Osborne targets bonuses at high street banks

Monday 26th October 2009

George Osborne has called for Britain's high street banks to be banned from paying "significant" bonuses to staff in order to prioritise lending.

In the Conservatives' strongest attack on bankers since the crisis in the sector last autumn, the shadow chancellor insisted bonuses should be paid in shares that cannot be cashed for three years instead.

In a speech at Reuters in Canary Wharf Mr Osborne outlined Tory plans to re-divert bankers' bonuses to help consumers and businesses.

Only £2,000 of bonuses would be payable in cash, although larger amounts would be permitted in shares, under the Conservative proposals.

"I am today calling on the Treasury and the Financial Services Authority to combine forces and stop retail banks paying out profits in significant cash bonuses," he said.

"The cash that would have been paid out should be put onto banks' balance sheets explicitly to support new lending.

"This should be a condition of continuing to receive taxpayer guarantees and liquidity support."

Mr Osborne added: "We cannot wait for the promised land of a new responsible bonus culture which looks more remote than ever. We need to take emergency steps to support bank lending and move the economy forward."

Figures released last week showed the UK economy contracted for a sixth consecutive quarter, confirming the longest recession since records began.

Despite GDP growth estimates for the third quarter of 2009 stood at a negative 0.4 per cent, government ministers are still confident of a return to positive growth in the final quarter.

Mr Osborne made clear on Monday morning he blamed the government for the continuing economic contraction.

He said both "confidence and credit" were lacking in the economy but sought a conciliatory approach to bankers as he did so.

"The politics of envy will play no part in our plans. But we do need the politics of common sense," he said.

"Cash for the economy, not cash for the bonuses. We are all in this together."

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