Investment bankers at the bailed-out Royal Bank of Scotland are in line to land £1billion in bonuses in defiance of increasingly frantic Government demands for restraint.
Business Secretary Vince Cable yesterday issued the first explicit threat from the Coalition of a new supertax on ‘scandalous’ City handouts.
It came amid mounting concern in Whitehall at plans by the leading banks to pay out a total of up to £7billion in the next few weeks.
Mr Cable threatened new transparency rules if the banks refused to put their own house in order – describing the bonus culture as a ‘poisonous fungus’ that has been allowed to flourish ‘in the dark’. He also said he wanted the biggest financial institutions broken up.
Mr Cable and Chancellor George Osborne will today hold crunch talks with heads of the leading banks.
Ministers fear a profound public backlash if bonuses are not reined in at a time when most of the country is tightening its belt.
They are braced for particular public anger over bonus payments at institutions that were propped up by the taxpayer during the financial crisis.
Early indications are that RBS, which is 84 per cent owned by the taxpayer, wants to pay out £1billion, though a final decision will not be made until the end of January.
More than 100 bankers at RBS were paid £1million or more in bonuses for 2009 – more than most workers earn in a lifetime.
And today research reveals that bank workers have already seen their basic pay boosted by an inflation-busting 17 per cent on average this year.
But 45 per cent still expect their bonuses to be higher than last time. Forty-eight per cent say they would consider changing jobs if their Christmas bonus expectations are not met, according to the research by financial services recruitment firm Astbury Marsden among 1,122 bank staff.
Last night Liberal Democrat Treasury spokesman Lord Oakeshott said: ‘Forget bonuses, these people wouldn’t have a job at all if it wasn’t for the taxpayers who bailed them out. They are effectively working for a nationalised industry.
‘Bank bonuses – especially in state-controlled banks – are an acid test of fairness for the Coalition.’
Obscene: Early indications show that RBS wants to pay out £1billion in bonuses
Mr Osborne, who has already announced a new £2.5billion-a-year levy on bank balance sheets, has been resisting a repeat of Labour’s one-off 50 per cent supertax on bonuses imposed last year.
And sources claim Prime Minister David Cameron has also been ‘cautious’ amid threats from financial institutions to leave Britain. But Mr Cable yesterday went public with his demands for an extra tax crackdown, suggesting he was taking personal charge of the issue.
‘If they don’t behave, if they don’t take account of their wider responsibilities, the Government has as a possibility some form of taxation,’ he said.
‘There are various ways of doing this, but we would rather they accepted that they had wider obligations to British business and to the public.
‘The Coalition agreement was quite clear that Government is going to take robust action on unacceptable bonuses and we’ve got to keep an eye on the other key issue, which is bank lending to small-scale business.
‘Whenever you meet a group of small businesses, they will tell you they find it very difficult to get credit from the banks on terms that are not crippling.’
He signalled his determination to implement requirements for banks to reveal details of individual employees paid over £1million a year, shelved by the Chancellor pending international agreement.
Mr Cable also said he would not be blackmailed by bank bosses threatening to move their bases to more favourable tax regimes, dismissing most as ‘not credible’ and suggesting he would not mind if some firms did leave Britain.
Yesterday RBS refused to confirm or deny the suggestion that bonuses to staff in its investment arm for 2010 would hit £1billion. Its directors are understood to have begun discussions on the payments.
Last night it emerged that RBS is trying to loosen the rules on its bonus payments so it can resume cash handouts.
The bank has been barred from making payments in cash to staff earning more than £40,000 since 2008.
But it is now understood to have proposed a £50,000 cap on cash bonuses to those earning more than £40,000. Larger sums are paid in stocks and shares to make up payouts.
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