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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Quiz: Can you identify fake news?

The furore around "fake" news shows no sign of abating. Can you spot what's real and what's not?

Hillary Clinton has spoken out today to warn about the fake news epidemic sweeping the world. Clinton went as far as to say that "lives are at risk" from fake news, the day after Pope Francis compared reading fake news to eating poop. (Side note: with real news like that, who needs the fake stuff?)

The sweeping distrust in fake news has caused some confusion, however, as many are unsure about how to actually tell the reals and the fakes apart. Short from seeing whether the logo will scratch off and asking the man from the market where he got it from, how can you really identify fake news? Take our test to see whether you have all the answers.

 

 

In all seriousness, many claim that identifying fake news is a simple matter of checking the source and disbelieving anything "too good to be true". Unfortunately, however, fake news outlets post real stories too, and real news outlets often slip up and publish the fakes. Use fact-checking websites like Snopes to really get to the bottom of a story, and always do a quick Google before you share anything. 

Amelia Tait is a technology and digital culture writer at the New Statesman.