Ed Miliband, the leader of the opposition Labour Party, will ask lawmakers to vote next week on a motion saying that pay at all British banks is out of control and urging curbs from any institution benefiting from an implicit government guarantee.
While the vote in the House of Commons on Feb. 7 won’t be binding on the government or any bank, Miliband has succeeded before in using Parliament to express public outrage. In July, News Corp. dropped its bid for the remainder of British Sky Broadcasting Plc before a debate called by the Labour leader, and on Jan. 29, Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester said he’d give up his bonus after Miliband called for a vote on it.
“The kind of huge bonuses which have caused such controversy recently should not be handed out for just doing your job,” Miliband said in a speech in London today. “Too many are getting bonuses which are too big, too often.”
Miliband argued that even though lenders such as Barclays Plc and HSBC Holdings Plc weren’t bailed out by the state in 2008 like RBS and Lloyds Banking Group Plc, they’re still benefiting from unspoken government backing and should behave accordingly. He said that voters expect them to exhibit restraint in a time of austerity.
‘Paying the Price’
“The consequences of the financial crisis are felt every time a library closes, every time a school can’t afford a new book, and every time a policeman or policewoman is taken off the beat,” Miliband said.
“The lesson of this week is to recognize the wider environment in which banks are operating,” he said. “People who did not cause the financial crisis are paying the price. Too many of those who did cause the financial crisis are not.”
As banks enter their bonus season, they’ve been on the receiving end of a public backlash. Two days after Hester waived his bonus, his predecessor, Fred Goodwin, was stripped of the knighthood he’d been awarded in 2004 for “services to banking” because of his role in RBS’s downfall.
Miliband praised RBS Chairman Philip Hampton for turning down a 1.4 million-pound ($2.2 million) stock award. Hampton said today the lender had failed to grasp how people in Britain would view the bonus awarded to Hester.
“It is true we underestimated the scale of the public reaction,” Hampton told the “Today” program on BBC Radio 4. He said that bankers’ pay had been “high for too long” in general, though it was now falling. He added that Hester’s compensation wasn’t excessive relative to other senior bankers.
Barclays is already planning to cut compensation for the 24,000 employees at its investment banking unit by as much as 30 percent, two people with knowledge of the talks said.
“This is a call for banking to recognize it has reached a crossroads,” Miliband said today. “To recognize that continuing on its current path will lead to further isolation from society, greater public anger -- and an economy which does not pay its way in the world.”