Banks to be urged to cut bonuses

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Business Secretary Vince Cable (left) and Chancellor George Osborne (right) will meet bank bosses over excessive bonuses

Bank bosses will face renewed pressure to act to curb excessive bonuses on Monday when they meet for talks with Chancellor George Osborne and Business Secretary Vince Cable.

Mr Cable renewed the threat of imposing taxes to tackle “scandalous” annual payouts as he insisted both coalition parties were united in seeking tough action.

He also expressed his determination to use the latest meeting to press for more openness on lavish pay and perks and for increased lending to small businesses.

Senior ministers have launched a series of starkly worded warnings of the need for restraint in the face of the squeeze elsewhere in the economy as the bonus season approaches.

But there remain doubts about whether the Conservatives are as committed as their Liberal Democrat governing partners to imposing extra practical measures at this stage.

Prime Minister David Cameron said on Friday that banks had to understand the “political context” of bonuses, given that the banks were bailed out by taxpayers who are now feeling the pinch. He spoke after his Liberal Democrat deputy Nick Clegg said the Government would not “stand idly by” while the banks appeared to get away “scot free” with the fallout from the financial crisis.

The rhetoric on the banks has provoked a hostile reaction from the City and some scepticism as to what action the Government could take unilaterally to curb excess.

Government sources played down suggestions that Mr Clegg’s comments heralded an imminent announcement of new action on bonuses, describing them as a “shot across the bows”.

Asked what practical steps could be taken, Mr Cable said there were “various ways” of taxing banks if they failed to act on bonuses, but declined to give any detail of what form it could take. “If they don’t behave, if they don’t take account of their wider responsibilities, the Government has as a possibility some form of taxation – there are various ways of doing this – but we’d rather they accepted that they had wider obligations to British business and to the public,” he told the BBC.

He insisted the Tory and Liberal Democrat coalition partners were united on the issue. “There is a coalition agreement that is absolutely clear and explicit that we have to take robust action on unacceptable bonuses. Both parties are fully signed up to that.”

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