George Osborne during a visit to the Royal Mint on March 25, 2014 in Llantrisant, Wales. Photograph: Getty Images.
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Osborne's U-turn on RBS bonuses has undermined his credibility

After voting against a cap as recently as January, the Chancellor has taken fright. 

For months, George Osborne has been battling in the European court to prevent the introduction of an EU cap on bank bonuses. But today at least, he's done the reverse. Under the new rules, banks are required to limit bonuses to 100 per cent of basic salaries unless they win shareholder approval for a cap of 200 per cent. It was a loophole that RBS intended to exploit in its pay-outs to executives. But rather than allowing the bank to do so (as its opposition to the cap would suggest), the government, as RBS's majority shareholder, has vetoed the plan. 

Abandoning the pretence that UK Financial Investments, which controls the state's 81 per cent share, acts independently of ministers, a Treasury spokesman said: "Under the new strategy set out by RBS's chief executive, Ross McEwan, RBS is heading in the right direction, but it has not yet completed its restructuring and remains a majority publicly owned bank. So an increase to the bonus cap cannot be justified and the government made clear it would not have supported such a proposal. The government therefore agrees that retaining the cap at the default ratio of 1:1 and RBS's proposed pay policy is appropriate."

In other words, far from opposing the EU cap, Osborne has acted entirely in accordance with its principles. It is a double standard that Labour has been quick to pounce on, noting that ministers voted against the party's motion to impose a minimum cap on RBS just a few months ago. Shadow Treasury minister Cathy Jamieson said:  

George Osborne is in a terrible muddle over bankers' bonuses. He is spending taxpayer's money on a legal fight in Brussels against the bonus cap and yet imposing the minimum cap at RBS.

The Government has bowed to pressure on RBS and finally admitted that bonuses of two times salary would be unacceptable at what remains a Bank in Government ownership. They voted against Labour's motion to impose the minimum cap at RBS in January, but have now been forced to reverse their position.

But confusingly at the same time the Chancellor is supporting higher bonuses in Lloyds Bank and elsewhere.

People who are facing a cost-of-living crisis are rightly angry about excessive rewards for failure in banking over recent years. The Chancellor should accept the logic of today's announcement and drop his legal action to block the bonus cap.

The Treasury has sought to justify the inconsistency by arguing that the large taxpayer stake in RBS means bonuses must be restrained. A Treasury spokesman said of the differing treatment of Lloyds and RBS: "It [Lloyds] is majority private-sector owned and the government's shareholding in the bank is now down to less than a quarter. Reflecting these different circumstances, the government will use its shareholder stake to support setting the bonus cap at the maximum allowable ratio of 2:1, in line with all other majority privately owned banks." 

But as so often in the case of Osborne, this decision has more to do with politics than policy. Ministers oppose a bonus cap on the grounds that, as Andrew Bailey, the head of the Prudential Regulation Authority, has said, any limit will "just increase base pay, reduce claw back and undermine financial stability". But all of these objections apply in the case of RBS. The bank responded to the government's veto by announcing that its new CEO Ross McEwan would receive an extra £1m a year in "allowances", doubling his salary. 

The reality is that the political cost of allowing the 81 per cent-taxpayer owned RBS to pay full bonuses was simply too high for Osborne to bear. Labour would have leapt on the move as further evidence of the Tories "standing up for the wrong people" and defending the super-rich. But by choosing political opportunism over intellectual consistency, Osborne has undermined his credibility with the free-market right. 

P.S. Then again, the Chancellor has never been one for consistency. Back in 2009, he declared: "It is totally unacceptable for bank bonuses to be paid on the back of taxpayer guarantees. It must stop." 

George Eaton is political editor of the New Statesman.

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Why it's a mistake to assume that Jeremy Corbyn has already won

The shadow chief secretary to the Treasury on why the race to be Labour's leader is far from over.

They think it’s all over.

But they’re wrong.

The fat lady has yet to sing.

The commentary and reporting around the Labour party leadership campaign has started to assume we have a winner already in Jeremy Corbyn. The analysis, conjecture, predictions/complete guesswork about what happens next has begun in earnest. So we have seen speculation about who will be appointed to a Corbyn shadow cabinet, and “meet the team” pieces about Jeremy’s backroom operation.

Which is all very interesting and makes for the usual Westminster knockabout of who might be up and who might be going in the other direction pdq...

But I think it’s a mistake to say that Jeremy has already won.

Because I hear that tens of thousands of Labour party members, affiliates and registered supporters are yet to receive their ballot papers. And I am one of them. I can’t remember the last time I checked my post quite so religiously! But alas, my papers are yet to arrive.

This worries me a bit about the process. But mostly (assuming all the remaining ballots finally land in enough time to let us all vote) it tells me that frankly it’s still game on as far as the battle to become the next leader of the Labour party is concerned.

And this is reinforced when we consider the tens of thousands who have apparently received their papers but who have yet to vote. At every event I have attended in the last couple of weeks, and in at least half of all conversations I have had with members across the country, members are still making their minds up.

This is why we have to continue fighting for every vote until the end – and I will be fighting to get out every vote I possibly can for Yvette Cooper.

Over the campaign, Yvette has shown that she has a clear vision of the kind of Britain that she wants to see.

A Britain that tackles head-on the challenges of globalisation. Instead of the low-wage low-skill cul-de-sac being crafted by the Tories, Yvette's vision is for 2m more high skill manufacturing jobs. To support families she will prioritise a modern childcare system with 30 hours of fully funded child care for all 3 and 4 year olds and she will revive the bravery of post war governments to make sure 2m more homes are built within ten years.

It's an optimistic vision which taps into what most people in this country want. A job and a home.

And the responses of the focus groups on Newsnight a few days ago were telling – Yvette is clearly best placed to take us on the long journey to the 2020 general election by winning back former Labour voters.

We will not win an election without winning these groups back – and we will have to move some people who were in the blue column this time, to the red one next time. There is no other way to do it – and Yvette is the only person who can grow our party outwards so that once again we can build a winning coalition of voters across the country.