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Last updated: January 11, 2011 11:18 pm
Ed Miliband lashed out at the government over its failure to tackle bank bonuses during heated exchanges in parliament on Wednesday.
The Labour leader accused David Cameron, prime minister, of breaking a pre-election pledge that no employee of a largely state-owned bank should receive a bonus over £2,000 - a pledge that the Labour leader said was still on the Conservative party website.
Mr Miliband also demanded to know why the government had failed to implement Labour legislation which would force financial institutions to declare any bonuses over £1 million
The whole country was fed up with Mr Cameron’s “pathetic excuses”, and now knew that the prime minister was “out of touch because of his failure on the banks”, he said.
Mr Cameron countered that the Labour government bailed out the banks and asked for nothing in return. ”The reason we have difficulty this year is because of the completely inadequate contract that his government negotiated”.
The debate during prime minister’s questions followed a defiant performance by Bob Diamond, Barclays’ chief executive during questioning by a parliamentary committee.
Mr Diamond said the time for “remorse and apology” by banks over their role in the financial crisis should end, during rancorous exchanges with MPs over bankers’ bonuses.
Under gruelling questioning, he acknowledged the public anger towards bankers over pay and said he wished he could “make the issue of bonuses go away”.
But Britain’s highest-profile banker argued that it was not possible to stop paying bonuses without severe consequences for business and the broader banking sector.
In front of a packed audience, Mr Diamond refused to yield to repeated demands from MPs that he give up his own bonus, as he has done for the past two years.
He signalled that it was now time for the debate to move on.
“There was a period of remorse and apology; that period needs to be over. We need our banks willing to take risks, to be confident and to work with the private sector in the UK to create jobs and improve economic growth,” he said at a hearing examining the retail banking sector.
In a forthright defence of industry practices, the new chief executive of Barclays, who took home £18m last year in his former role as head of Barclays Capital, the investment banking division, said the bank must be able to pay competitive bonuses.
Mr Diamond’s comments came as Barclays Capital, the investment bank, this week prepares to tell several hundred of its staff that they are out of a job. The cuts, which will affect the bank’s offices in the US and Asia as well as the City of London, come after a period of expansion for BarCap, which acquired the US operations of Lehman Brothers in 2008 and has been building out its equities and advisory business in Europe and Asia.
The government is determined to force British banks to reduce bonuses this year, although its attempts have lost momentum.
George Osborne, chancellor, insisted that he had not given up efforts to impose bonus restraint on the banks and said Barclays could take a lead by cutting Mr Diamond’s pay.
Mr Osborne laid down five conditions for a peace deal with the banks, including increased business lending and a demand that bonuses should be lower than would otherwise have been the case.
He said: “If the banks can’t commit to that, nothing is off the table.”
But his warning was met with derision by Labour, which believes Mr Osborne is in full retreat on the bonus issue.
Alan Johnson, shadow chancellor, said: “The chancellor bows to the rich and powerful while bearing down on everyone else.”
Mr Diamond reaffirmed Barclays’ commitment to the UK – “this is the place we want to succeed, it is great for business, for attracting talent and raising capital” – but warned that forcing restraint on bonuses could drive banks overseas.
“The other option is that you don’t have investment banks located in the UK,” he said.
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