David Cameron has threatened the banks with higher taxes if they fail to rein in lavish bonuses.
The Prime Minister signalled a new focus on banking sector tax revenues, saying that unpopular decisions on bonuses would make it difficult to keep a regime “that they might favour”.
His comments backed Deputy Prime Minister Nick Clegg’s warning that the Government will not stand on the sidelines if banks refuse to restrain their pay levels.
Mr Cameron insisted the banks have to understand the “political context” to the issue of bonuses, given that the banks were bailed out by taxpayers who are now feeling the pinch.
The British public found it “very galling” to see bankers paying themselves “unjustified bonuses”, he said.
“We have had to bail out the banks and use taxpayers’ money in a difficult economic situation and I do believe in social responsibility, that people have to think of their responsibilities when they make these decisions.
“I think we have to start thinking more about the revenue we raise from banks. What we want is strong and sustainable revenues so that we can put those to good use.”
Mr Clegg used an interview with the Financial Times to issue a call for “visible restraint” in the forthcoming bonus round.
“The banks should not be under any illusion, this Government cannot stand idly by,” he said. “It is wholly untenable to have millions of people making sacrifices in their living standards, only to see the banks getting away scot-free.”
The rhetoric on the banks provoked a hostile reaction from the City and some scepticism as to what action the Government could take unilaterally to curb excess.