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

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

Read Next
 

Errors & Omissions: the paraphernalia of a practised burglar – screwdrivers, gloves, children

Guy Keleny
The PM proposed 'commonsense restrictions' on migrant benefits  

So who, really, is David Cameron, our re-elected ‘one nation’ Prime Minister?

Andrew Grice
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
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?