The recent RBS bonuses have sparked controversy and debate among many politicians, but what’s it all about?
Do not fear! We have been reassured by the chairman, Sir(?) Philip Hampton that the number of RBS millionaires was lower than a year ago – phew! (N.B the ‘Sir(?)’ picks up on David Mitchells point on 10 o’ Clock Live that titles such as Sir shouldn’t be removed but should be brandished on the peoples foreheads to show the demise of our society). In 2011, RBS made a loss of £2 billion. Yet while its bonus pool has almost halved since 2010, that still leaves £400 million to be divided up, on top of increased salaries. Last month chief executive Stephen Hester was forced to waive his bonus of almost £1 million following weeks of press, political and public outrage.
Taxpayers currently own 84% of RBS (as the government bailed them out in 2008 to the tune of $45bn) so it is well within the government’s power, as majority shareholder to do more than invent ‘Project Merlin’ a fairly placid agreement which covers lending and bonuses and which coincidently has the same name as the BBC’s fantasy adventure programme. Hmm. Liberal Democrat peer Lord Oakeshott resigned as a Treasury spokesman in the House of Lords after making an outspoken attack on Project Merlin. He dismissed it as “pitiful”, saying officials at the Treasury “couldn’t negotiate their way out of a paper bag. […] If this is robust action on bank bonuses then my name’s Bob Diamond [the boss of Barclays Bank] and I’m going to claim my £9m bonus next week.”
Additionally, while Bob Diamond can gain support for his comments on the need to ‘celebrate rewards for success’, there is a clear struggle to see this ‘success’ as Barclays own profits fell 3% and equity decreased to 6.6%. It feels right to also mention here that if there wasn’t a bail out of RBS and Lloyds-HBOS, there may have been a run on all the banks including Barclays.
So, down to the politics, the Labour leader Ed Miliband was accused of stirring up a ‘witch hunt’ against bankers as he called for a tax on bonuses and new rules to rein in top pay. Yet one wonders whether the problem in part can be attributed to the Labour government who initially set out the terms of the RBS bailout, deciding upon an ‘arms-length’ nationalisation. Government wouldn’t make the decisions, including set bonuses, but would carry all of the risks with its investment. Furthermore Labour is accused of failing to regulate the banking industry before the crash in 2008.
David Cameron has urged other executives to show restraint when they are offered large payments in the coming weeks. I know ‘urged’ is a verb however for a doing word, it has very little substance and need I comment on the fact he said ‘coming weeks’? Following Diamonds comments the PM’s spokesman said “It is not for me to comment on pay deals for individuals at private sector companies”. Following accusations that Miliband is on a witch-hunt, Cameron is proving reluctant to join the tussle. Earlier this week he seemed to be calling time on the furore by criticising the ‘snobbish’ attacks on business.
All in all, it seems like bankers bonuses are here to stay, and so is political grand-standing.
Stephen Hester: RBS Staff must be paid fairly