Banking: Bonuses

Lord Oakeshott of Seagrove Bay Excerpts

Tuesday 11th January 2011 Lords Chamber

[Lord Oakeshott of Seagrove Bay]

My Lords, I thank the Minister for the Statement. I do not know whether he has read it lately, but I have here an excellent document, The Coalition: Our Programme for Government, in which Nick Clegg and David Cameron promised,

“radical plans to reform our broken banking system”.

Item 1 said on banking:

“We will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial sector … We want the banking system to serve business, not the other way round”.

There is not much sign in the briefing that has been coming from No. 10 and the Treasury that they are very aware of those commitments. Can the Minister assure us that he will draw those commitments to the attention of the people in the Treasury who are working on these schemes, because frankly the messages that are coming out are not right when we are trying to do a serious negotiation with the banks to improve their behaviour?

Specifically on the Royal Bank of Scotland, what possible justification is there for Mr Hester, who is one of the highest-paid public sector workers in the country, to get any bonus at all when his bank has missed its legally binding mortgage and business lending targets by a mile?

[Lord Sassoon]

My Lords, I am always grateful to my noble friend Lord Oakeshott for reminding us of what is in the coalition agreement, which is always at the heart of what we do. I am sure that my colleagues in the Treasury will need absolutely no reminder of what the coalition agreement says in this area, because it is precisely because we are guided by the coalition agreement that we now have a package that, as I have explained, means that 2,500 banks as opposed to 25 are caught by the code. For all their talk, the previous Government had not actually brought in any new remuneration code. We now have one in place. We are continuing, as I said, to urge our European partners to work with us on a common set of banding disclosures. The current discussions are precisely to make sure that bonuses are lower than they would otherwise have been and that lending is higher.

In respect of the Royal Bank of Scotland, as I said in the Statement, we found ourselves having inherited a most extraordinary agreement negotiated by the previous Government that put absolutely no restrictions on RBS’s payments and bonuses this year. We want to see RBS now not as a front-runner, which seemed to be where it was encouraged to be under the previous Government’s agreement, but as a back-marker when it comes to its bonus payments for this year.