RBS and Stephen Hester’s bonus

I understand the level of anger about excessive bonuses, especially in state owned banks. I therefore welcome Stephen Hester’s decision to waive his bonus. He should be focussing on the important job at hand, namely getting back the billions of pounds of taxpayers’ money that was put into RBS.

I welcome the fact that the Government is committed to tackling unacceptable bank bonuses. Indeed, cash bonuses at RBS have been capped at £2,000 this year and the Government has been very clear that the overall bonus pool at RBS must be considerably lower than last year. It is my view that banks should be prioritising the build up capital, not paying out huge bonuses and dividends. I am confident that Ministers will use all of the tools available to them to make sure that this is the case.

While tackling bonuses is vital, it is just as important to make sure the banks make a substantial contribution to the public purse. This is why the Chancellor has introduced a permanent bank levy that will raise £2.6 billion a year from the banks.

Finally, in order to tackle the issue of bonuses further, the Financial Services Authority has outlined some of the toughest rules in the world on bonuses in its revised remuneration code. Bonuses will be deferred and linked to performance and there are strict limits on the amount of cash that can be paid up front.

As a result of all these measures, I am confident that the Government and the FSA are doing what they can to ensure the bonus culture is tackled and the banks contribute many billions extra to public spending.