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I meet the banks frequently to discuss a range of issues, remuneration being one of them. As confirmed by the Chancellor on Tuesday, he and I are in discussions with them to see whether we can reach a new settlement in which banks show restraint and pay smaller bonuses than they would otherwise have done, and demonstrate greater transparency and disclosure.
"Transparency is key to creating confidence in any commitment from our banks to behave more responsibly on pay".
Yet his efforts in Cabinet to implement a City pay and bonus disclosure scheme have come to nothing. On
"There is much more disclosure in some other Western countries, and this is something we can do, something I can do."
Yet the Chancellor will not allow him to do anything. Does not the Government's inaction on this issue demonstrate that we have a Business Secretary in office but increasingly out of power?
The hon. Gentleman tells a very interesting fictional story about Cabinet discussions. On transparency, we have a system of disclosure in this country for directors of public companies, as I am sure he is aware.
Does the Business Secretary acknowledge the contribution made to the economy by the 1 million people working in the UK financial sector, who contribute £25 billion in taxes every year, on top of the staggering £54 billion contributed to the UK economy by the financial sector. That is essential for schools and hospitals. Will he defend the sector that he is charged with promoting?
My hon. Friend is absolutely right. That is a massive sector of the UK economy and it makes a major positive contribution. It is unfortunate, in a way, that its reputation has been so damaged by activities in a handful of banks.
The Secretary of State has been right to say that as long as the taxpayer acts as a guarantor of the banking industry, the Government have a legitimate interest in remuneration, specifically in banks in which the state has a large stake. Will he therefore tell the House what he and the Chancellor mean when they say that no option will be taken off the table if the bonus round is not agreed to the Government's satisfaction? In other words, what specific actions will the Government take if they are not satisfied with the outcome of the bonus round?
The right hon. Gentleman poses the problem absolutely correctly. The reason why bonuses are an issue-they are not one to anything like the same degree in other industries-is that some banks are publicly owned and others are guaranteed. The remedy lies in the work of the Independent Commission on Banking, which reported last year on issues such as generating competition and the possible break-up of particular institutions.
May I say to the Secretary of State that big bank bonuses are entirely inappropriate when lending to small and medium-sized enterprises is not taking place as it should? Only this week I was told of a business franchisee in Kettering who was told by Barclays bank that his account, which had been in credit for five years, would be closed unless he paid an annual fee of £25,000 because of spurious new audit requirements-which, when he looked into it, were completely false. He has been lied to by Barclays bank, and its chief executive should not get a bonus.
Indeed, it would help if bonuses, where they exist, reflected performance in lending to the good companies that my hon. Friend describes. That is precisely why the Chancellor and I are discussing how we will ensure a proper flow of credit to those excellent enterprises, which are the backbone of our economy.
We have just heard a lot of drivel from the Secretary of State. The coalition agreement said:
"We will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk."
Will the Secretary of State use his nuclear option to make that happen, or will he dance away from it, in the same way as the coalition has danced away from the net lending targets that were also in the coalition agreement?
The coalition agreement is a much more eloquent statement of our position than the hon. Gentleman's rather tortured metaphors. It states precisely that we will take robust action on unacceptable bonuses, and that remains our position.