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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What price would the UK pay to stop Brexit?

The EU could end Britain's budget rebate and demand that we join the euro and the Schengen zone.

Among any group of Remain politicians, discussion soon turns to the likelihood of stopping Brexit. After Theresa May's electoral humbling, and the troubled start to the negotiations, those who oppose EU withdrawal are increasingly optimistic.

“I’m beginning to think that Brexit may never happen,” Vince Cable, the new Liberal Democrat leader, said recently. A growing number, including those who refuse to comment publicly, are of the same view. 

But conversation rarely progresses to the potential consequences of halting Brexit. The assumption that the UK could simply retain the status quo is an unsafe one. Much hinges on whether Article 50 is unilaterally revocable (a matter Britain might have been wise to resolve before triggering withdrawal.) Should the UK require the approval of the EU27 to halt Brexit (as some lawyers believe), or be forced to reapply for membership, Brussels would extract a price. 

Guy Verhofstadt, the European parliament’s Brexit co-ordinator, recently echoed French president Emmanuel Macron's declaration that “there is always a chance to reopen the door”. But he added: “Like Alice in Wonderland, not all the doors are the same. It will be a brand new door, with a new Europe, a Europe without rebates, without complexity, with real powers and with unity.”

The UK's £5bn budget rebate, achieved by Margaret Thatcher in 1984, has long been in the EU's sights. A demand to halt Brexit would provide the perfect pretext for its removal. 

As Verhofstadt's reference to “unity” implied, the UK's current opt-outs would also be threatened. At present, Britain (like Denmark) enjoys the right to retain its own currency and (like Ireland) an exemption from the passport-free Schengen travel zone. Were the UK to reapply for membership under Article 49 of the Lisbon Treaty, it would be automatically required to join the euro and to open its borders.

During last year's Labour leadership election, Owen Smith was candid enough to admit as much. “Potentially,” he replied when asked whether he would accept membership of the euro and the Schengen zone as the price of continued EU membership (a stance that would not have served Labour well in the general election.)

But despite the daily discussion of thwarting Brexit, politicians are rarely confronted by such trade-offs. Remaining within or rejoining the EU, like leaving, is not a cost-free option (though it may be the best available.) Until anti-Brexiteers acknowledge as much, they are vulnerable to the very charge they level at their opponents: that they inhabit a fantasy world. 

George Eaton is political editor of the New Statesman.