Brown and Mandelson must be prepared to act over bank bonuses

By Andy Reed

The Prime Minister has insisted there should be “no reward for failure” at banks which have had to be bailed out by the taxpayer.

Gordon Brown was speaking after reports Royal Bank of Scotland is considering awarding large bonuses, despite expectations of huge annual losses. However Gordon then stopped short of saying the government would impose a salary cap on rescued banks. This is despite last Wednesday President Obama capping executive pay at rescued US banks.

I had hoped that Prime Minister Gordon Brown would follow up his tough words with action if the banks failed to heed his warning.

I am sure there are lots of good technical reasons why some bonuses should be paid to low paid staff – but I think it is morally indefensible at this time to allow anybody else to benefit. These are the people who have brought the global economy to its knees. sadly we have to entrust them to help us get back out of the mess they created but they shouldn’t be paid bonuses to do so. The public rightly expect them to be eating humble pie – not paying themselves fat bonuses. I hope Gordon and Peter Mandelson back up their strong words if the RBS is daft enough to try to pay bonuses.

This is a great example of where Ministers need to act and think politically as well as technocrats. It is a tough call much of the time as I learned in my 2 years in the Treasury Team with Gordon Brown. Ironically there is probably nobody else who thinks so politically and strategically every minute of the day.

This is where there is a danger of the public disengaging with us. Quite rightly they feel the bankers got us into this mess. They never had much taste for their massive bonuses anyway but now they look grotesque. There is not technical argument that will convince the public that bankers deserve anything other than to suffer like the rest of us. Yes we need them to help us out of the mess they got us into but we certainly shouldn’t be afraid of bankers being poached as an excuse for having to pay bonuses. I am sure there are lots available to fill vacancies.

Even the Church of England Synod will be taking time this week to discuss the moral implications of the financial crisis. Perhaps we need to spend a little more time in lifting our heads from the technical measures needed to keep the economy afloat and – in a phrase I hate – to create a narrative about what we are doing and why. And to do it in a way that chimes with the public. I am sure they are ahead of us on this one and would welcome a tougher stance.

If RBS go ahead and pay bonuses I will be left with no morally defensible explanation to my constituents why a bank bailed out by them as taxpayers is then giving away their money to failed bankers. Sometimes we just need to see it in these stark and simple terms and say its wrong and ACT.