Banks still not lending and City bonuses must end, say Labour MPs


Labour has called for an end to “excessive” City bonuses while many people are coping with a “squeeze on their living standards”.

But chancellor George Osborne has warned against creating an “anti-business culture” which could undermine the prosperity and jobs offered by the free market economy.

Labour has been keen to make the political running on banking reforms and bonuses, believing that the chancellor and prime minister David Cameron have been slow to clamp down on high pay.

Chuka Umunna, the shadow business secretary, said bankers were “right at the centre of the crisis” yet continued to enjoy “very high remuneration” while others are struggling to find work in a slow-growing economy.

Umunna, speaking at an opposition day debate on responsibility and reform in British banks, said small and medium-sized sized enterprises (SMEs) were having trouble accessing credit.

He said the Bank of England’s Trends in Lending publication showed net lending to companies fell in nine of the last 12 months and by a total of over £10bn in the last year.

Lending to SMEs in November last year fell by 6.1 per cent compared with the same month in 2010, said Umunna, citing a report by the Department for Business, Innovation and Skills.

Umunna said: “This all matters because as the governor of the Bank of England said last month, people have seen this extraordinary squeeze in their living standards, but as for the institutions and bankers right at the centre of the crisis that created these problems, those people now seem not only not to be suffering a gigantic squeeze on their living standards, but actually get continued very high remuneration, in part because the taxpayer has been forced to step in and bail them out.”

But Osborne believes the fall-out over bonuses and pay could undermine the benefits the free market economy offers.

The chancellor said he would fight against an “anti-business culture” in a speech to the Federation of Small Businesses.

Osborne said: “Of course we need to reform our banking system – and nobody has done more than this government to address the too-big-to-fail problem that so offends every taxpayer.

“Of course rewards for failure are unacceptable – and those who believe in the free market are the first to say so.

“But a strong, free market economy must be built on rewards for success.

“There are those who are trying to create an anti-business culture in Britain – and we have to stop them. At stake are not pay packages for a few but jobs and prosperity for the many.”