* Cameron promises to veto any rise in total RBS pay pot
* Prime Minister stops short of agreeing to back a cap on
* Labour call for bonus cap, says PM's pledge a red herring
* RBS says no decisions yet taken on pay plans
By William James and Matt Scuffham
LONDON, Jan 15 British Prime Minister David
Cameron refused on Wednesday to answer a call to cap individual
bank bonuses at the largely state-owned Royal Bank of Scotland
, but said he would veto any increase in the bank's
overall pay pot.
Bankers' pay leapt into British political focus ahead of the
annual financial sector bonus season, when the opposition Labour
party called on the government to block any attempt by RBS to
pay its top staff bonuses worth twice their salary.
The Conservative-led government stopped short of agreeing to
that, saying it had yet to receive any proposal from RBS.
But, in an effort to show his government is taking a hard
line on excessive pay, Cameron promised that the government
would use its veto power as an 81-percent shareholder in RBS to
block any rise in the overall pay pot at RBS's investment bank.
"If there are any proposals to increase the overall pay,
that is pay and bonus bill at RBS, at the investment bank ... we
will veto it," Cameron told parliament.
RBS had been expected to join rivals, such as Barclays
and HSBC, in seeking shareholder approval to
pay bonuses twice the size of salaries. A European Union bonus
cap lets banks double bonuses if they win shareholder backing.
Hoping to cash in on Britons' dim view of bankers, Labour
argued that the government should not allow the heavily
loss-making bank to bypass the EU cap at a time when ordinary
families' living standards are being squeezed by stagnant pay.
Labour finance spokesman Chris Leslie called Cameron's veto
on total pay "a complete red herring", highlighting that with
RBS shedding staff, it provided little restraint.
The furore will hamper efforts by new RBS boss Ross McEwan
to steer calmly through the bonus season. McEwan waived his
annual bonus following public anger over the pay of his
predecessor Stephen Hester.
Britain's finance minister George Osborne and many banks in
London oppose the EU curbs, arguing they will force up fixed
salaries and could drive important staff to rival institutions.
Bank of England Governor Mark Carney also told Britain's
Treasury Select Committee on Wednesday that he agreed that a
bonus cap was not the best way to control bankers' pay.
RBS, rescued by a 45 billion pound ($74 billion) government
bailout during the 2008 financial crisis, said that no decisions
had yet been taken on pay and conversations were continuing with
shareholders. The Treasury declined to comment.
LABOUR BANK REFORMS
Ahead of a 2015 election Labour's proposal formed the first
part of a renewed push to convince voters the party had learnt
the lessons of the financial crisis which occurred during their
time in power.
Labour has around a 5 percentage point overall lead over the
Conservatives in opinion polls, but the public's view of its
economic management skills lags that of Cameron's party.
Labour leader Ed Miliband is expected to unveil proposals to
force Britain's biggest banks to sell branches in a keynote
speech on Friday, although party sources would not give any
further details of his plans.
Speaking to The Times newspaper, RBS chairman Philip Hampton
said any forced disposals of branches would be "incredibly
expensive", citing the difficulties the bank has experienced
selling 315 branches that it was ordered to offload by the
"That's already taken us four years and there is still a
year or two to go. We've paid a billion quid [in separation
costs]. It's incredibly expensive," he said.
RBS has shrunk its investment bank since 2008, meaning it
has fewer staff than competitors who could be in line for big
bonuses. However, it still paid out more than 600 million pounds
in bonuses last year, including payouts of more than a million
pounds to 93 employees.
The bank had 368 so-called 'code staff', or those in
risk-taking positions, in 2012, earning an average of 700,000
pounds. Their bonus was on average 1.3 times their fixed pay.
RBS made a pretax loss of 634 million pounds in the third
quarter of 2013, although that was down from a 1.4 billion loss
a year ago.