Osborne under pressure as bonuses surge to £35m at bailed-out banks

Chancellor ‘must say why he has not curbed excess’ as EU considers imposing new limits on bosses’ pay

George Osborne is facing calls to explain bonus payouts worth an estimated £35m that have been handed out by the bailed-out Royal Bank of Scotland and Lloyds Banking Group.

The scale of the rewards – including £3m in shares to the new RBS boss Ross McEwan – were announced to the stock exchange as it emerged the European commission is considering a new clampdown on boardroom pay by requiring firms to disclose a ratio for the gap between executive pay and the pay of an average employee.

In a move that would emulate the pay structure at the employee-owned John Lewis – where the chairman cannot earn more than 70 times the average pay rate throughout the company – the commission is working on proposals that would force the 10,000 stock market-listed companies across the EU to reveal pay ratios. Any such move would make it possible to compare bosses’ pay and highlight any who are paid excessively in relation to their peers.

The disclosures by Lloyds and RBS – which in the past five years has now reported losses totalling more than the £45bn of rescue funds pumped in by the taxpayer in 2008 – have further inflamed the row over City pay. It has already been stoked by attempts by banks to side step an EU rule limiting bankers’ bonuses to 100% of salary, or 200% if shareholders give the go-ahead.

Rob MacGregor, Unite national officer for finance, said: “George Osborne needs to come to the Commons and explain why he is failing to rein in the excesses of the City and turning a blind eye to the bonus bonanza in our state backed banks.”

The 11 members of RBS’s executive committee, including McEwan, have cashed in long-term bonus plans and been awarded new payouts potentially worth more than £23m.

Lloyds, which is 31% owned by the taxpayer, has handed out more than £12m in share bonuses – granted in previous years but due to be paid out now – while the head of its retail bank, Alison Brittain, has cashed in a near £1m buyout award, which she was handed as an incentive to join the bank two years ago.

Unlike RBS, Lloyds – which made a small profit of £415m in 2013 – did not make any announcement about new bonuses awarded for 2013.

The TUC general secretary, Frances O’Grady, said: “Our bailed-out banks remain deep in debt to the taxpayer and have no right to offer such lavish bonuses. Lloyds and RBS need to focus on fuelling business growth, rather than lining the wallets of senior bosses. As major shareholders in both banks, taxpayers rightly expect the government to do more to tackle this culture of greed.”

The latest pay disclosures come amid expectations that the industry will soon face scrutiny of the way it treats small business customers. The banks could face a full competition inquiry after the Office of Fair Trading completes its preliminary study later this month.

RBS, which is 81% taxpayer owned, shed light on the way the team assembled by McEwan, who was promoted to chief executive on 1 October, is being paid.

While the new RBS boss had called on his so-called executive committee to waive their annual bonuses for 2013 because of the £8.2bn of losses reported last week, the three newest members have still been awarded bonuses.

Rory Cullinan, head of RBS’s new “bad bank” dealing with sour loans, received £2.5m in shares. Alison Rose, promoted to run the commercial and private bank, took just under £900,000 and Donald Workman, who runs the Asian businesses, £460,000.

Those three are part of the 11-strong management team – which includes Mc-Ewan – that was also awarded almost £14m in shares through a long-term incentive plan (Ltip) due to pay out in three years, depending on performance.

McEwan waived his annual bonus when he was promoted to replace Stephen Hester but has now been awarded almost £3m in shares through the Ltip. The members of that executive committee also had more than £5m of shares awarded in previous years released to them.

RBS pay policy will face further scrutiny when its publishes its annual report. That will provide more details about its pay policies amid expectations that it will hand McEwan an extra tranche of shares in an “allowance” to match other banks’ response to the bonus cap.

Antonio Horta-Osorio, his counterpart at Lloyds who received £7.5m in 2013, was last week handed £900,000 in these allowances, intended to prevent him losing out as a result of the bonus cap, Antony Jenkins of Barclays has been given £950,000 and Stuart Gulliver of HSBC some £1.7m.

Sharon Bowles, the Liberal Democrat MEP who chairs the European parliament’s influential economic affairs committee, told Reuters that the committee would discuss at its meeting on Monday whether to toughen up the bonus clampdown.

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