Brown ducks confrontation over banks’ huge bonuses

1/2
12 April 2012

The Government ducked a confrontation with the banks over pay and bonuses today as it emerged that Lloyds and Barclays were both set to reward staff with big rises.

News of the pay deals appeared to undermine Gordon Brown's tough rhetoric on City bonuses but neither Downing Street nor the Treasury seemed willing to criticise the banks.

The Treasury insisted that Chancellor Alistair Darling was not in principle against paying bankers for performance, although that had to be balanced with "restraint" to reflect recent taxpayer bailouts. It said it was relaxed about a bonus plan for part-nationalised Lloyds Banking Group, which will reward staff with bonuses of up to 200  per cent of their salaries.

The Government's UK Financial Investments — which handles taxpayers' shares in the banks — approved the Lloyds package because bonuses will be paid in shares over three years.

As both sides tried to cool the bonus row, No 10 also refused to condemn Barclays for planning salary rises instead of top-ups. The Prime Minister's spokesman said: "How individual banks determine their remuneration is not for the Government."

In a pre-Christmas giveaway, some 20,000 workers at the Barclays Capital investment bank will see their salaries jump sharply. High-flyers at Barclays — which does not have state-owned shares but does benefit from Bank of England support — could enjoy rises of 150 per cent or more, pushing their basic pay up to as much as £300,000. The rises, backdated to June, are an attempt to circumvent a stringent new pay regime coming into force next year.

Many other investment banks in the City are raising basic salary levels ahead of the clampdown, which will rein in cash bonuses and force banks to stagger payouts over several years. But the rules do not affect basic salaries.

The Treasury and Royal Bank of Scotland also appeared to be stepping back from the brink in their spat over bonuses at the bank's investment arm. Some RBS board members had threatened to quit in protest at the Treasury's veto powers over the bank's planned £1.5 billion bonus pool.

But it appears that both sides are now seeking to avoid confrontation when the bonuses are awarded next month. RBS has signalled it will succumb to pressure by cutting its bonuses to "the low, low end of the scale". For its part, the Treasury appeared ready to accept that the bonus pool will be £1 billion this year, broadly in line with the previous year and half a billion pounds less than some in RBS had wanted.

The National Audit Office today revealed that the Treasury rated RBS as sound less than a week before it saved bank with a £37 billion lifeline.

The NAO reported that taxpayer support for Britain's banks now runs to £850 billion, while the cost of financial advice to the Treasury since September 2007 would hit £107 million by April.

Edward Leigh, chairman of the House of Commons public accounts committee, predicted that much of the taxpayers' money poured into the banks would be lost for good.

Create a FREE account to continue reading

eros

Registration is a free and easy way to support our journalism.

Join our community where you can: comment on stories; sign up to newsletters; enter competitions and access content on our app.

Your email address

Must be at least 6 characters, include an upper and lower case character and a number

You must be at least 18 years old to create an account

* Required fields

Already have an account? SIGN IN

By clicking Create Account you confirm that your data has been entered correctly and you have read and agree to our Terms of use , Cookie policy and Privacy policy .

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in