Labour leader Ed Miliband accused David Cameron of a “disgraceful failure of leadership” after the chief executive of the majority taxpayer-owned Royal Bank of Scotland (RBS) was awarded a bonus in shares worth almost £1m.
Stephen Hester’s £963,000 award prompted a storm of criticism from MPs from across the political divide and Tory Mayor of London Boris Johnson.
But Chancellor George Osborne defended the bonus, saying the alternatives would have been worse for the taxpayer.
Mr Hester, who has a salary of £1.2m, could get 3.6 million shares in the bailed-out financial institution, which is 83 per cent state-owned.
The payout was limited to about 60 per cent of what it might have been amid intense political pressure for it to be kept to a minimum.
But Mr Miliband, MP for Doncaster North, said the Prime Minister had failed to live up to his rhetoric on executive pay and shareholder activism.
“It’s a disgraceful failure of leadership by the Prime Minister,” he said.
“He’s been promising for months action against excessive bonuses, executive pay, and now he’s nodded through a million-pound bonus.”
He added: “He must now explain, not least to the British people, why he has allowed this to happen.”
Mr Johnson joined the condemnation, saying he was “at a loss to justify” the scale of the payment.
He told the BBC he had sympathy for Mr Hester and wanted an end to “incessant banker-bashing”.
But he went on: “I find it absolutely bewildering because RBS occupies the same status in the economy as Gosbank did in the Soviet Union: it’s a state-owned bank.
“The idea that this is not in the control of the Government seems to me to be far-fetched.”
But Mr Osborne said that the Government could have stopped the bonus only by over-ruling the RBS board.
“I think the important point for people to understand is that the alternatives would have been worse for the taxpayer.
“Either there would have been a much larger bonus, of the kind he would have got a few years ago. Or the British Government would have had to take over complete ownership of RBS and over-ruled the board, and I think that would have cost the taxpayer more.”