - £37,000 + benefits

£30000 - £37000 per annum + attractive benefits: Ashdown Group: .NET Developer...

Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Digital Project Manager/BA

£300 Per Day: Clearwater People Solutions Ltd: An experienced Digital/Ecommerc...

Creative Content Executive (writer, social media, website)

£30000 - £35000 Per Annum + 25 days holiday and bonus: Clearwater People Solut...

Day In a Page

Read Next
 

The truth about kids on holiday

Rosie Millard
 

August catch-up: Waiting on the telephone, tribute to Norm and my Desert Island Discs

John Rentoul
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home