George Osborne has been accused of bowing to City pressure after he confirmed that it “might be better” if Britain did not act unilaterally to force banks to disclose details of bonus payments over £1m.
Labour claimed the chancellor had got cold feet over the increased transparency because of intense lobbing by the banks. Vince Cable, the business secretary, is also concerned about the abrupt change of tack.
Mr Osborne said he needed more time to consider the advice of Sir David Walker – author of a report on high-end bank pay – who argued in Monday’s Financial Times that Britain would be “mistaken” to go it alone.
Sir David said Britain should hold back on new regulation of bank pay until the chancellor had persuaded other big financial centres to follow suit.
Mr Osborne confirmed on Monday that he was no longer committed to Sir David’s original plan to list pay in bands above £1m. “It might be better for Britain to promote this internationally rather than just unilaterally,” he told the BBC.
Alan Johnson, shadow chancellor, said Mr Osborne should implement Labour’s plans for pay disclosure. “Labour legislated to make bankers’ bonuses more transparent,” he said. “The government have yet to implement that legislation. The public have the right to this information.”
Mr Cable is privately fuming at the public change of policy by Mr Osborne at a time when bank regulation was still being actively discussed in the cabinet.
“Transparency is key to creating confidence in any commitment from our banks to behave more responsibly on pay and bonuses,” said Mr Cable. “Outrageous and irresponsible pay structures were a driver in our financial crisis.”
Mr Cable’s allies insisted that talks with Mr Osborne were proceeding well, but they said he was adamant that shareholders should have more information about bank pay policy.
“International agreement is not a precondition for taking action in this area,” said one ally. Another said: “Vince thinks that authors of reports should stick by what they say in their report.”
Sir David, former chairman of Morgan Stanley International, insists that when he made his recommendations on bank pay last year he expected that there would be international convergence around more transparency.
But the absence of any movement by the US has made him think again. He fears that British banks could engage in regulatory arbitrage and shift activity offshore to avoid disclosure.
Mr Osborne, who needs a strong City to provide much-needed tax revenues, said it would be wise to take notice of Sir David’s views. “The first thing we have to do is to listen to what he has got to say – to consider his new insight into this,” he said.
Yet Mr Cable badly needs some action on bonuses, given his comments about “obscene” payments before the election. The coalition agreement also talks of “robust action to tackle unacceptable bonuses in the financial services sector”.
The Liberal Democrats hope that he may be helped off the hook if banks voluntarily show restraint in the bonus payments they make next February and March. “Those talks are going well,” said one aide to Mr Cable.
But Lord Myners, former City minister, insisted that disclosure was the only sustainable answer.
“If shareholders are not given the information to make informed decisions when they vote on remuneration, then the whole responsibility for approving the broad culture and context of banker remuneration falls squarely into the hands of the government and the regulators,” he told Sky News.
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