March 6 (Bloomberg) -- Prime Minister David Cameron defended the British government’s resistance to the European Union’s planned cap on bankers’ bonuses after the opposition Labour Party accused him of being “totally out of touch.”
Labour leader Ed Miliband used the prime minister’s weekly question-and-answer session in Parliament today to attack Cameron’s stance on the EU proposals after Chancellor of the Exchequer George Osborne said yesterday in Brussels that he can’t support them. Miliband began by asking Cameron about “John from east London,” a banker who earns 1 million pounds ($1.5 million) a year.
“He’s worried that under the new regulation his bonus may be capped at 2 million pounds,” Miliband said, to laughter from Labour lawmakers sitting behind him in the House of Commons in London.
Cameron replied by pointing out that Miliband had worked as a Treasury aide to Gordon Brown during his decade as chancellor starting in 1997. “Under this government, bonuses are one quarter of what they were when he was in the Treasury,” the prime minister said. “I don’t have to listen to the croupier in the casino when it all went wrong.”
Wage inequality is being used by Labour in a bid to show Cameron’s Conservatives as a party that does too much to help the rich at the expense of what Miliband calls the “squeezed middle.” Cameron’s party came third last week in a special election in Eastleigh in southern England, fomenting renewed dissent in his party over his ability to lead it into the next election in 2015.
“I can’t support the proposal currently on the table, but I hope if we make progress over the next couple of weeks that we have a proposal I can support,” Osborne said yesterday after other EU nations backed the bonus-cap deal.
Ireland, which holds the EU’s rotating presidency, pledged to iron out the last elements of the agreement in coming weeks. Pay rules were a late addition to EU legislation on how it will apply global guidelines to strengthen bank capital requirements.
Talks had dragged on for 18 months before the Irish negotiated the bonus agreement, which says bonuses can’t be bigger than salaries unless certain conditions are met, in order to move the broader effort forward.
Banks have warned that the bonus curbs would place them at a disadvantage in hiring the best recruits and force them to boost executives’ basic pay.
London Mayor Boris Johnson, a Conservative like Cameron and Osborne, said the U.K. government should be ready to block the proposals, calling them an attack on London as a financial center.
“We don’t try to cap the pay of oil executives or football players,” Johnson told reporters in the British capital today. “I can see why people rage about what happened with the banks but this is an attempt to knock London off its perch and we’re not going to let it happen.”
Johnson, a possible future Tory leader, said the U.K. should be ready to invoke the “Luxembourg Compromise,” which allows an EU government to block a majority decision when it is highly detrimental to the national interest.
“I really hope Brussels will think again,” Johnson said. “It’s not just hostile to the greatest financial center on earth. It’s hostile to growth across the EU. If this did succeed, people would just head off to New York or Singapore.”
The plans will push those working in London’s finance industry to join the campaign for Britain to quit the EU, a leading euroskeptic Conservative lawmaker said.
“There are those in the euro system who can’t quite forgive the success story that is the City of London, and these spiteful proposals are deliberately designed to harm a U.K. national interest,” Douglas Carswell told Guy Johnson on Bloomberg Television’s “The Pulse” today. “I have advocated that the United Kingdom should withdraw from the European Union, and I think that message will now resonate with a lot of bankers.”
To contact the reporter on this story: Gonzalo Vina in London at firstname.lastname@example.org
To contact the editor responsible for this story: James Hertling at email@example.com