Politicians from all sides rounded on the state-supported Royal Bank of Scotland yesterday as the row intensified over the failed bank's apparent determination to share £1bn of bonuses among staff.
The former deputy prime minister John Prescott called on the Treasury to rule out any bonuses and the shadow chancellor, George Osborne, told bankers: "The party's over."
The Treasury announced it had commissioned an independent review of the reward policies at banks, but the chancellor, Alistair Darling, admitted that existing contractual obligations between RBS and its employees may mean bankers still receive handsome bonuses. It has been suggested the bank has set aside a bonus pot of £1bn for its 177,000 employees. There is growing anger that bankers who mishandled billions in the run up to the recession may still be rewarded despite RBS being propped up by £20bn in taxpayers' money.
Sir Fred Goodwin, the former chief executive of RBS, and Sir Tom McKillop, the former chairman, will face some of this opprobrium when they give evidence to the Treasury select committee this week.
Speaking on BBC1's Sunday AM programme, Darling said he had reached an agreement with the new chief executive of RBS, Stephen Hester, that no one "associated with losses" should be rewarded. However he appeared to concede RBS bankers were likely to receive bonuses out of sync with performance in 2008, with losses running into billions set to be outlined in three weeks. The chancellor said: "Obviously there are contractual problems with some staff."
RBS also wanted to make sure they have slimmed bonus payments down to the absolute minimum, the chancellor said. "They have to understand that these banks would not be here but for the British taxpayers, therefore they have to show the degree of restraint that people would expect," he said.
But Prescott dismissed the contractual obligations. He is using a Facebook site to create a campaign to stop RBS and other banks involved in the government's recapitalisation scheme receiving bonuses.
He said: "Using the contracts argument is absolutely nonsense. These contracts would have been worthless without the government. Without the government, these bankers would have been on the dole. We are seeing a reversal of Robin Hood - rob the poor to pay the rich. The many are paying for the few. No ifs, no buts, don't pay the bonuses."
The employment minister, Tony McNulty, also questioned bonuses for senior bank executives and board members "in the current circumstances".
The Treasury said the former chairman of Morgan Stanley, Sir David Walker, would chair the review of banks and their bonus structures. A Treasury official said: "There will be a tightening of the banks' purse strings. This is about keeping any rewards in line with the public mood, and the public mood is unforgiving."
Darling has asked Walker to make recommendations about the effectiveness of risk management by banks' boards, including how pay affects risk-taking. It will also look at how boards operate and at the balance of skills.
RBS would not be drawn on a figure for capped bonuses but said there would be "no reward for failure".
The Treasury said it had been planning to move on bonuses for some time and pointed to a review begun in October.