British politicians up pressure over bank bonuses

10th January 2011, Comments 0 comments

Banks in Britain came under fresh pressure Monday to award smaller bonuses this year as the government demanded restraint and the opposition called for the pay-outs to be more heavily taxed.

The day after Prime Minister David Cameron said that he wanted to see a smaller bonus pool than last year, his deputy, Liberal Democrat leader Nick Clegg, warned that sky-high pay-outs seemed to come "from a parallel universe."

Their comments followed reports that Stephen Hester, the chief executive of bailed-out Royal Bank of Scotland (RBS), would be paid 6.8 million pounds (8.2 million euros, 10.5 million dollars) in bonuses and salary this year.

Opposition Labour leader Ed Miliband also weighed in Monday, calling for the government to extend a one-year tax on bankers' bonuses introduced by the previous Labour administration.

When Cameron's Conservative-LibDem coalition came to power in May, ministers announced plans to replace the bonus tax with a broader bank levy, which is expected to raise 2.5 billion pounds a year from 2012-13.

Miliband claimed the levy would raise only 1.25 billion pounds this year and said this was insufficient at a time when sweeping austerity measures designed to pay down a huge budget deficit were beginning to bite.

He said that Labour's bonus tax had raised 3.5 billion pounds last year.

"It is unfair and it is the wrong economic judgment to be cutting taxes for the banks at a time when everybody else is paying more," he told a press conference in London.

"We believe the extension of the bonus tax for another year is not only fairer, but more responsible."

However, Cameron's spokesman said the bonus tax was specificially designed "as a temporary thing" because of the likelihood that banks would find a way to avoid it if it became permanent.

He noted that finance minister George Osborne said last year that "banks should be making their fair contribution but we don't want to be driving them abroad and our aim would be to extract the maximum sustainable revenues from financial services".

Speaking in a television interview Sunday, Cameron said he wanted bonuses to be smaller this year than last, particularly at RBS, which is majority owned by the taxpayer after a bailout during the financial crisis.

Deputy Prime Minister Clegg echoed his remarks in a BBC interview Monday, saying: "I totally accept that the sky-high numbers that are bandied about in the City of London seem to come from a parallel universe to many people."

He added that particularly "for those people running state-owned banks, they have to be sensitive to British taxpayers."

© 2011 AFP

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