CHANCELLOR George Osborne has vowed to stop “anti-business” critics of the bonus culture who he believes could cost the UK jobs and prosperity.
In a week when some of the biggest bonuses for bank executives are expected to be announced, Mr Osborne used a speech to the Federation of Small Businesses (FSB) last night to defend the massive payments that have been widely condemned by his political opponents.
The Chancellor’s comments came as Labour sought to keep up the pressure on David Cameron over “excessive” City pay, using a House of Commons. RBS is 84 per cent owned by the taxpayer. This week, pressure from Labour also persuaded Network Rail chief executive Sir David Higgins to pass on his £340,000 bonus.
However, it is thought that the political pressure will not affect banks and other businesses in the private sector.
Barclays chief executive Bob Diamond is expected to receive up to £10m, while it is believed that a similar sum will go to HSBC boss Stuart Gulliver.
But Lloyds Banking Group chief executive Antonio Horta-Osorio, whose bank is 41 per cent owned by the taxpayer, has said he will not take up his bonus – thought to have been worth about £2.4m – after taking time off due to poor health.
As Labour yesterday held an opposition day debate on introducing a “bonus tax”, Mr Osborne went on the attack, warning that Labour and other critics of bonuses “are trying to create an anti-business culture in Britain”, which has to be stopped.
He said: “Of course we need to reform our banking system … Of course rewards for failure are unacceptable, and those who believe in the free market are the first to say so. But a strong, free market economy must be built on rewards for success.
“There are those who are trying to create an anti-business culture in Britain and we have to stop them. At stake are not pay packages for a few, but jobs and prosperity for the many.”
He spoke after Labour called for a clampdown on “excessive” City bonuses at a time when ordinary people were facing the “biggest squeeze on their living standards in a generation”.
Shadow business secretary Chuka Umunna demanded change, saying that the current culture saw bankers “right at the centre of the crisis” continue to receive “very high remuneration” while many people struggled for jobs in a slow-growing economy and profitable businesses were struggling to access financing or had gone under.
Mr Umunna challenged the notion that attacking the status quo was “anti-business”. He said: “This is an utterly absurd notion, given that among the most vociferous critics of our banks are the small and medium-sized businesses who make up the overwhelming majority of businesses in this country.”
Labour’s motion said the party believes that bank executive remuneration should be related to performance and that banks either directly or indirectly supported by the taxpayer must recognise that the taxpayer expects very large bonuses only to be paid to “reflect genuine exceptional performance”.
It also urged the government to consider repeating the bankers’ bonus tax, in addition to the bank levy, to pay for 100,000 jobs for young people. And it called on the government to increase transparency, accountability and responsibility in the setting of pay in the sector.
Labour’s motion was defeated by 244 votes to 295.
Conservative Treasury minister Mark Hoban called on the banking industry to show “leadership” in the up-coming bonus round. But he went on: “Across the board there is a consensus that we need to tackle excessive pay. It is this government that is answering that now.”
He said: “We are remedying what the Chancellor has described as ‘the biggest failure of economic management and banking regulation in our country’s history’. That failure was presided over by the party opposite.”
City bonuses tripled under Labour to £11.6 billion, but fell to £6.7bn last year and are expected to drop this year, said Mr Hoban.
He added: “Under the previous government, bonuses became a right, not a reward.
“After 13 years of a Labour government, we have a substantial challenge to dismantle the culture of excessive pay in the banking sector.”
Labour MP Adrian Bailey, chairman of the Commons business, innovation and skills select committee, said resentment was building up among low- and middle-income voters that they were being made to pay for the bank bailouts while those responsible appeared to still reap the rewards of high pay.
Mr Bailey said: “It not only offends a great sense of injustice in the country, but is arguably both socially and economically dysfunctional.”
David Hillman, spokesman for the Robin Hood Tax campaign, which is pushing for a financial transaction tax, said: “It is high time the government moved beyond rhetoric.
“It will take more than warm words in the Commons to ensure banks pay to repair the damage done to our economy and society.”