Chancellor George Osborne has said that although the extremely large bank bonuses are reviled, they are a necessary evil, as long Sir Phillip Hampton and Stephen Hester from the Royal Bank of Scotland would have been much worse for the country. Mr Osborne said that although the Government had the ability to vote against the bonuses at the state-backed lender, he felt ultimately it was up to the Bank to decide on what should be paid in bonuses. Mr Osborne praised the work of Sir Phillip Hampton, saying he was hired after the crash in order to fix RBS’s problems, including reducing its balance sheet and workforce and that he was achieving those goals. Therefore, Mr Osborne argued it was appropriate for the board to decide on an appropriate bonus.
Sir Phillip Hampton, the Chairman of the Royal Bank of Scotland announced that he would be rejecting his bonus of 5.17 million shares of the bank in February. This would have been worth around £1.4m. The announcement came after much outcry last week over the bonus, from both politicians and members of the public. Many said as the bank was state-backed, Sir Phillip should act more as a public servant than a banker and reject the bonus.
Royal Bank of Scotland chief executive Stephen Hester also announced that he would be rejecting his bonus of around £963,000 in shares as well. While Mr Osborne defended the bonuses, he called the decision by both men ‘sensible and welcome’. Labour Leader Ed Milliband also praised the decision of the men not to take their bonuses and said they had ‘done the right thing’. Earlier in the week Mr Milliband said that Labour would force a vote, after the Government announced that despite being majority shareholders in the bank, they would not block the bonuses. According to polls, public opinion was behind politicians calling for the bonuses to be blocked, with most feeling that the £1.2m a year salary Mr Hester receives, roughly 46 times the average wage, was more than enough compensation.