Break up the banks to stop bumper bonuses

3.17.00pm GMT Tue 12th Jan 2010

"This is yet more proof that Labour's badly designed bonus tax is having no effect on bonus payouts" said Vince Cable, Liberal Democrat Shadow Chancellor, commenting on evidence given to the Treasury Select Committee today by the Chief Executives of RBS and Lloyds.

"Bankers tell us that their bonuses are a reward for their skills and ingenuity.

"At the moment, this seems to involve borrowing taxpayers' money at half a percent from the Bank of England and then lending it back to us at eight, 10 or even 20 percent.

"It's hard to find the skill in that and even harder to see how bankers feel that they have a right to collect bonuses for it.

"This is yet more proof that Labour's badly designed bonus tax is having no effect on bonus payouts.

"The best way to deal with bonuses and achieve a fair deal for the taxpayer, who guarantee these institutions, is to split the banks up. Before this is done an additional 10% levy on their profits should be introduced.

"This is a much more effective solution than a one-off windfall tax and recognises the debt that the banks owe to the taxpayer."