City bonus systems need to change, the Prime Minister told the Liaison Committee yesterday as he faced questions from MPs over the UK's economic condition.
Gordon Brown's questioning followed the Treasury Select Committee's grilling of banking chiefs over their involvement in the decline of the UK's banking
It was during this hearing that RBS chief executive Stephen Hester said that despite receiving a £20billion Government bail-out and now being majority owed by the tax payer, RBS
still plans to dish out staff bonuses, which according to reports, could total £1billion.
Mr Hester's confirmation that bonuses will still get paid have infuriated taxpayers - John Prescott’s petition "No Ifs No Buts- Give up the Bonus, RBS" has so far received 29,400 signatures from disgruntled members of the public.
One supporter, Adryon Stuart said: “For the management of these organisations to still get bonuses is insane. There is no other industry where this would happen in this situation.”
It is following public outrage over the issue that the Prime Minster has proposed that a better bonus system needs to be put in place.
Speaking yesterday Mr Brown said that the most important principle to follow over bonuses is that there should be no reward for short term; he said that rewards should only be for long term success.
He also said that bonuses should not be a "one way bet", and that they should be a reward that can be taken away upon failure.
The new bonus system should also be backed up if possible by the Financial Services Authority (FSA
), the Prime Minister added.
And the principle of repaying bonuses has been backed up by a Populus poll conducted for The Times, which found that 64 per cent of those surveyed thought that bankers who took decisions which led to the taxpayer bailouts should be forced to repay their bonuses.
The Times poll also found that the capping of bonuses would be supported by 85 per cent of respondents, while 82 per cent also think that bankers' salaries should be capped.
Commenting on the issue of City bonuses, Liberal Democrat leader Nick Clegg said: "We need to cut through the nonsense about bonuses and stop them, right now, at board and senior management level.
"Banks can no longer justify a system of pay that destabilises the financial system."
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