Stephen Hester: RBS boss 'should turn down his £1m bonus' says Jeremy Browne

• Lib Dem Foreign Office minister Jeremy Browne said Hester earns more in three days than a soldier serving in Afghanistan would earn in a year


• Criticism from inside Coalition puts David Cameron under pressure to act
  


• Ed Miliband claims the award is a clear 'failure of leadership' from the PM
  


• Boris Johnson says he is 'at a loss' to explain the size of the bonus
  


• Bank claims it showed 'restraint' as Stephen Hester was entitled to £1.5m

By Gavin Allen

Last updated at 2:33 PM on 27th January 2012

Bonus: Royal Bank of Scotland CEO Stephen Hester was given £1m by RBS chiefs, despite a catalogue of failures and his decision to axe 3,500 jobs

The boss of Royal Bank Of Scotland has a public duty to turn down his £1m bonus, a Liberal Democrat minister said today as the bank came under mounting pressure following the massive pay award.

Jeremy Browne, a Foreign Office minister, pointed out that Hester had earned the same in three days as a soldier serving on the frontline in Afghanistan would earn in a year and called on the bank boss to examine his conscience.

Mr Browne's criticism adds to the widespread fury triggered by the taxpayer-owned bank's decision to give Hester a bonus worth more than many ordinary workers earn in a lifetime.

While the bank insists it has shown restraint - claiming its chief executive was 'entitled' to £1.5million - the decision has become a lightning rod for public disgust at the culture of rewards for failure.

Labour leader Ed Miliband, the Bank of England's governor Mervyn King, union leaders and taxpayers' watchdogs have all slammed the pay award from a bank which received a £45 billion state bailout.

The pay award comes just days after ministers announced a crackdown on executive pay and David Cameron said a seven-figure sum for Mr Hester would be unacceptable.

The Prime Minister said rewards for failure made 'people's blood boil' when – in the words of Mervyn King – hard-up Britons were suffering 'a ferocious squeeze'.

But Cameron has been placed in a very difficult position by the criticism from within the coalition government and he now faces pressure to follow up his words with action.

Speaking on BBC1's Question Time, Mr Browne said: 'I think he should reflect on that.

'He is working for a company which is five sixths owned by us, the taxpayer, and I think he has to think like a public servant, not like someone who's there to line their own pocket.

'He needs to think like a public servant who has a duty to his country, not just his own wealth.'

'No-one's forcing him to take this money. He could struggle on with £1.2m.'

Angry: David Cameron said that the rewards for failure make people's 'blood boil' while Lib Dem minister Jeremy Browne, right said Hester had a duty to refuse the bonus, which is more than a soldier earns a year

Labour leader Ed Miliband seized the opportunity to pressure Cameron, saying that the pay award showed the Prime Minister had failed to live up to his rhetoric on executive pay and shareholder activism.

'It's a disgraceful failure of leadership by the Prime Minister,' he said.

'He's been promising for months action against excessive bonuses, executive pay, and now he's nodded through a million-pound bonus.

'He's also been lecturing shareholders about how they need to be more active in holding executives to account.

'He owns, through the British Government, 83% of the Royal Bank of Scotland.

'He must now explain, not least to the British people, why he has allowed this to happen.'

Pressuring the PM: Ed Miliband, left, said the pay award was a clear failure of leadership from David Cameron while Boris Johnson said he was 'at a loss' to explain the size of the bonus

London mayor Boris Johnson joined the condemnation, saying he was 'at a loss to justify' the scale of the payment.

He said he had sympathy for Mr Hester and wanted an end to 'incessant banker-bashing'.

But he went on: 'I find it absolutely bewildering because RBS occupies the same status in the economy as Gosbank did in the Soviet Union: it's a state-owned bank.

'The idea that this is not in the control of the Government seems to me to be far-fetched.'

Protesters from civic campaign group Avaaz are due to gather at the RBS headquarters in London later to call for bonuses to be dropped.

Trade union leaders have also vented their anger at the size of the bonus, pointing out that millions of public sector workers were facing a pay freeze and lower pensions as well as job losses.

Protest: A man wearing a 'fat cat' suit stands outside Royal Bank of Scotland in London, with a cigar yesterday as the bank met to decide on the bonus

David Fleming, Unite national officer, said: 'What planet does Stephen Hester and his banking chums live on?

'Taking almost £1 million from taxpayers' pockets as a bonus is utterly disgusting and offensive to every working person across the country. How can a Royal Bank of Scotland senior banker who is responsible for sacking over 21,000 workers be rewarded in this way?'

TUC general secretary Brendan Barber said: 'Ordinary people facing the biggest squeeze in their living standards for decades and businesses desperate for credit will not understand why Mr Hester should get such a huge bonus.

'The Government has been lecturing public servants about how they must accept a pay freeze and a big increase in pension contributions. They seem to have made an exception for Britain's best paid civil servant.'

Paul Kenny, general secretary of the GMB union, said: 'A bonus of nearly a million pounds looks to ordinary people like he has won the lottery - with a ticket they paid for.'

David Hillman, spokesman for the Robin Hood Tax campaign, said: 'Curbing Hester's bonus at state-owned RBS is a small step in the right direction but nowhere near enough.

It is believed any payout to Hester would be in shares rather than cash, and deferred for three years.

Senior Government sources said they were satisfied Mr Hester's bonus, which was £2m last year, had been cut and insisted he had to be paid well or be lost to a better-paid job in the private sector.

Gary Greenwood, an analyst at Shore Capital, agreed and argued that the real test of Hester's pay is how much he could earn somewhere else.

Sir Philip Hampton, chairman of RBS, said the bonus was fair, adding: 'A safer and more valuable RBS is in the interests of our customers, shareholders and the UK economy.

'We are progressing well toward this goal under the leadership of Stephen Hester.'

Criticism: Sir Mervyn King said it would be wrong if rewards go to a small elite earlier this week, while TUC leader Brendan Barber said the Government's lectures on pay freezes clearly don't apply to Hester

But Hester's bonus is just the first of many for staff at a bank in the process of laying off 3,500 employees. 

RBS's share price, meanwhile, has slumped by 40 per cent, giving the taxpayer a paper loss of billions of pounds.

The bank fell slightly short of its target for lending to small firms under the government's Project Merlin initiative to get credit flowing through the economy,

Critics argue the Merlin goals are faulty as they measure banks' 'capacity' to lend – the money they make available in theory.

Small firms claim the banks have hiked up loan charges and fees, deterring businesses from taking up the funds.

Under the terms of Merlin, RBS and the country's other four biggest banks pledged to lend small and medium-sized firms £76billion in 2011.

Between January and September, this should have seen them hand out £57billion – and they fell £1billion short.

Lord Oakeshott said RBS, which is 83 per cent state owned following its bail-out in 2008, was 'the worst culprit by far' among the banks.

RBS earlier this month announced a further 3,500 job losses in its investment banking operation, on top of 2,000 announced previously. The bank has shed around 30,000 staff in the past two years, 22,000 of them in the UK.

Source : dailymail

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