Banking: Royal Bank of Scotland

Debate between Lord Sassoon and Lord Hoyle

Tuesday 1st February 2011 Lords Chamber

[Lord Hoyle]

To ask Her Majesty’s Government whether they have any plans to limit bonuses to be paid to senior Royal Bank of Scotland staff.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, UK Financial Investments manages the Government’s shareholding in the Royal Bank of Scotland on an arm’s-length and commercial basis. The Government are clear that remuneration policies at banks need to reward long-term sustainable performance, not incentivise short-term excessive risk taking. We have made it clear to RBS that it should have a smaller bonus pool than last year.

[Lord Hoyle]

I thank the Minister for that reply. Is there not something lacking when we cannot take firmer or more positive action in a bank in which we have 83 per cent of the shareholding? Does it not give the green light to the banks to carry on in the same way, while innocent people are losing their jobs because of the folly of the bankers, who are seen to be very close friends of this Government? The Government have talked tough and acted weak. Is there not a smell of hypocrisy about?

[Lord Sassoon]

I am grateful to the noble Lord, because it enables me to point out that we are hamstrung in dealing with the bonus situation at RBS. The previous Government signed an agreement with RBS that did not cover the payment of bonuses this year, which means that our hands are tied. I wish they were not. It was the wholly inadequate agreement that the previous Government signed that leaves us where we are.

Lord Forsyth of Drumlean: My Lords, will my noble friend confirm that 50 per cent tax will be paid on every pound that is paid in bonuses; and that 12 per cent national insurance will be paid by the employer, plus 2 per cent by the employee? Therefore, 63 per cent of the bonuses—I think that is the right number—will come back to the Exchequer at a time when it needs revenue. If the money is not paid in bonuses, presumably it can be offset against losses and the Exchequer will receive nothing.