The spectacle of an institution saved from collapse by £45bn of taxpayers’ money then handing out £250m in bonuses would be tricky at any time. Coming, as it does, just as Royal Bank of Scotland faces fines of £500m-plus for rigging the Libor international interest rate benchmark, it is more troublesome still.
Next month’s bank bonus season may be easier for the Government than last year’s. After all, the debacle of the RBS chief executive forced by public pressure (and political weakness) to forgo the £1m to which he was entitled is unlikely to be repeated. Any number of caveats and clawbacks are also now in place to minimise the bill. But the sense that the taxpayer is, directly or not, footing the bill for the bank’s Libor-fixing will pile the pressure on the Government all the same.
Even so, there are no easy solutions. For all the fulminations of banker-bashers, it is neither legal, nor is it in the Exchequer’s best interests, simply to cancel all bonuses. RBS already pays some of the lowest in the industry. To withdraw them altogether would both break employees’ contractual terms and also dent the bank’s ability to attract and retain quality staff. Given that the vilified investment operation, in particular, is central to returning RBS to the black, any course that damages its prospects is self-defeating.
All of which only illuminates the irreconcilable tensions in the state ownership of RBS. The imperative, therefore, must be for the Government to sell down its stake in the bank as soon as may be.
Here, at least, there has been progress. Stephen Hester’s efforts to restructure the ailing operation are proceeding apace. With a helping hand from elsewhere – not least the recent calm in the eurozone – the bank’s stock has shot up and is finally within sight of the price that we paid for it. But it is not there yet. In the meantime, there is no alternative but to accept – albeit through gritted teeth – that bonuses must be paid.