Stop Northern Rock bonuses

Northern Rock’s decision to pay £9 million in bonuses to its staff tomorrow has triggered a furious political row. Some MPs are saying publicly – and many privately - that direct control of the bank should now be taken away from its bosses and given to the Treasury.

The bank is already nationalised but control rests with its board. It was bailed out with £30bn of taxpayers money. It has 4,500 employees. The bonus will work out at about £2000 for each employee. When it was nationalised 1500 workers were made redundant.

Bosses will get much larger bonuses. Gary Hoffman, the chief executive recruited from Barclays, was promised a £1.2 million golden hello and a £700,000 base pay package. All bonuses have still to be approved by the remuneration committee of the Board.

The bonuses are because the bank has quickly fulfilled its pledge to repay a quarter of the public money that it had been given to stop it going bust. In fact it has repaid more than half the money.

But in clawing back the money it has been accused of behaving in a grasping way and helping to trigger a mortgage drought. A few days ago it was sternly instructed by the government to start lending rather than withdrawing money.

The cry now is for the Board to brought totally under the thumb of government and its agencies with all its commercial autonomy stripped away.

Its decision to go ahead with bonuses and to pay salaries which people in and out of the Commons find obscene could not have come at a more sensitive time.

The worst slump since 1946 is predicted. Unemployment is likely to be beyond two million – official figures always lag behind reality – and is certain to climb to three million unemployed by the end of 2009.

Banks and bankers have been saved by the taxpayer and have been accused of everything from greediness to ungratefulness, from grabbing the money and then refusing to honour the strings that were attached to it.

Gordon Brown and Alistair Darling are deeply angry with the City. Brown ticked off bankers two days ago. The Royal Bank of Scotland came in for scathing criticism. RBS and its shamed former boss reported the biggest loss in corporate history of £29 bn.

There is growing resentment in Whitehall and the Treasury that the bankers have been given everything they asked for and are now continuing to welsh on the deal. An insider said: “ Brown is an honourable man and feels the bank have spat in his eye.”

Vince Cable, the Liberal Democrat Treasury spokesman, said of Northern Rock’s decision: “ This is bringing the worst of the City bonus culture into a public body .. this is indefensible.” He called on the government to block the Northern Rock payments.