Brutal reception for bank boss as govt hit by bonus row
By Ian Dunt
Barclays boss Bob Diamond faced a wall of criticism from MPs today, as the government fought to escape attacks over bonuses.
MPs on the Treasury committee took the Barclays chief to task for bank bonuses, high-risk investments and tax avoidance.
The meeting came as Downing Street backed down in its battle to limit this year’s round of City bonuses, triggering anger among MPs and members of the public.
George Osborne was forced to defend himself in the Commons today, as he answered an urgent question on bonuses.
Labour MPs openly mocked and laughed at the chancellor as he tried to list government action against the banks.
Mr Osborne insisted that he would still try to force banks to reduce bonuses, become more transparent and start lending to small businesses.
“If the banks cannot commit to that I’ve made it very clear to them that nothing is off the table,” the chancellor said.
Shadow chancellor Alan Johnson accused Mr Osborne of “sneering arrogance”.
Since arriving in government, the coalition had gone from “the scent of the rose garden to the stench of broken promises”, Mr Johnson said.
Mr Diamond’s appearance raised even more problems for the government, after he admitted that no government minister had ever asked him to not take a bonus. The comment raised questions about the pressure the government claims to have put on the banking sector.
“People will be appalled to learn that for all the tough rhetoric, the government has never asked the Barclays chief executive to reduce his bonus,” TUC general secretary Brendan Barber said.
“The cosy conversations taking place behind closed doors are the opposite of what voters are being told.”
Despite the controversy over bonuses, Mr Diamond began the session by insisting that banks no longer needed to apologise for the financial crisis.
“The period of remorse for banks is over,” he said.
In an openly hostile exchange, Labour MP John Mann told Mr Diamond: “You gambled and you won. Someone had to win. Someone had to lose. The rest of us lost.
“The taxpayer lost – losing services, losing jobs. You were part responsible, weren’t you?
“You were part of the problem that we all now have. Isn’t that the case?”
“No, I don’t think so. Our obligation was to our owners,” Mr Diamond replied.
Asked if he would forego his bonus this year, Mr Diamond went on: “I haven’t been offered a bonus. That’s a decision the remuneration committee will be taking over the next few weeks.
“If offered a bonus this year, will you agree to take no bonus?” Mr Mann asked again.
“You’re not a big fan of Barclays, are you?” Mr Diamond answered.
Mr Mann answered: “I’m a big fan of getting answers from you.”
To laughs from the committee room, Mr Mann then asked: “Why is it easier for a camel to pass through the eye of a needle than for a rich man to enter heaven?”
Mr Diamond replied: “I’m pretty stuck on this one.”
The American then argued that taxpayers should never again be reduced to bailing banks out of trouble.
“It’s not OK for taxpayers to have to bail out banks,” he told MPs.
“Banks should be allowed to fail.”
Labour MP and parliamentary private secretary to Ed Miliband Chuka Umunna took Mr Diamond to task for tax avoidance.
Asked if he would commit to reduce the use of offshore businesses to avoid UK tax, Mr Diamond said: We’re complying with the spirit and letter of the law.”
Mr Umunna accused the Barclays chief of being engaged in “tax avoidance on a grand scale”.
Mr Diamond replied: “I can assure you were not engaged in tax evasion”.
In a forensic exchange, Mr Umunna continued: “There’s a big question mark over your head, Mr Diamond.
“You pushed very hard to purchase Lehmans sometime before it filed for bankruptcy.
“Do you understand why people think perhaps you are not suitable to run one of the biggest banking institutions in this country?”
Mr Diamond went on to strongly defend his decision-making during the period in which Lehman Brothers filed for bankruptcy.
Tory MP and former Barclay’s employee Andrea Leadsom told Mr Diamond that she was disappointed by his contribution.
“You seem to argue for the status quo for its own sake,” she said.
“You’re in denial about the extent to which the taxpayer has supported you. You’re denying the lack of competition in the UK. You are claiming levels of customer satisfaction hugely challenged throughout the industry.
“It seems to me the emperor has no clothes. You’ve given us nothing.”
The meeting came just as the government backed down in its battle over City bonuses.
Mr Clegg and Mr Cameron tried to quell the sea of anger over bankers’ bonuses in a series of media appearances, but critics pointed to the gulf between their tough pre-election rhetoric and their current appeasement.
“I totally understand the frustration, if not anger, of people who work hard, pay their taxes and play by the rules,” Mr Clegg told the BBC today.
“We’ve got to acknowledge that we need a healthy banking system for a healthy economy.
“We’ve also got to acknowledge that this government’s done a whole lot of things. We’ve imposed a levy on the banks which will raise much more money than Labour’s one-off bonus bank tax ever did,” he continued.
“We’ve also got to get the banks to lend more money. That’s the most important thing of all to businesses, to first-time borrowers. That’s what will get the wheels of the economy going.”
Banks are understood to have agreed to a broad set of guarantees to increase lending to small businesses.
