MPs told government agency UK Financial Investments (UKFI) that it is wrong to protect high pay at state-owned banks RBS and Lloyds in a treasury committee hearing yesterday.
But executives at UKFI, which manages taxpayers’ stakes in the bailed-out lenders, declared that it is precisely their role to provide a “nuclear deterrent” against such political meddling so as to preserve value for the Exchequer.
UKFI chairman Robin Budenberg said: “We have a choice. We could either pay the employees of RBS on a basis that we consider… competitive – albeit that I think across the board in RBS pay is at the low end of the competitive range – or we could do away with any pretence of competitive pay. And my own view is that that would not be in the public interest. We might find one or two people who would be prepared to do that but… you would find it impossible to keep and attract the sort of people you need to run an incredibly complex bank.”
Andrea Leadsom MP fired back: “I completely disagree with you.” She said the “proof is in the pudding” that RBS chief executive Stephen Hester decided to waive his bonus rather than quit his job.
But UKFI’s Jim O’Neil confirmed that major private investors have raised serious concerns with the agency about how politicians are damaging the value of their shares.
UKFI also revealed that the advice fees it paid Deutsche Bank for the £747m sale of Northern Rock amounted to £1.84m and said that building societies had been put off bidding for the bank due to regulatory confusion over how they can raise capital.