Labour powerless to curb banker bonuses as 5,000 are in line for £1m payouts
Labour's attempts to stop the return of bumper bonus payouts was in crisis this afternoon as bankers ignored the pleas for restraint.
City minister Lord Myners protested that 5,000 bankers looked set to pocket £1 million-plus payouts in the new year.
He admitted that "many hundreds" of the bonuses would be made at the 84 per cent state-owned Royal Bank of Scotland.
There were also signs that the Government might cave in to a threatened mass resignation by RBS directors if a plan to increase their bonus pot by a 50 per cent was vetoed.
In a key remark, Lord Mandelson agreed with RBS chiefs that their staff should not be "singled out" for more restraint than others.
"I understand the point of view that RBS directors are expressing," he said. "They say they have to remain competitive in the market in recruiting senior executives and that's why it's important that all the banks are equally restrained and that RBS is not singled out." The Treasury also defended its surprise seizure of the bank's bonus pool, saying other shareholders will be equally worried about excess pay.
One minister dismissed the threat by the RBS board, urging them to "make my day" by resigning en masse.
The bullish Government response came despite warnings in the City that capping bonuses for RBS's investment banking "stars" would undermine its status and lead to an exodus of top performers.
RBS chief executive Stephen Hester made clear yesterday that there were tensions with the Government's UK Financial Investments (UKFI) over remuneration.
Board members say their lawyers have told them they would have to resign if they lost the power to set pay levels. But earlier today, Lord Mandelson said: "The Government's view on this is very clear. There has to be restraint exercised by all the banks."
The row is over an estimated £1.5 billion bonus pool for staff at the investment arm of the bank. The pool is 50 per cent bigger than last year and would give 20,000 bankers the equivalent of three times the national average salary each.
Treasury sources said it was likely that the RBS board would, in the end, voluntarily cut its bonus levels in consultation with the Government.
Lord Mandelson said the bank, which has been bailed out with £45 billion of taxpayers' money, could not escape the new post-credit crisis reality, adding: "At the end of the day, the bank's board have to take their responsibilities."
He said he recognised the need for a bank to retain top staff through bonuses but called for all banks to restrain themselves.
A Treasury spokesman said: "As a major shareholder UKFI needs to be satisfied that RBS's approach to remuneration is in keeping with the FSA's [Financial Services Authority] code of practice.
"We expect other institutional shareholders will be equally concerned to ensure remuneration practices do not pose a risk to the stability of the organisation."
