The simmering tension between the Business Secretary and Chancellor threatened to boil over yesterday, after Vince Cable issued a strongly worded response to George Osborne’s suggestion that proposed UK banking bonus reforms could be toned down.
Osborne, who has been accused of giving into pressure from the City, told the BBC that it “might be better” if the UK did not act unilaterally in forcing banks to disclose details of bonus payments of over £1 million.
He said that he needed more time to consider the advice of Sir David Walker, the author of a report on high level bank pay, who argued in Monday’s Financial Times that the UK would be “mistaken” to go it alone and should hold back on new regulation of bank pay until other global financial centres followed suit.
But Cable retorted in a statement: “Transparency is key to creating confidence in any commitment from our banks to behave more responsibly on pay and bonuses. Outrageous and irresponsible pay structures were a driver in our financial crisis.”
Banks are legally required to disclose bonuses and salary payments of more than £1 million following new legislation, which was introduced by former Chancellor Alistair Darling but has not yet been implemented.
Darling acted on recommendations made by Walker in a report last year, but he has now changed his mind despite the fact that disclosure requirements in some territories, including Hong Kong, exceed those of the UK.
Walker said that when he made his recommendations last year he had expected to see more international action on transparency. But lack of movement in the US has made him fear that UK banks could simply shift activity offshore to avoid disclosure.
Former City Minister Lord Myners insisted that disclosure was the only sustainable answer, however. He told Sky News: “If shareholders are not given the information to make informed decisions when they vote on renumeration, then the whole responsibility for approving the broad culture and context of banker renumeration falls squarely into the hands of the government and regulators.”