Bankers’ bonuses under fire as Barclays chief faces Parliament

Barclays chief executive Bob Diamond was today questioned by the Treasury select committee regarding the behaviour of the bank, reports Claire French.

Barclays’s new chief executive, Bob Diamond, has told the Treasury select committee that banks will continue to invest in risk to produce profits for their clients and shareholders. Using a similar line of rhetoric as the Mayor of London, Boris Johnson, Diamond put the pressure on the government to limit regulation, saying that London remains one of the most desirable places in the world for investment banking.

Johnson is reported to have warned David Cameron in December about the “mood music” coming from some government ministers in relation to the bankers. Committee member Chuka Umunna MP asked Mr Diamond about his company’s tax payments to the United Kingdom – informing the committee, and the Barclays boss, that there are 30 bank subsidiaries in the Isle of Man, 38 in Jersey and 181 in the Cayman Islands.

He said:

“… a cursory reading of your group returns suggests you have over 300 companies operating in tax jurisdictions around the world.”

Diamond told the committee that the company had paid £2billion in tax to HMRC last year, and around £12.5bn in the past six years. He was unable to put a figure on the amount of non-payroll tax paid out – questioning how much tax the bank pays outside of salaries. Denying that the bank avoided paying tax, he commented on efforts to be “tax efficient”.

David Cameron yesterday announced that the government would not be imposing limits on bonuses paid out. Mr Diamond said banks were “showing restraint”. Bonus levels have not been finalised at Barclays, but as Left Foot Forward reported yesterday, industry payments are expected to reach £7bn this month.

Conservative MP David Ruffley repeatedly asked whether Diamond was thankful to the British taxpayer for the £100bn a year subsidy to the five big banks – which he said makes money cheap to borrow for Barclays; Diamond replied:

“We are thankful to everyone.”

Populist “banker bashing”, which the prime minister warned against on The Andrew Marr Show on Sunday, reared its head for a few brief exchanges on paying back public money and showing “restraint” in accepting multi-million pound bonuses. Somewhat marred by Ruffley’s hysteria, committee members’ voices were overcast in media reports by Diamond’s clever sound bytes: he made it clear that banks should be allowed to fail instead of accepting government support.

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