Britain’s top labor leader, Brendan Barber, called for a “drastic realignment” of bankers’ pay as Liberal Democrat ministers told lenders they may face more taxes unless they keep bonus payments low.
“We still haven’t found the right mechanisms to change the culture in the banks,” Barber, the general secretary of the Trades Union Congress, said in a interview today in Liverpool, northwest England, where he is attending the Liberal Democrats’ annual party conference.
“I’m very much concerned that the mindset is still business as usual,” Barber said. “The banks haven’t changed their reward system in any fundamental way and they are still not serving the needs of the wider economy, with the rate of lending going into the wider economy depressingly low.”
Deputy Prime Minister Nick Clegg and Business Secretary Vince Cable told activists at the party conference this week that bankers remain a target for the government even as the financial crisis ebbs. Cable said yesterday that banks face “a potential train crash” if they pay out big bonuses this year.
“I think we need a drastic realignment of the level of rewards. People getting 2 million, 3 million, 4 million, 5 million packages is totally unjustified and needs a total rethink,” Barber said. The TUC represents more than 6 million workers.
“It’s incredibly important that the banks understand you cannot possible award yourself ludicrously sky-high bonuses,” Clegg told BBC Radio 4 today. “If the banks pay themselves unjustified bonuses, we reserve the right to take very serious action.”
The business secretary said the government was considering implementing a bank tax proposed by the International Monetary Fund if lending to businesses doesn’t increase and if banks don’t moderate pay.
The stock of lending to U.K. businesses by British banks and building societies contracted by 2.5 billion pounds in July, and lending to British companies has “remained subdued” since the end of 2008, the Bank of England said yesterday.
Figures released today showed banks paid 40 percent more than predicted in a one-off bonus tax to the government, suggesting the levy on payrolls in force from December 2009 to April 2010 failed to limit executive pay.
Lenders paid 3.5 billion pounds ($5.4 billion) by Aug. 31. Chancellor of the Exchequer George Osborne said in June he expected to raise 2.5 billion pounds from the tax.