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British PM warns banks over bonuses

Oct 05 2010 18:57 Sapa & AFP

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Birmingham - British Prime Minister David Cameron warned Tuesday that banks could face action over huge bonuses after new figures showed payouts were likely to hit $11bn this year.

Cameron, whose centre-right Conservatives lead a coalition that is gearing up for harsh cuts, said massive bonuses would be "intolerable" if banks failed to free up credit and support small businesses.

"If these banks don't get on and lend money to small business, and if at the same time they're spending vast amounts on bonuses for themselves, that's an intolerable situation," Cameron told BBC radio.

He said the government had already put in place a bank levy following the global financial crisis that would raise "billions" of pounds, but added that it would "look very carefully at this bonus issue."

"We cannot just stand by if the banks aren't lending and if they are paying themselves large bonuses," he said.

"People will be angry about this because people do see that the banks got out of control."

The Conservative-Liberal Democrat coalition government, which took power in May, is set to outline deep cuts which it says are necessary to slash the record deficit inherited from the previous Labour administration.

Cameron's comments came after a consultancy said City bonuses were likely to recover this year to the levels seen before the financial crisis, around £7bn (€8bn).

The Centre for Economics and Business Research (CEBR) said, however, that the government would take back much of the bonuses due to a new 50% tax rate on high earners.

"A whopping seven billion pound bonus payout will be easier to stomach if the lion's share goes to the nation," said CEBR economist Benjamin Williamson.

Finance minister George Osborne pledged the most dramatic changes to the state benefits system since the 1940s, in a speech at the annual Conservative party conference on Monday.

His announcement comes two weeks before the government unveils its spending plans, which are expected to include cuts of 25% in most departmants.
david cameron  |  financial crisis
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