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February 6, 2012 12:21 am
David Cameron is facing renewed calls to take a stronger stance on bankers’ pay ahead of a key Commons debate this week.
As MPs prepare for a vote on Tuesday on the issue of bank remuneration, Chuka Umunna, shadow business secretary, warned the prime minister not to cave in to demands from Conservative party backers to defend the City of London against political attacks.
Mr Umunna told the Financial Times it was “unbelievably absurd” to label as anti-business those who took issue with the operation of the financial services sector. “The most vociferous critics of the sector of late can be found among the country’s businesses,” he said.
His comments follow warnings from Conservative party backers that the controversies surrounding the pay of Stephen Hester, the current Royal Bank of Scotland chief, and the knighthood of Fred Goodwin, the bank’s former chief, risked alienating the business community.
Michael Spencer, one of the top fundraisers for the Tories and chairman of Icap, the City broker, told the Sunday Times that the row that forced Mr Hester to give up his £1m bonus sent a negative message to the business community.
“I think the way Hester was effectively bullied out of his bonus was very negative indeed for the message it sends to the business community at large,” Mr Spencer said.
Lord Wolfson, the senior Tory peer, told the Financial Times last week the political pressure that forced Mr Goodwin to give up his knighthood seemed “rather cynical – an act more worthy of a school bully than a government”.
Angela Knight, chief executive of the British Bankers’ Association and former Tory Treasury minister, said on Sunday: “The events of the past week [have] seen people inflamed by aggressive rhetoric and individuals pilloried. Due process and the principle of fairness were set aside in favour of expediency.
“What was it all for? No doubt at the end someone is doing better in the polls than might otherwise have been the case. And everyone hates bankers, so who cares if a few of them get hurt?”
However, Downing Street is also conscious Labour leader Ed Miliband’s calls for “responsible capitalism” appear to have caught the public imagination.
When Mr Hester turned down his bonus, he did so knowing that MPs were likely to vote overwhelmingly against it in a debate forced by Labour.
The debate will now focus on remuneration in banks more generally, with Barclays expected to take centre stage as it prepares to set bonus levels for its executives this week.
While Labour has scented political blood over the bonus issue, party officials are wary of leaving voters with the impression that the party has tacked permanently to the left.
Meanwhile, union leaders on Monday claimed that changes to the way pay and bonuses were taxed could raise £1.7bn a year for the Treasury.
The Trades Union Congress said corporation tax relief for pay and bonuses worth more than 10 times average earnings should end in the banking and financial services sector. Stopping relief on earnings over £262,000 would raise £1.7bn a year which would pay back the deficit created by the financial crash, the union organisation said.
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