Labour to force vote on RBS bonus

It will hold an Opposition Day debate the week after next to heap pressure on the Government as the row continues to grow over the payment, which is worth almost £1m.

Although the vote will not be binding it could prove deeply embarrassing for the coalition Government, which has faced widespread criticism for its decision not to block the bonus at the taxpayer-funded bank.

A Labour source said: “David Cameron’s failure of leadership cannot be allowed to stand. We will force a Commons vote to let MPs show the public’s disapproval of Mr Hester’s bonus.”

Ministers insisted allowing the bonus to go ahead would protect taxpayers from “bigger financial risks” and warned installing a new board at RBS would cause “chaos”.

Danny Alexander, Chief Secretary to the Treasury, suggested blocking the payout by stepping in to directly control the arm’s-length operation would have triggered worse problems.

The Liberal Democrat said the Government had “looked at all the options in terms of how we should deal with” the bonus.

He told the BBC’s Sunday Politics with Andrew Neil that taking control directly of RBS, would cause potentially much bigger financial risks for the taxpayer?

“In the end the calculation, from the point of view of protecting the taxpayer, is it was better to ensure that that didn’t happen to RBS, given that there are tens of billions of pounds of your money and all your viewers’ money tied up in this.”

Work and Pensions Secretary Iain Duncan Smith said there would be “chaos” if the Government got rid of the bank’s board. He told BBC1’s Andrew Marr Show: “The reality is the contract we inherited from Labour meant that very clearly the board takes the decision on this, you can’t interfere and tell them what to do.

“If we didn’t like that then, of course, the only option would be to get rid of the board. Now, if you do that, imagine what would happen in the banking sector and imagine what would happen to RBS. You’d have chaos.”

Mr Duncan Smith said it was for Mr Hester “individually to make a decision about” whether to accept his bonus.

Mr Hester is facing mounting pressure to follow the bank’s chairman, Sir Philip Hampton, and waive his bonus.

Sir Philip, chairman of RBS since 2009, had been on course to claim 5.17 million shares in the financial institution in February, but it is thought he told the bank’s remuneration committee it would “not be appropriate” for him to take a £1.4m payout.

A double bonus scheme could greatly inflate Mr Hester’s £1.2m annual salary to a possible £8m over the coming years.

The bank chief is entitled to both short-term bonuses and long-term incentive bonuses based on factors such as performance and meeting targets.

The £963,000 he was awarded last week was a short-term bonus equalling 3.6 million shares, relating to the 2011 calendar year.

Short term bonuses are capped at 200 per cent of his annual salary. The long term scheme is based on the previous three years, so Mr Hester is approaching the point at which it can come into effect.

It is thought the long term bonus could potentially reach £6.4m. Mr Hester’s combined salary and bonus earnings could therefore reach £8m but it is unlikely that maximum target will be met.

Lord Turner, chairman of the Financial Services Authority, said excessive bonuses are “not good for society”.

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