Labour today stepped up the pressure on the government over City bonuses as the new chief executive of Barclays, Bob Diamond, stood firm against demands that he give up his potential £8m payout for 2010.
Forcing George Osborne to the House of Commons dispatch box to defend his attempts to crack down on bankers' bonuses, the shadow chancellor, Alan Johnson, said the coalition had gone "from the scent of rose garden to the stench of broken promises" since the election.
"The chancellor, who says we are all in this together, bows to the rich and powerful whilst bearing down on everyone else. His sneering arrogance will not get him out of this one," Johnson said.
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But Osborne criticised Labour for allowing Royal Bank of Scotland a free rein on bonuses in 2010 and insisted that "nothing is off the table" in continuing talks with the banks about lending £200bn to businesses this year and providing more information on pay.
Diamond – who took the helm of Barclays on 1 January – had earlier been asked repeatedly by the Treasury select committee if he would waive his bonus for 2010, as he was forced to do in 2008 and 2009.
He insisted he had not yet been awarded a bonus for 2010 and would decide "with family" whether to accept the payout.
Becoming fractious at times during his first appearance before MPs, he said: "There was a period of remorse and apology for banks and I think that period needs to be over."
Diamond, who spent 14 years running the investment banking arm Barclays Capital before his promotion, repeatedly refused to say he was "grateful" for the taxpayer's support of the banking system – worth £100bn, according to Bank of England estimates.
"We are very grateful for the central banks around the world and the governments around the world for the actions they have taken," he said.
The TUC general secretary, Brendan Barber, later denounced Diamond as "the poster boy for everything that is wrong about Britain today".
When asked by MPs to defend bankers' pay, Diamond recollected his childhood experiences in Massachusetts, US, where he was the eldest of nine children and raised by parents who were both teachers. "I learned at a very early age that if I wanted a new shirt or bicycle I had to pay for it myself," he said.
He insisted the bank was aware of the hostility it faced from the public over bonuses.
"We have to balance the responsibility we have and the recognition of the environment we operate in," he said. "I don't agree that I can isolate bonuses and assume that it would not have consequences on the rest of the business.
"I wish I could isolate bonuses and say I'm going to have a really good Barclays Capital and I'm going to have a really good Barclays retail bank, but I'm just not going to decide at the end of the year not to pay anyone. But it's not that simple."
Diamond's elevation to the top slot has resulted in a dramatic change in his pay deals. As the head of BarCap, his £250,000 salary was bolstered by intricate performance-related pay deals that have brought in almost £70m in the last four years through a combination of cash and shares and have offered him unlimited bonus potential.
But he will receive far less as the Barclays chief executive. His salary has risen to £1.35m, with the possibility of an annual bonus equal to 2.5 times that amount, and long-term share-related deals equal to five times his salary.
Diamond played down suggestions that the bank might move out of London and flatly denied that he been asked to show restraint on bonuses.
The chancellor declined an offer from the Labour benches to condemn Diamond's claim that it was time for bankers to stop apologising. Osborne said: "The apology should start with the last Labour government."
Asked in the Commons what bonus Barclays should offer its chief executive this year, Osborne replied: "Less than he was paid in 2009."
Osborne said he wanted a package agreed with the banks before the end of the month that will lead to a material increase in lending, an increase in banks' contributions to the community and a lower overall bonus pool in the first year of this government compared with the last year of the Labour government.
He said: "We want to see bonus restraint. We want to see it lower this year than under the last Labour government. We want to see them deferred.
"We want to make sure they don't reward risk-taking which goes badly wrong, and we want to get away from guaranteed bonuses that people got regardless of what happened to their financial institution.
"That is why we are looking at greater transparency, greater shareholding involvement."
The chancellor said his priority was to see a net increase in lending over and above last year's £180bn, although government officials refused to put a number on how much they hoped to achieve.
Major banks are offering to lend £200bn to businesses in 2011 and being urged to provide more disclosure on pay in talks with the government, known by the codename, Project Merlin.
Tonight, the UK arm of Spanish bank Santander was said to be set to pull out of the talks following the exit of Standard Chartered last month.
Osborne said: "We are seeking a new settlement with the banks ... if we don't agree a new settlement, and if they don't meet our requirements, then nothing is off the table.
"This government have done more in seven months to create a safer, more properly regulated banking system than [Labour] did in 13 years."
Referring to Labour's negotiations with RBS when it joined the asset protection scheme, Osborne said Labour explicitly encouraged bonuses at market rates for 2010, adding nothing meaningful was agreed by the Labour government on increasing lending. Labour demanded a veto on RBS bonuses in 2009.
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