Banking: Bonuses

Lord Myners Excerpts

Tuesday 11th January 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am grateful to my noble friend Lord Ryder for enabling me to remind noble Lords that other Governments are increasingly following the lead of the UK and introducing variations on the measures that we have introduced for the taxation of banks. Since the announcement of our bank levy, Germany, France and other countries have followed with similar constructs. It is critical that we make sure that, while the UK regime is the toughest interpretation among global financial centres of what has been agreed internationally, we seek to work within the framework laid down by the Financial Stability Board and endorsed by G20 Ministers. Whether it is in relation to the US, other European countries or global financial centres, we will continue to work energetically with our partners to secure, as far as is possible, common standards in this area.

[Lord Myners]

My Lords, in 2009 the Prime Minister said that no bonuses of more than £2,000 should be paid to bankers while banks were in receipt of government support. The coalition agreement talked about robust action and detailed programmes to handle unacceptable bonuses. On that we have heard nothing at all. When we proposed disclosures about remuneration under the Walker report, this was supported by both the Conservative and Liberal parties. The Government have done nothing to implement the Walker recommendations.

The Minister asked for ideas. I will give him four. First, shareholders should be given a clear fiduciary responsibility, for which they can be held accountable under law, to take appropriate action to oversee the companies in which they have invested their clients’ money. Secondly, banks should not be able to offset the past losses against current corporation tax liabilities while they are in receipt of central government support, which most of our major banks still are through the special liquidity scheme and the credit guarantee scheme, as a consequence of which very few will pay any corporation tax for the foreseeable future.

Thirdly, there should be a charge for the capital that banks effectively enjoy through the state guarantee. The Bank of England has estimated that this is worth £100 billion. A fair charge for that would be of the order of £12 billion to £15 billion—the annual charge for risk for capital, which the Minister will understand—rather than the derisory £2.5 billion pounds which ultimately, but not initially, will be raised under the Government's bank levy proposal. That is a considerably smaller amount than was raised under the bank payroll tax.

Finally, if the Minister finds the RBS employment agreement with Mr Hester unacceptable, he can terminate it and replace it with a new one. Will he do so, because the people of this country will not accept a situation in which in excess of 5,000 people working in British banking will receive total remuneration in excess of £1 million per annum? This is totally unacceptable and we are entitled to a decent answer from the Minister to these questions on bonuses, rather than the blather that we have heard about other matters.

[Lord Sassoon]

My Lords, I am not going to stand here and listen to the ridiculous tirade from the noble Lord, Lord Myners. If he had all these brilliant ideas, why did he not implement a single one of them when he was in office? It ill behoves him to come here with this litany of ideas, which may or may not be good but are given to me not in the spirit of co-operation but as a lecture telling me what we are not doing. I could repeat—but it would bore noble Lords interminably—the Statement of my right honourable friend, which gave a great list of things that we are doing and have done. The Government of the noble Lord, Lord Myners, left only 25 banks with any sort of disclosure requirements. We have extended that figure to 2,500. His Government managed to get a paltry four banks signed up to the much lauded taxation agreement. We now have the top 15 banks signed up. I could go on. It is no good the noble Lord giving me a lecture about what we should do. He had years to deal with the matter and completely failed. We are getting on in a very practical way to make sure that the banking industry and regulatory system is fixed.