Page last updated at 16:56 GMT, Monday, 9 February 2009

Brown 'very angry' about bonuses

Gordon Brown: "Sweep aside short term bonus culture of the past"

Prime Minister Gordon Brown is "very angry" about proposed bank bonuses and wants bankers to consider waiving their right to them, his spokesman has said.

He said executives should "consider whether they actually receive" bonuses even if legally entitled to them.

Earlier Mr Brown said - amid reports the taxpayer-saved RBS group is to pay out 1bn in bonuses - the culture of rewarding failure was being ended.

Conservative leader David Cameron said ministers were "asleep on the job".

And the Liberal Democrats have described ministers' response to the issue of bankers' bonuses as "pathetic".

Speaking in London, Mr Brown said: "We are leading the world in sweeping away the old short term bonus culture of the past and replacing it with a determination that there are no rewards for failure and rewards only for long-term success."

"In the future there must be rewards for success - but long-term sustainable success and not just short-term gains."

Treasury minister Yvette Cooper said any contractual or legal obligations on banks to pay bonuses at a time when they were making huge losses must be "challenged".

'Moral responsibility'

"We have made very clear that as major shareholders in these banks we won't accept bonuses for failure," she told the BBC. "These do need to be curtailed."

Ms Cooper said there was "a lot to be said" for going down the same route as the US and banning future cash bonuses for bank staff, but said bankers should also look to their own actions.

Senior executives need to take responsibility and consider whether they should be taking bonuses.
Yvette Cooper, Chief Secretary to the Treasury

"I think there is a moral responsibility on some of these bankers, even if they are legally entitled to take bonuses, at a time when the bank is only still standing because of government intervention and why I think there is an important issue of needing to restore trust in the city, senior executives need to take responsibility and consider whether they should be taking bonuses."

Chancellor Alistair Darling said on Sunday the RBS Group should not reward staff with huge bonuses, but says he cannot rule out pay-outs for some bank staff.

Barclays, which has not received any direct financial support from the government, said on Monday that none of its directors would receive cash bonuses this year.

The Treasury has ordered an inquiry into general UK bank management to be led by ex-City regulator Sir David Walker.

The timescale of the Walker review has fuelled complaints from opposition parties that the Treasury response was too slow.

'Asleep at wheel'

Conservative leader David Cameron said the review was "much too late in coming" and that he had been warning about the dangers of excessive bonuses for many months.

"It does appear that the government has been completely asleep at the wheel," he said.

For banks now owned by the taxpayer, future bonuses should consist of shares not cash and only be paid out when much of the investment made by the government had been repaid.

Executives at RBS needed to "recognise the fact" that the bank would have not survived in its current form if the government had not stepped in, he added.

Cameron: Government 'asleep on the job' on bank bonuses.

"As the principal shareholder, you are able to say what is and what is not acceptable."

"It is outrageous for taxpayers to put 20bn into banks to see a billion of that used to pay out bonuses," he said.

The Lib Dems said that, instead of dealing "decisively" with the problem, the government was "playing for time" in order not to upset the banking industry.

"The government must freeze all bonus payments for employees of semi-nationalised banks and ensure that the pay details of those earning over 100,000 a year are published," said its Treasury spokesman Vince Cable.

'Broken system'

Under the terms of October's bank-bailout, no board directors at partly state-owned firms will receive any cash bonuses this year.

But the scale of the reported pay-out at RBS, in which the government holds a 68% stake, has caused an outcry and led to calls for an across the board ban on bank bonuses.

RBS, which is expected to have made a huge loss over the past 12 months, is talking to the government about possible bonuses but insists it has contractual obligations to many executives.

The determination of Britain's bankers to hang on to their bonuses show just how broken down the banking model has become
Brendan Barber, TUC general secretary

RBS has said that any bonuses will be dramatically reduced and there will be "no reward for failure in those bits of its business where the losses were concentrated".

Brendan Barber, general secretary of the Trades Union Congress, said: "The determination of Britain's bankers to hang on to their bonuses show just how broken down the banking model has become.

"We do not need a review of bonuses, but a root and branch reform of the whole banking sector and the employment of people who do a fair day's work for a fair day's pay, not expect a bonus to get out of bed in the morning."

Last week US President Barack Obama announced a $500,000 (355,000) limit on executive pay at US firms that needed substantial fresh government aid.

The move follows widespread public anger over the levels of pay on Wall Street, but is not expected to be applied retrospectively.

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SEE ALSO
Q&A: Bank bonuses
09 Feb 09 |  Business
Chancellor warns RBS over bonuses
08 Feb 09 |  Business
Clegg: Banking review 'pathetic'
08 Feb 09 |  Politics Show
Osborne calls for new bank accord
02 Feb 09 |  UK Politics
Obama slams Wall Street bonuses
29 Jan 09 |  Business
Rock staff bonus 'indefensible'
21 Jan 09 |  UK Politics
UK banking bosses 'should resign'
12 Oct 08 |  UK Politics

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