Voters must stop seeking to “take revenge” on banks and accept they are vital to the economic recovery, David Cameron has said.
Signalling he is prepared to defy public opinion, the Prime Minister indicated he will reject demands for punitive action on bankers bonuses and admitted his approach could be unpopular.
Taxpayers are “rightly angry” about bankers getting huge bonuses, Mr Cameron said.
But he insisted he will not court short-term popularity by trying to “hammer” the financial sector.
Instead, he said, the Coalition will try to strike a balance between heeding calls to impose tough rules on the banks and allowing them to get on with lending to British businesses.
“It’s about getting the balance right. It’s not going to be easy and it won’t satisfy everybody,” Mr Cameron said.
"But we’ve got to try to work for that balance rather than just think, let’s take revenge on people because they’ve made us mad as hell."
City investment banks are beginning their bonus season, informing staff about their payments for 2010, with total bonuses expected to be £7 billion.
It emerged yesterday that JP Morgan, a US bank, will pay £1.87 billion in salary and bonuses to its London staff. They will enjoy an average payout of £234,180.
Other large payments will be announced in the coming weeks, including bonuses at state-owned RBS.
Mr Cameron said he understood public anger over bonuses: “There is part of me, like probably everyone in this room, that thinks, right, let’s just go after every penny we can get out of those banks, let’s tax these bonuses to hell. That would look good for a few weeks.”
But, he said, punitive taxes on banks could be counterproductive, hurting bank lending and profits, in turn harming the UK economy.
“We want a growing economy which is creating job and that means banks that are lending to businesses. I want to maximise the amount of tax they actually pay,” he said.
“I don’t want to just try to win good headlines by saying I’m going to hammer these guys. I want to make sure they’re paying more tax this year than last year.”
Mr Cameron's remarks come days after Bob Diamond, the chief executive of Barclays, caused anger by telling MPs that the time for bankers to show remorse over the financial crisis is over.
Ed Miliband has launched repeated attacks on Mr Cameron over bank bonuses, and yesterday suggested the issue helped Labour to victory in the Oldham by-election, where the Conservatives finished a poor third.
The Labour leader will keep up the pressure on banks today, saying Labour will be the party of protest over bonuses.
“I want us to articulate the frustration of people who are fed up with bankers taking vast public subsides and then rewarding themselves for failure while the rest of the country struggles,” Mr Miliband will say in a speech.
Liberal Democrat ministers have also demanded stronger action on bank bonuses, backed by some Conservatives.
Michael Gove, the education secretary, told the BBC that the banks’ behaviour had been “outrageous” and said they should face “legislation and castigation” over bonuses.
By contrast, Lord Heseltine of Thenford, one of the elder statesmen of the Conservative Party today warns against the “folly” of targeting bonuses and driving bankers out of Britain.
“The financial services industry is hugely important to the British economy; if you want to be world competitive, then you have to pay the sort of money that the world industry will pay,” the former deputy prime minister tells the Daily Telegraph today.
“It would, in my view, be the utmost folly to create a climate in this country which was anything other than sympathetic to the financial services industry.”
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