Business Secretary Vince Cable has pledged to take “robust action” on the “scandalous” and “completely unjustified” payouts by banks in Britain.
The Liberal Democrat MP vowed to press ahead with plans to curb City worker’s lavish pay and bonuses, despite fears that many financial firms could relocate abroad as a result.
He said: “The banks shouldn’t underestimate our determination to act. They are deluding themselves, really seriously deluding themselves, if they believe the Government is not going to take this seriously.”
A defiant Mr Cable insisted he would not be blackmailed by bank bosses threatening to move their bases to more favourable tax regimes, passing some threats off as “not credible”.
He also indicated he would accept some firms leaving if it meant a fairer and more stable banking system.
“We’re not going to be bullied. I meet all kinds of companies who say, ‘give us something or we’ll go somewhere else’, but you can’t just give in the whole time,” he said.
“We don’t want to lose firms from the UK. But you’re dealing with internationally mobile companies and some come and some go.”
Chancellor George Osborne and Mr Cable will meet chief executives of the major banks this week for talks in which excessive bonuses and lending to small businesses will be high on the agenda.
Mr Cable said the issue of tackling the culture of secrecy around banking pay would also be discussed.
“We’ve got to have strong disclosure rules: start shining light on what’s actually going on at the top of the leading banking institutions,” he added.
“If you keep people in the dark, you grow poisonous fungus. Certainly we can’t leave things as they are.”
The Independent Commission on Banking has been appointed by the Government to examine banking reform and any strong recommendations will “have to be followed through”, according to Mr Cable.
He said: “They may well recommend radical action, both in terms of breaking up the banks to create more competition and in the interests of systematic stability. Anyone in banking who thinks that is not going to be taken seriously by the Government does need to think again.”
The Prime Minister last week threatened the banks with higher taxes if they failed to rein in lavish bonuses.
Mr Cameron insisted the banks had to understand the “political context” to the issue of bonuses, given that the banks were bailed out by taxpayers who are now feeling the pinch.
The British public found it “very galling” to see bankers paying themselves “unjustified bonuses”, he said.
His comments backed Deputy Prime Minister Nick Clegg’s warning that the Government would not stand on the sidelines if banks refused to restrain their pay levels.
Mr Cable said there were “various ways” of taxing banks if they failed to act on bonuses but declined to give any detail of what form it could take.
“It clearly is an option and they (the banks) understand that,” he said - adding that he believed the banks were aware of the need for action.
He insisted the Tory and Liberal Democrat coalition partners were united on the issue.
“There is a recognition that we have to deal with it. There is a Coalition Agreement that is absolutely clear and explicit that we have to take robust action on unacceptable bonuses.
“Both parties are fully signed up to that.”