You don’t hear the once frequently-touted line “we’re all in this together” much anymore. Vote for “change” was another phrase repeated by the Conservatives who promised to bring equality, justice and, above all, trust back into a government that had seemed to forget that it was elected by the people and for the people. Cringeworthy as it sounds coming from a Tory politician, the phrases were obviously perceived by many to be legitimate as they rushed to the polls to vote Conservative, forgetting for a moment that the very nature of the word “conservative” contrasts strongly with the word “change”.
Perhaps Cameron doesn’t dare spout the line “we’re all in this together” these days because he knows he’ll be laughed out of government, or perhaps he innately knows that now he’s in power, heartwarming phrases that don’t actually mean anything are no longer needed to garner votes. Still, there’s no doubting that the simple phrase was powerful coming after years of a Labour government that seemed unaccountable to the public. A party that had lost the trust in the people, prompting the Conservative party, of all parties, to act as if they were going to bring trust and accountability back into government.
Despite never really believing Cameron’s rhetoric of “we’re all in this together”, I was still stunned to find that Cameron didn’t act on that phrase and step in to ensure that Stephen Hester, the Royal Bank of Scotland’s chief executive, was blocked of his nearly £1m bonus. Cameron has also been stating for months now that he would be “tough” on executive pay, especially in light of growing public anger.
I was stunned because I believe Cameron missed a trick here. Actually living up to one’s rhetoric is, surprisingly, admired in a politician, and had Cameron followed through with his sentiments I believe he would have won back a lot of public support in both his leadership and the coalition itself. Here Cameron was offered a golden opportunity, yet he let his Tory sentiments get the better of him.
It also awarded Ed Miliband, the Labour leader, a chance to strike back at Cameron for failing to act on his rhetoric. Now, whilst I feel the Labour party has been a pretty rubbish opposition party (missing many chances to really strike back at the coalition and assert their own position and a counter deficit-reduction plan), this inaction on Cameron’s behalf was impossible for Miliband to ignore.
“It’s a disgraceful failure of leadership by the prime minister,” Miliband said, in a rare moment where he channeled the public’s anger. “He’s been promising, for months, action against excessive bonuses, executive pay – and now he’s nodded through a million-pound bonus.
“He’s also been lecturing shareholders about how they need to be more active in holding executives to account. He owns, through the British government, 83% of the Royal Bank of Scotland. He must now explain, not least to the British people, why he has allowed this to happen.”
You see, the RBS (now 83% owned by taxpayers) decided to award Stephen Hester a £963,000 bonus. Hester already earns a basic salary of £1.2m, and the move to award nearly £1m as a bonus has led to public outcry, and a missed opportunity by the coalition to actually act on behalf of the will of the electorate.
Even Boris Johnson, the Conservative Mayor of London, decried the decision, stating that RBS should be run “on public sector lines”. In an interview with the BBC, Johnson added: “The idea that this is not in the control of the government seems to me to be far-fetched. Stephen Hester is an able man, probably doing a difficult job, and his contract must have been drawn up, I guess, when he was appointed in 2008 under Alistair Darling and Gordon Brown.
“I do not know what they were thinking of when they drew it up that way, but it certainly seems to me to be right that the government should step in and sort it out. People will not understand how somebody can get a whacking great bonus like that when they are basically running a state-owned concern, and I am at a loss to justify it.”
David Cameron and Nick Clegg both pretended it was all the fault of the Labour government and, despite the fact that their government owns 83% of the bank, said there was nothing they could do.
Cameron said: “He was brought in to do this job, his contract was put into place by the last government – we are obviously constrained by that contract.”
Clegg also blamed everything on Labour and acted as if his hands were tied, stating: “The last government not only let the banks get away with blue murder – then they entered into contracts with them, which allowed them to continue to pay themselves large bonuses. Now whether you like it or not – and I don’t particularly like it – we are constrained by those contractual obligations.”
George Osborne also stated that he didn’t really care about any of this rubbish and doesn’t really know what he’s talking about. Speaking in Davos, the chancellor said: “I think it is difficult to justify levels of pay in the financial sector compared to other industries.”
The only problem with Clegg and Cameron’s rhetoric that it was all “Labour’s fault” and Hester’s bonus was “constrained” by a pre-existing contract is… well, it’s not exactly true.
Documents provided to The Independent revealed that their claims were misleading, if not entirely false. As the Independent reports:
“A copy of Mr Hester’s personal contract with RBS, updated in 2009 and seen by The Independent, reveals he has no contractual right to a bonus – and the Government could use its position as the bank’s largest shareholder to veto any remuneration it thought was excessive.
“In the section on bonuses, the contract states: “The executive [Mr Hester] may, at the discretion of the Remuneration Committee, be entitled to participate in any Bonus Scheme as approved by the Remuneration Committee, the terms of which may, at the sole discretion of the Remuneration Committee, require the Executive to defer a proportion of any bonus awarded to him.”
The Independent continues, stating that: “Sources at RBS confirmed that the Remuneration Committee’s recommendations had to be put to a full vote of shareholders at the annual general meeting, which the Government controls.”
Labour also denied such “contractual obligations” regarding the bonus were in place. Lord Myners, the Treasury minister responsible for the banks when Labour was in power, confirmed there was no contractual obligation for a guaranteed bonus in the contract.
So this is where I remain confused. Here was a golden opportunity for the coalition to utilise their power as shareholders and garner public support, though instead they used excuses which seem to be rather… fabricated.
Meanwhile, RBS chairman Sir Philip Hampton has given up a £1.4m bonus he was due later this year, the bank has announced. Whether this is out of a real moral obligation or due to controversy surrounding Hester’s bonus, we do not know, but I feel the act itself is honourable. A spokesman said: “Sir Philip Hampton will not receive the 5.17m shares he was awarded in 2009 when he joined RBS.”
The Guardian reports that Hampton is thought to have told the bank’s remuneration committee it would not be appropriate for him to take the shares to which he is entitled. He was given the scheme when he was appointed at the 83% state-owned bank as part of a three-year long-term incentive deal.
The chairman’s decision to waive his bonus is likely to put further pressure on Hester and the coalition. The government’s inaction is also allowing Miliband to have a voice, as Labour hopefully begins to find its purpose in opposition. In a statement on Saturday, Miliband encouraged the government to vote against the bonus at the RBS annual general meeting in April.
“Freezing the pay of a nurse or hospital porter while allowing a publicly owned bank to pay million-pound bonuses, is the last nail in the coffin of this prime minister’s claim that we’re all in it together,” he said.
“Having spent weeks boasting he would block bonuses, David Cameron refuses to even publicly explain why he has changed his mind.”
The Guardian has helpfully produced a set of data that puts Hester’s near-£1m bonus into perspective, stating examples of things that £963,000 could buy.
All in all, I am left baffled by this government’s inaction and Clegg’s growing inability to detach or distance himself from Cameron. The missed opportunity to garner real public support seems pointless to me, and only serves to reinforce my belief that in no way are we “all in this together”, and further supports my view that this government would rather make the poor pay for the mistakes of the rich. Being tough on banker’s bonuses, particularly banks that are 83% owned by the public, would send an important message. Instead, the banking sector is still being allowed to get away with “blue murder” in Clegg’s words, while the public is being made to pay for the mistakes of the few.
- RBS chairman gives up £1.4m bonus (guardian.co.uk)
- RBS chairman declines £1.4m bonus (independent.co.uk)
- You: Anger grows over RBS chief’s £900,000 bonus (guardian.co.uk)
- Stephen Hester bonus puts David Cameron under pressure – The Guardian (guardian.co.uk)
- Sir Philip waives £1.4m RBS share reward (thetimes.co.uk)
- Boris joins attack on No 10’s ‘failure’ over RBS boss’s bonus (independent.co.uk)
- Labour attacks bonus for RBS boss (bbc.co.uk)
- RBS chief’s £1 million bonus sparks anger – Reuters UK (uk.reuters.com)