Stephen's views on the Government's bail-out of UK banks
Stephen with Liberal Democrat Shadow-Chancellor Vince Cable
The banks participating in the government-supported recapitalisation scheme are Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide, Standard Chartered and RBS. In addition, there are the recently nationalised Northern Rock and Bradford & Bingley, which can be included in the list of banks now being supported by government funding.
Naturally the issues surrounding the banking crisis are both complicated and sensitive. I share taxpayers' concerns that the money used in the government's rescue-package should be spent reshaping the banks rather than paying for executive bonuses.
In regards to the so-called 'City bankers', which I take to mean high-salary investment bankers exercising high-risk strategies, my Liberal Democrat colleagues and I believe that the continued receipt of excessive bonuses by these bankers is unacceptable. It is rather astounding that these wealthy bankers take bonuses which seem unimaginably large to most people, whilst their banks are propped up by public funds. As Liberal Democrat Shadow Chancellor, Vince Cable, has stated in regards to sizeable bonuses for investment bankers, "when millions of people are facing pay cuts or even unemployment, this is indefensible." I believe that the government should follow the example of President Barack Obama, who has imposed a salary cap of $500,000 for executives of US banks supported by the US Treasury bail-out package. Of course, the Government would need to set its own UK-specific salary cap.
However, at the same time I also believe that administrative and non-senior executive staff at UK banks should not be castigated by the government for mistakes made by senior executives. The bonuses normally received by staff at lower salary grades does not represent anything close to the excessive amounts still being paid to some senior executives, and where their performances have remained strong and their decisions had little or no influence on the overall collapse of the banks it seems unfair to penalise them. The difficulty of course is in determining where to draw the line between staff at lower levels of the bank's structure and those whose poor decisions and risky strategies directly led to the need for these banks to be rescued by the Treasury's bail-out package. The government needs to undertake a fair remuneration assessment of employees at all levels of the banks in order to ensure a fair deal across all job levels.
My Liberal Democrat colleagues and I believe that the Government must freeze all bonus payments for employees of semi-nationalised banks such as RBS and Lloyds-HBOS. In addition the pay details of all employees earning over £100,000 a year must be published. In the long term, we believe that a new bonus framework must be created, ensuring that they are linked to long-term performance of the company, with bonuses payable in shares that will not be redeemable for five years. My colleague, Lib Dem Shadow Chancellor, Vince Cable, has for months been pressing the Government to take up positions on the boards of the nationalised and part-nationalised banks in order to exert more pressure over remuneration and lending levels.
As regards Sir Fred Goodwin, I believe it is entirely unreasonable for him to receive a £650,000 per year pension. Although he cannot be accused of being solely responsible for the collapse of RBS he nevertheless was a key player in the decisions that led to the bank losing billions of pounds and thus needing the support of the government's bail-out package to avoid insolvency. However, I believe the government should think carefully before attempting to alter legislation in order to strip Sir Fred Goodwin of his pension. As stated by my colleague, Lib Dem Shadow Chancellor, Vince Cable, "the Government would be on strong ground to tell him he is entitled to pension payments available to employees of bankrupt companies under the Pension Protection Fund, which have a maximum of £27,000 a year." A similar ruling could then be imposed on other retiring executives who are deemed to have been directly implemented in the high-risk strategies exercised by UK banks that led to their collapse.
These are extraordinary times. I never imagined that I would be supporting the nationalisation of the British banks. However, if the bail outs had not occurred then more banks would have failed, leading to unemployment amongst bankers, rather than questions over bonus eligibility.
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