No more bonuses- you’re nationalised

Half a cheer for President Obama saying no-one in a semi nationalised US bank will earn more than $500,000. Where the bank is loss making and dependent on taxpayers dollars it is difficult to see why anyone is paid as much as $500,000.

Here in the UK I am blocked from asking questions about pay and bonuses at our state banks. Parliament is meant to follow public money wherever it is spent, yet I am told firmly by the House authorities that the government will answer no questions on bankers’ remuneration at RBS or Northern Rock. It is typical that the government wants to pay them too much, and then does not want to defend this provocative decision.

As RBS has announced it lost around £28 billion last year, and has therefore written off all the £20 billion of capital we so recently tipped in, I can see no case for paying a single bonus to any executive in that bank. The management should explain that saving more jobs at the bank requires restraint on pay. They should be grateful they still have jobs, given the lamentable performance. Anyone else working for a non bank that lost that sort of money would be worrying about getting the sack as the business fought to control the losses by cutting costs.

Many of my constituents are paid a lot less than these top bankers at RBS. Why should they have to work harder and pay more tax, just so those who presided over the business catastrophe at RBS and Northern Rock can still get a bonus for their record breaking losses last year?

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13 Comments

  1. Colin D.
    Posted February 5, 2009 at 8:28 am | Permalink

    I agree 100%.
    It strikes me that a decision by government to forbid bonuses and cap or cut salaries would be very well received by the electorate and improve the poll ratings.
    The fact they have not done so suggests to me that ‘someone’ is worried about skeletons in the cupboard. Could it be that to alienate the banking executives might result in few embarrassing beans being spilt?

  2. Ian Jones
    Posted February 5, 2009 at 8:44 am | Permalink

    I dont think Obama has done anything, all words as only applies to companies who ask for lots of money “from now on”. I.e. the banks can still trough away.

  3. RobertD
    Posted February 5, 2009 at 8:59 am | Permalink

    If you can’t get a question in the House, in itself a disgrace, is there any mechanism or process that the public can use to put pressure on the government and the bank non-execs? The obvious one of telling them where to stick their overdraft and credit card might be a bit self defeating in the current financial climate, but some form of customer protest or boycott might be the only pressure that they understand. Sorry. I forgot. Now that they are part of the public sector customer views are of even less value than that of a politician.

  4. Brian Tomkinson
    Posted February 5, 2009 at 9:54 am | Permalink

    This should be a front page story in the newspapers contrasting Brown’s secrecy to Obama’s action. As shareholders, the taxpayers should have a right to know the remuneration of the bosses of the banks that they own. How dare the House authorities tell you that the government will not answer any questions about bankers’ remuneration. I hope you are not going to allow them to brush you off so easily and disdainfully.

  5. rugfish
    Posted February 5, 2009 at 10:17 am | Permalink

    Again, how is it fair or sensible of the government to pay £1 million in salary to the newly appointed head of Northern Rock ? ( Bonused too ). In the same breath the government remove the rights of shareholders along with their savings there, and payout their money to the guy which is completely over the top.

    I’m sure you will understand why people think there’s a law for them and another for us in this country.

  6. Lola
    Posted February 5, 2009 at 10:23 am | Permalink

    You do not seriously imagine that the collusion between the two criminally irresponsible organisations who have worked together to bankrupt us viz, the current goverment and the UK banking system, is going to stop now do you? New Labour is all about using other peoples money to line the pockets of their apparatchiks and their client state, which now includes the banks and all their employees. It is no wonder that they won’t answer your questions – another New Labour tactic, never answer a question unless it is with another question – since they are going to sanction bonuses and pay rises and all the rest of it. It’s called buying votes.

    And for more evidence that they will do this and go on being profligate with our money see this morning’s Citywire Morning Markets email. Go to:

    http://www.citywire.co.uk/adviser/-/news/other/content.aspx?ID=328429&re=4677&ea=130254

  7. THE ESSEX BOYS
    Posted February 5, 2009 at 11:49 am | Permalink

    I hear that a Conservative (JR?) has made the point this morning that had the taxpayer not stepped in RBS would be bust already – and then the question of bonuses would be entirely academic. Quite so. (I did not say that – I said a state financed loss maker should not pay bonuses for the losses)
    Isn’t this similar to the basis on which the government wish to value Northern Rock shares…ie what would they be worth WITHOUT taxpayer support?

    We were driven over the cliff by greedy bankers and speculators and the subject is therefore so crucial to our future wellbeing, with most of these people still in office, that it demands a separate commission to investigate. We would like to know the specific contractual criteria on which any bonus of, say, £250,000 or more has been paid in the last 3 years.
    We suspect that whoever set them paid little or no heed to anything other than short-termism and probably took into account the reward that would flow through to the senior management setting those criteria.

    We agree with Frederick Forsyth’s stance on yesterday’s Daily Politics – he wants the perpetrators to be pursued and, where relevant and possible, charged with fraudulent activity.
    Not only is that just – it is a supreme vote winner.

  8. Jason
    Posted February 5, 2009 at 11:59 am | Permalink

    Surely this must be taking the pith….there is utterly no justification whatsoever for any bonuses….i mean they are all taking us for a ride. As you say they should be pleased to have their jobs….any argument that they need to retain talent is rubbish…where else would they go? There is nowhere…so most will think better stay put…especially as our money is supporting them now.

    I cannot believe the govt can choose not to answer questions about such issues….ITS OUR MONEY!!! If the opposition cannot ask questions about such issues – what is the purpose of having a parliamentary process at all? Why can’t we ask questions about remuneration…after all, there are remuneration committees for other state employees, including politicians? This is not a democracy anymore….a bloody shambles…hoist the hammer and sickle above parliament. At least under communism, these plebs would get paid the same as everyone else…it seems nulab is morphing into something else – state capitalism – whereby the public are robbed blind and the incompetent are not only rewarded – but praised. They dictate the debate and are above any form of questioning or accountability. I recall Gordon Brown pleading with the banks for transparency….aren’t we entitled to the same? As the saying goes, in the land of the blind, the one-eyed man is King.

  9. arisaig
    Posted February 5, 2009 at 12:40 pm | Permalink

    John,

    Surely there is no valid basis on which this info can be withheld from you either as an MP or as a taxpayerwho is funding these institutions. You have mentioned the ongoing erosion of the democratic process in Parliament frequently…is there any prospect of this being challenged before we can get rid of this govt which is bringing Britain to its knees?

    Sadly the mass of employment legislation which we have had imposed from Govt and Europe means that it will probably be almost impossible for the Govt to change the Bank staff terms and conditions(including bonuses) without massive payouts at industrial tribunals…they have created their own dilemma but one way or another it will be the taxpayer picking up the tab!

  10. Paul from MK
    Posted February 5, 2009 at 3:25 pm | Permalink

    If the circumstance weren’t so serious, you’d want to laugh.

    The American Bankers who, in the mid-nineties, had a Clinton Administration coerce them into taking on increased risks and, later, a Democrat led Senate refuse to acknowledge that things were starting to go wrong, are now punished by having a new Democrat President capping their salaries.

    Meanwhile, the British Banks, suffering from no such meddling and using their own ‘judgment’, are to be rewarded!

  11. Alan Wheatley
    Posted February 5, 2009 at 3:49 pm | Permalink

    I agree that those who were in charge at a bank when it had to go to the government for taxpayer’s money to survive should not be paid large salaries and bonuses.

    But what do you pay the new CEO who has replaced the the one that presided over the decline, given that he/she has been appointed on the basis they are the best person to lead the bank’s recovery?

    Perhaps a moderate salary plus a large bonus incentive linked to real, long term results would be a reasonably balanced approach.

  12. Bazman
    Posted February 6, 2009 at 2:57 pm | Permalink

    Maybe someone could explain why these bankers get a bonus for taking their company to the wall? As ESSEX BOYS says, had they not been nationalised bonuses would be academic. Corporate welfare for the upper middle classes. Who no doubt tut and curse any form of welfare or fraud for the rest of the population.

  13. Adrian Smith
    Posted February 9, 2009 at 7:35 pm | Permalink

    Bonus’s cannot be justified if they are not for the greater good of the company as a whole, not individual blocks of the company, I would have thought. What I don’t understand though, is why the culprits, ‘handling’ dodgy’ risks that have failed, have not been prosecuted for fraud, contravening gambling acts etc. Can’t the lawyers be brought in to see exactly what laws have been broken and then tell us as shareholders ( the taxpayer) what they are? If necessary we can bring the prosecution through the police. Just need to know what the crime actually is please. Let’s do it!

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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