Fury as Northern Rock’s 4,000 workers to get £8.8million in bonuses

Northern Rock staff will receive a handy bonus for helping the bank repay its £26bn Government loan

Nationalised Northern Rock is paying its staff a 10 per cent bonus – funded by the taxpayer, it emerged today.

The state-run bank will hand out £8.8million in total to its 4,000 staff after they met targets on repaying the bank’s £26billion loan from the Government.

They returned a quarter of the money by December 31.

The average bonus appeared to be £2,000 but senior bankers were expected to get much bigger sums in line with their salaries.

The once-beleaguered bank has now paid back half of it’s loan and sights are now set on the new bonus – a further ten per cent – once three-quarters is repaid.

Lib-Dem Treasury spokesman Vince Cable said: ‘This seems an extraordinary action from a state-owned bank which still owes billions to taxpayers.

‘When millions of people are facing pay cuts, or worse unemployment, this seems extremely crass.’

The Newcastle-based lender announced the bonus on the day unemployment soared by nearly 80,000.

It was bailed out by the Treasury last year with a £27billion loan. It pledged to repay the cash as soon as possible and to date has handed back £15billion.

Under an ’employee incentive’ scheme agreed with the Government, its staff get a bonus if they are ahead of schedule with the repayments.

But the bank has been attacked for its aggressive plan of repossessions and this week was forced by ministers to stop its programme of cutting back on lending.

A Northern Rock spokeswoman confirmed that the 10 per cent bonus would be paid to staff who met the criteria.

She said: ‘This applies to all the staff as it is a company wide policy, and those in positions of seniority are subject to more stringent conditions and the amounts they receive are up to a renumeration committee’s discretion.’

The average wage at the Rock is thought to be around £22,000 amongst lower level employees. This means they can expect a £2,200 pay out on top of their basic salary.

The decision by the Rock and other banks to proceed with handing out additional financial rewards to staff makes a mockery of Gordon Brown’s pledge to crack down on the banking ‘bonus culture’.

This scheme was designed alongside the new business plan in March last year, although its introduction was deferred until the restructuring programme had been completed.

It applies to all staff at Northern Rock, subject to certain qualification criteria and delivers rewards based on the Company achieving its core plan objectives.

When the loan has cleared, they face a further 15 per cent reward and another 25 per cent of their salaries when Northern Rock is eventually returned to the private sector.

Shadow chief secretary to the Treasury Philip Hammond said: ‘Once again, the confusion in government policy is exposed.

‘The state-owned Northern Rock is paying millions in bonuses to its staff, while Gordon Brown boasts of a bank-ing bonus crackdown – just days after the Government reversed the policy of shrinking Northern Rock, that they are being rewarded for delivering.’

Mail Online readers were also incredulous. John from Newbury commented: ‘While investors suffer. Brilliant.’

Dave, from Chelmsford, wrote: ‘Hang on…. what bonus is the taxpayer going to get from Northern Rock!’.

Nigel, from Somerset, said: ‘Why should anyone get a bonus for just doing heir job! This bank, due to it’s own stupidity, got into trouble, ruined many people’s lives and lost them money and now it is paying out vast amounts of the stuff to it’s employees.

‘How long before it ends up back in problems again and more people lose their savings or the public have to bail them out. Sheer stupidity, just when the banking world needs level heads and intelligence.’

Experts also fear Rock employees could push home repossessions through faster so that they pay off the government loan more quickly.

Chris Tapp, director at Credit Action, a national money education charity said: ‘At one point, Northern Rock was accountable for a fifth of all repossessions which were taking place.

‘In the last three months, we have seen the government putting a lot of pressure on mortgage lenders to offer more flexibility when it comes to mortgage repayments.’

He encouraged Northern Rock and all mortgage lenders to make allowances for their customers.

‘They should act responsibly as they are an organisation which is now funded by tax payers money.

‘A lot of people have faced repossession over the last year, and employees at Northern Rock themselves might be people who are coming up against hard times.

‘I would tell them to consider what to do with their bonuses carefully.’

By Daily Mail Reporter
Last updated at 4:33 PM on 21st January 2009

Source: Mail Online

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