Gordon Brown declared yesterday the era of big City bonuses was over as he called for bankers who took irresponsible risks to be “punished”.
Following Wednesday’s historic £500billion bailout plan, the prime minister spoke of his anger at the way banks had been operating.
With many voters clearly furious that it would be the taxpayer who picked up the bill for banks’ mistakes, Mr Brown said he would be going around the country to explain why the rescue was necessary.
Liberal Democrat leader Nick Clegg last night called on the prime minister to remove the bank executives responsible for the crisis.
Meanwhile Work and Pensions Minister Tony McNulty became the first member of the government to publicly acknowledge that the UK could be heading for a recession. “The success of the announcements (on Wednesday) will be the precursor to how deep and how long the recession will be,” he said.
“We’re slowly getting to a stage where the slowdown may well turn technically into recession – and then we’ll be talking about the nature and depth of the recession.”
In a TV interview, Mr Brown said he shared the public anger at the damage the banks had done to the economy.
“I am angry too. I am angry at irresponsible behaviour,” he said. “Our economy is built around people who work hard, who show effort, who take responsible decisions, and where there is excessive and irresponsible risk-taking, that has got to be punished.”
However, pressed later on what form of punishment he had in mind, the prime minister’s spokesman said only that he did not want to see irresponsible risk-taking rewarded.
Mr Brown said the banks who signed up to the rescue plan – which will see the government invest up to £50billion in return for preference shares – would have to accept there could be no more huge bonus payouts for top executives. “The days of big bonuses are over. One of the conditions of us helping the banks is that we will have to reach an agreement about their executive remuneration,” he said.
Mr Brown said the banks had only themselves to blame for the way they had been left dangerously exposed following the collapse of the sub-prime mortgage market in the US.
“Most of this has come out of America and then affected the British banking system – but there have been abuses in our system as well and these have got to be dealt with too,” he said. “Where these guys have taken irresponsible risks, that is completely unacceptable. The problem is they didn’t know what they were buying from America.”
Mr Clegg said the government should go further, removing those executives who caused the problems. He also called for a ban on bonuses for bank board members, to remove the incentive to pursue “distorted, short-term business models”.
“Now the taxpayer has bailed out the banks, those senior executives who took excessive risks leading to this crisis shouldn’t be let off the hook,” he said.
“The government’s rescue package must be used as a starting point to reform the way banks operate to ensure this crisis is never repeated.”
Tory leader David Cameron last night repeated his call for the government to block bonus payments this year to the senior executives of banks which signed up to the rescue plan. “We need a culture where there aren’t rewards for failure and where senior leaders, if they screw up, face the consequences.”