UK Politics

Cameron and Miliband clash over bank bonuses

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Media captionEd Miliband challenges David Cameron on bankers' bonuses

David Cameron and Ed Miliband have traded verbal blows over bank bonuses in their first Commons clash of 2011.

The Labour leader accused the PM of breaking promises on curbing bonuses and cutting taxes on banks this year.

Mr Cameron said he had got his figures wrong and Labour had let the banks "get away with absolute murder".

The clash at prime minister's questions comes amid rising speculation that payments for leading bankers will total £7bn this year.

The BBC's Business Editor Robert Peston says the outgoing chief executive of Lloyds Banking Group Eric Daniels is in line for a bonus of about £2m this year.

This came on top of recent reports that Stephen Hester, boss of the Royal Bank of Scotland which is 84% taxpayer-owned, could receive a £2.5m bonus.

Downing Street have denied giving up attempts to curb banker bonuses and say a permanent bank levy will bring in £2.5bn a year by the end of this parliament.

'Pathetic excuses'

But Labour are urging ministers to extend the bankers' bonus tax which was in place last year and, the party argue, raised £3.5bn.

In the Commons Mr Miliband attacked the government over bank bonuses. He asked for an update on "progress" on a previous Conservative call that no banks in which the taxpayer owned a large stake should pay cash bonuses of more than £2,000.

And he said that the government's bank levy was due to raise less this year than Labour's one-off bonus tax had last year, asking Mr Cameron if it was "fair and reasonable at a time he's raising taxes on everyone else to be cutting taxes this year on the banks".

Mr Miliband accused the prime minister of being "out of touch": "The country is getting fed up with the prime minister's pathetic excuses on banks," he said.

But Mr Cameron said it was Labour's bank bailout - which had "asked for nothing in return" - which was causing difficulties now. He accused the previous government of drawing up a "completely inadequate contract".

He denied cutting taxes on the banks and suggested shadow chancellor Alan Johnson could not "do the numbers".

"Last year, the banks paid £18bn in tax, this year they are going to be paying £20bn in tax, their taxes are going up."

Mr Miliband said the government's banking levy was raising £1.2bn a year - while Labour's bank bonus tax raised £3.5bn: "In anyone's language that is a tax cut for the banks," he said.

'Nothing man'

But Mr Cameron said the government's banking levy would raise £2.5bn a year "once it is fully up and running" - while Labour's bank bonus tax had raised £2.3bn "net" and former Labour chancellor Alistair Darling had said it could not be raised ever year.

He said Labour had done little to regulate bankers' bonuses - at a time when Ed Miliband was working at the Treasury.

"We've ended up with a shadow chancellor who can't count and a Labour leader who doesn't count," Mr Cameron said.

"He was the nothing man when he was at the Treasury and he is the nothing man now he's trying to run the Labour Party."

Mr Miliband said the prime minister had backed greater deregulation of the banks when he was leader of the opposition: "That is the truth, there we have it. Life in 2011 on Planet Cameron: One rule for the banks, another for everybody else."

Asked about Mr Daniels' reported bonus, Transport Secretary Philip Hammond told BBC Radio 4's World At One "it was not welcome news" as ministers expected taxpayer-supported banks to be "leaders in showing restraint" over bonuses.

Lib Dem MP Don Foster defended the action the government had taken to get banks to pay more taxes and for bonuses to be paid in shares but said "nobody was happy" with the current situation.

"Some of the figures being talked about are totally unacceptable which is why it is so vital the discussions going on are successful," he said.

Although the total annual payments to bank staff this year are expected to be lower than in 2010, the TUC has said ministers had "unconditionally surrendered" over the issue.

"People will be appalled to learn that for all the tough rhetoric, the government has never asked the Barclays chief executive to reduce his bonus," its secretary general Brendan Barber said.

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