Bank Bonuses: Labour Pressures Osborne On RBS
The Chancellor is under pressure to block a move by the Royal Bank of Scotland (RBS) to double the amount it is allowed to pay out in bonuses.
The mainly taxpayer-owned bank is expected to invoke a new EU rule which would allow it to pay out up to twice an employee's salary - providing shareholders approve it.
RBS stressed on Wednesday it had not made any decision yet and was in talks with UK Financial Investments - the Government body charged with managing taxpayer stakes in banks - and other shareholders about its pay and bonus plans.
But Labour has tabled an opposition day motion - to be debated today - calling on the Government to reject any request by the bank to raise the bonus cap.
The party argues it would be wrong to allow a loss-making, part-nationalised lender to pay such rewards.
Shadow treasury chief secretary Chris Leslie said: "At a time when families face a cost-of-living crisis and bank lending to business is falling, it cannot be right for George Osborne to approve a doubling of the bank bonus cap.
"It shouldn't have taken the EU to act to rein in excessive bonuses, but there has been no action from the Chancellor here in Britain.
"As the majority shareholder, the Government should reject any request from†RBS to increase the cap.
"We will put this to a vote in the House of Commons as part of our opposition day debate on the Government's wider failures on banking."
Such a move places Mr Osborne, who is challenging the bonus limits in the courts to protect the City, in a difficult position in that he does not want to be blamed for RBS losing key personnel to better-paying rivals though he is also mindful of Labour's accusation he is standing up for the wrong people.
In a speech focussed on reform in the EU today, he said of the banks: "This Government has done more than any to bring the banking system back under control, to regulate banking properly, to ringfence retail banks."
He insisted a system was needed to ensure that if things went wrong then money could be taken away from those banks.
RBS, the FT reported, was not alone in wanting to invoke the new EU rules which would limit a bonus payout to 100% of a worker's salary unless shareholders backed an increase to double that figure.
Barclays has already moved to support the bigger rewards, but the bank received no state help at the height of the financial crisis and so the Government has no means to potentially control its bonus scheme.
Sky News learned last week that the new chief executive of RBS, Ross McEwan, was drawing up cost-cutting plans to be announced next month that could result in thousands more job losses at the bank.
It has significantly slashed its investment banking operation - traditionally employing those on the biggest bonuses - since its bailout, under orders to concentrate more on day-to-day lending in an effort to boost the UK economy.
The Labour leader Ed Miliband†is to use a speech on Friday to demand the five biggest players on the high street, HSBC, RBS, Lloyds, Barclays and Santander, be forced to sell branches in a bid to stimulate improved competition.
The banks last year accounted for 90% of bank customers and total lending.
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