Justify £1.6bn bonuses in face of £7k-a-minute loss, RBS told

ROYAL Bank of Scotland was attacked by politicians yesterday over its decision to award £1.6 billion in bonuses to staff while posting a £3.6bn loss.

• Picture: Michael Hughes

Welsh Secretary Peter Hain said bankers were now more unpopular than MPs and called on them to justify to the public their "very large bonuses".

The bank, which is 84 per cent owned by the taxpayer, also came under fire in the Commons from Labour deputy leader Harriet Harman, who expressed "deep concern" over the bonuses.

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She called for remuneration schemes that "discourage short-termism and discourage risk".

Ms Harman was responding to a question from Liberal Democrat front-bencher David Heath, who said: "I simply can't understand how the Royal Bank of Scotland, which is 84 per cent owned by the UK taxpayer, can announce simultaneously losses of 3.6bn and bonuses to staff of 1.6bn."

The loss equates to 6,849 a minute, or almost 10 million a day.

Mr Hain went further, saying: "I think bankers have made themselves even more unpopular than politicians in recent times and that's saying something.

But I think the banks need to explain to the public, whose money has bailed them out, how they can possibly justify those very large bonuses."

But the two senior Cabinet members appeared to be breaking ranks with the government line set by Prime Minister Gordon Brown, with City minister Lord Myners defending the bonuses for the banks.

He said: "I have no doubt that both RBS and Lloyds have been making absolutely every effort they can to meet their lending targets.

"It is very clear from talking to them that they are aggressively seeking lending opportunities. There is no sign that I can see of a reluctance to lend in general."

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A spokesman for Mr Brown said: "The Prime Minister has been in the vanguard of making it clear that the old cash-driven bonus culture has to end.

"What we are seeing with the RBS announcement is that that is being delivered. They have a new bonus culture."

RBS also defended the payouts, pointing out that chief executive Stephen Hester had foregone a bonus worth more than 1m.

Mr Hester said the level of the rewards pot was set by the board and was not "imposed upon us from outside", although he added that there had been a need to balance external pressures with the need to retain key workers.

"I do believe – because of the nature of the tightrope that we are walking – we will continue to lose staff."

The Conservatives argued RBS should not be singled out for criticism, but a spokeswoman said the party believed bankers' pay had got "out of kilter" with the rest of society and needed to be restrained through measures such as an internationally-agreed bank tax.

SNP Treasury spokesman Stewart Hosie said RBS bosses would struggle to explain to taxpayers why the already well-rewarded were being offered bonuses while the bank continued to make a loss.

"Any bonuses should encourage long-term sustainable growth and, as such, it is welcome that most bonuses are in shares," he said.