GEORGE Osborne has performed a remarkable U-turn over plans to force banks to reveal details of pay and bonuses, in a major coup for the City.
The chancellor has repeatedly said he would press ahead with proposals to make banks publish the pay and bonuses of employees who earn more than £1m in bands, while keeping their names anonymous.
But yesterday Osborne said it would be wrong to impose the new measures without some kind of international agreement, after senior banking figures argued it would make the City less competitive.
“There are European rules that are being developed in this area and it might be better for Britain to promote this internationally rather than just unilaterally,” Osborne said.
The volte-face followed a similar change of heart from Sir David Walker, the architect of the rules. He said the rules were designed in the hope that other countries would follow suit.
Sir David also fears that greater transparency could lead to wage inflation, with lower-paid bankers demanding more once they realise they are earning less than their colleagues.
Osborne’s U-turn is likely to provoke a furious response from Liberal Democrat business secretary Vince Cable, a long time campaigner for greater transparency in City pay.
Yesterday he said: “Transparency is key to creating confidence in any commitment from our banks to behave more responsibly on pay and bonuses. Outrageous and irresponsible pay structures were a driver in our financial crisis.”
In May, Cable told City A.M. there was a case for introducing similar reforms for all British corporations. “There is an argument for applying them across the board,” he said.
Meanwhile, former City minister Lord Myners – who was instrumental in preventing the names of bankers being published – yesterday hit out at Osborne’s about turn.
He said the climb-down demonstrated “the power of the banking lobby” and accused the chancellor of departing from the coalition agreement he signed up to on entering government.