Bonuses and cuts: A ‘crucial year’ for Britain
By Ian Dunt
Nick Clegg has heralded a “crucial year” for Britain, as he tried to paper over the government’s failure to tackle City bonuses.
Speaking on the Today programme, the deputy prime minister admitted that 2011 would see the deficit reduction plan hit Britain hard.
The comments come as the government stepped back from a coalition agreement pledge to take “robust” action to tackle “unacceptable” bonuses in the financial services sector.
The government is expected to unveil a series of commitments to a business development fund instead, in a bid to prove they are serious about seeing lending return.
The move prompted Labour leader Ed Miliband to demand that the government extend the one-off tax on bonuses.
Miliband calls for renewal of bonus tax
The retreat on bonuses marks a significant defeat for Mr Clegg and business secretary Vince Cable, who both made much of their anger at bonuses in the pre-election period.
The two men demanded a tough stand against bonuses in government as well, but Mr Cameron is understood to have been convinced that taking a tougher stance on bonuses could have threatened HSBC, RBS and Barclay’s investment operations in London.
“I totally accept that the sky-high numbers that are bandied about in the City of London seem to come from a parallel universe to many people,” Mr Clegg said.
“But I think the key issue of principle is this – for those people running state-owned banks, they have to be sensitive to British taxpayers, who are the shareholders of these state-owned banks, so we are entitled to say that should be reflected in the sensitivity with which bonuses are awarded.
“The people who run these banks should show extra sensitivity and transparency in the way in which they reward themselves.”
Despite the bonus controversy, Britain’s financial services sector showed signs of a strong recovery in the final quarter of 2010.
Figures from the CBI showed that 50% of financial services businesses reported a growth in sales during the period.
While the government is braced for anger when bonuses are paid this year, it still appears willing to step in where the bank is partly state-owned.
Asked whether he would consider vetoing bonuses at RBS, where chief executive Stephen Hester is thought to be preparing for a £2 million bonus on top of his £1.2 million salary, Mr Cameron replied: “Absolutely, absolutely. We are the predominant shareholder in it.”
But Liberal Democrats were said to be irritated by the tone of the prime minister’s appearance on the Andrew Marr show, in which he defended the banks against their critics.
“The whole country suffered from irresponsible lending practices, from irresponsible behaviour,” he said.
“But we need to recognise that there were a lot of people to blame for the mess we are in and that we shouldn’t just think it’s an easy scapegoat to pick one in view.
“Governments made mistakes, regulators made mistakes, politicians made mistakes; everyone was involved.”
Meanwhile, Mr Clegg warned that 2011 would see the spending cuts hit the country hard.
“For the country as a whole, clearly this is the year when the savings that we have announced are going to start having an impact,” he said.
“That clearly will be difficult but I think at the same time there are signs that the repair job we are doing on the government finances and the general creation of greater confidence in the economy might also start showing itself as well.
“I think it will be a crucial year – a crucial year, yes, of some very challenging circumstances for millions of people in this country, but I hope the beginning of a real turnaround as we move forward and as we successfully implement the repair job on the economy.”
The comments come as Ed Miliband warned of a lost generation of children resulting from the scrapping of the future jobs fund.
