Bob Diamond's £6.5m bonus shows little “restraint”

Don’t believe the myth that Barclays didn’t benefit from state support.

It's payday for the man Peter Mandelson once described as the "unacceptable face of banking". Sky News's Mark Kleinman reveals that the Barclays boss Bob Diamond has been awarded a bonus of £6.5m for 2010. In a risible attempt to demonstrate "restraint", £1.8m of the bonus will be paid in shares and £4.7m in "deferred incentives". But the payout still makes Diamond the best-paid boss of the four big high-street banks.

In response, we can expect Barclays to remind us that it did not receive a pound of taxpayers' money. Yet this seemingly plausible defence does not bear scrutiny. Though it was not bailed out by the state, Barclays benefited immensely from the emergency measures introduced by the government to prevent a sector-wide collapse.

As John Varley, the former chief executive at Barclays, conceded in 2009:

There are two ways I would say the system as a whole benefited generically.

One was in the injection of liquidity undertaken by the Bank of England and a new structure put in place in March 2008.

And the other was the making available of guarantees from government for funding undertaken by banks. It is important to recognise that in each case the banks were encouraged to use these new structures that were put in place and we did.

It is also important to recognise that we were required and we did pay a price for these things, but I'm not trivialising the importance of the intervention. It was important.

Without the state-led bailout of RBS and Lloyds-HBOS, there would have been a run on all the banks, including Barclays. It was for this reason that George Osborne, while shadow chancellor, called for a ban on bonuses at banks that had received any sort of government guarantee.

As he said at the time: "It is totally unacceptable for bank bonuses to be paid on the back of taxpayer guarantees . . . it must stop." Having utterly failed to live up to this pledge, Osborne now insists that it's time to move from "retribution to recovery". But as Mervyn King pointed out at the weekend, few share this view.

Last month, Vince Cable rightly denounced the decision to award the RBS chief executive, Stephen Hester, a bonus of £2m as "offensive". Will the coalition's conscience speak out today?

George Eaton is political editor of the New Statesman.

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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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