SENIOR bankers should no longer be paid bonuses, Liberal Democrat leader Nick Clegg said yesterday.
Clegg, who will play the role of kingmaker after the election if polls pointing to a hung parliament are correct, said the ban should apply to all variable pay – including deferred stock. It would cover executive board members and senior bankers that have a say on strategy.
In an exclusive interview with City A.M., Clegg said: “For the state run banks – there’s a moral argument to say for the whole banking system as long as its enjoying an implicit guarantee – it seems to me that you want to remove bonuses.”
“They create incentives for decisions which aren’t necessarily in the long term interest of the taxpayers, who are either implicitly or explicitly keeping them afloat.”
In a wide-ranging interview on financial regulation and the economy, Clegg also said that if the Liberal Democrats form a coalition government they will press for:
•An extra ten per cent levy on operating profits at state-owned banks;
•The government to hold onto its stakes in RBS and Lloyds for up to ten years;
•Capital requirements for banks to be temporarily eased, freeing up cash for lending;
•A separation of retail and investment banking for all institutions operating in the UK;
•And a 50p top rate of tax on capital gains for those earning over £150,000, as part of plans to tax income and capital gains at the same level.
The Lib Dem leader would not be drawn on which party he would back in the event of a hung parliament, although he savaged Tory plans to cut public spending immediately after an election, arguing they were “economically illiterate”.
And he threw his weight behind those economists that say spending cuts should be delayed until a recovery is in full swing, a view that is generally seen as sympathetic to Labour’s plans.
“We think the Conservatives are wrong on timing while Gordon Brown’s wrong because he’s living in denial about the need for a contraction at all,” Clegg said.
Asked if he would prop up Gordon Brown even if the Tories were to win more seats in a hung parliament, he replied: “It is not an arithmetic question.”