Labour will on Wednesday demand that the government prevent bailed out Royal Bank of Scotland from paying out bonuses more than twice the size of its bankers' salaries and call for a repeat of the bonus tax.
The debate will also scupper attempts by the new boss of RBS – Ross McEwan – to take the drama out of the bank's annual bonus round. McEwan said he would waive his bonus when he was appointed three months ago to avoid the furore surrounding the pay of his predecessor Stephen Hester.
But Labour's shadow City minister Chris Leslie intends to put pressure on the chancellor by blowing open the ongoing debate in the City about how to handle the bonus cap being imposed by Brussels. As a result of new rules introduced at the start of this year – but which come into force for bonuses paid this time next year – bonuses for top staff can only be equal to the size of salaries.
Under the EU law – which Osborne is fighting through the courts – banks can pay bonuses twice the size of salaries if they ask shareholders' approval. The taxpayer – through UK Financial Investments – owns 81% of RBS.
Leslie said last night ahead of an opposition day debate: "At a time when families face a cost-of-living crisis and bank lending to business is falling, it cannot be right for George Osborne to approve a doubling of the bank bonus cap."
"As the majority shareholder, the government should reject any request from RBS to increase the cap … The case for repeating Labour's tax on bank bonuses, to fund a compulsory jobs programme for young people, is getting stronger by the day," Leslie said.
RBS has not yet decided how to handle the bonus cap although it is widely expected that all banks will ask shareholders to approve motions to pay twice times salary. Banks such as Barclays are also planning additional allowances to pay their top staff from next year.
According to the motion of the opposition day debate, Labour will accuse the government of failing to deliver a competitive banking system and allowing bankers' pay to remain "unacceptably high".
McEwan is currently devising his strategy for RBS – bailed out with £45bn of taxpayer money over five years – that is expected to involve a further scaling back of the investment where the headcount has dropped to around 9,000 from around 24,000 before the crisis.
RBS said on Tuesday "no decisions have been made". When it publishes its results for 2013 – which McEwan has already warned will show a loss because of the creation of a new non-core division – RBS is expected to show the size of its bonus pool for that financial year. Last year it revealed that it had paid 95 bankers more than £1m on the same day Barclays admitted it had paid 428 bankers more than that amount.
If RBS did decide to ask shareholders to approve a twice salary limit on bonuses the vote would most likely take place at the annual meeting, probably in May.
guardian.co.uk © Guardian News and Media Limited 2010
image: © Mark Ramsey