LONDON BRIEFING:BRITISH SHADOW chancellor George Osborne has just been given a taste of what life will be like next year when, barring one of the biggest upsets in British electoral history, he moves into No 11 Downing Street, writes FIONA WALSH

Osborne no doubt thought he was on safe ground when he stood up on Monday to deliver a bank- bashing speech on the reviled bonus culture. The speech did not go quite as the opposition spokesman had planned, however. He secured the headlines he wanted but in the process sparked a vicious backlash from the City, traditionally the Conservative Party’s staunchest supporter.

His proposal for an “emergency plan”, which he said would stop cash going into the bank accounts of bankers this Christmas and instead into the economy, was variously dismissed as ridiculous, shallow and simplistic.

Not for the first time, the shadow chancellor’s grasp of the complex workings of the financial world was called into question.

Osborne attacked bankers’ bonuses – so far, so safe. The banks have to understand that we are all in this together, he said – and who could disagree with that?

But then – and this is where he got himself into trouble – he called on the retail banks to pay anyone other than small branch and call-centre staff bonuses not in cash but in new shares.

The cash saved as a result should then be “put on to banks’ balance sheets” explicitly to support new lending to businesses and families, he said. The plan should be a condition for any bank receiving taxpayer guarantees and liquidity support.

Apart from the fact that the really big bonuses are awarded not by retail banks but by the investment banks, the problem with paying large bonuses in new shares rather than cash is that it would dilute the holdings of existing shareholders. In the case of bailed-out banks Lloyds Banking Group and Royal Bank of Scotland, the loser would be the government (ie the taxpayer).

And the idea that the money saved by banning cash bonuses would immediately flow back into the economy in the form of new lending by the banks is fanciful in the extreme. The banks have been slow to resume lending but not through a lack of resources, more a reluctance to take risks in the dire economic climate.

The need for bonuses to be tied to longer-term performance has already been widely accepted in the banking industry, which realises short-term risk can no longer be encouraged. The banks have signed up to the City regulator’s new code on banking and Britain has given its full support to the proposals agreed by the G20 nations in Pittsburgh last month, including clawing back bonuses if a business should later turn bad.

There is much further to go, however, and Osborne is not alone in failing to produce any credible proposals for a comprehensive and enforceable overhaul of the bonus system.

Outlining rules that apply only to the British retail banks would make it harder for them to compete with investment bank rivals from the US and Europe.

The reaction to Osborne’s “emergency plan” this week was brutal, although many preferred to voice their criticism anonymously, mindful of the fact that this time next year he will almost certainly be installed in Number 11.

But the politicians were not so timid, with the Liberal Democrat treasury spokesman, Lord Oakeshott of Seagrove Bay, accusing Osborne of “toe-curling” ignorance, saying he “hasn’t a clue how markets and public companies operate”.

That may have been a little harsh, but the reception Osborne received this week should make the chancellor-in-waiting think more carefully in future when in pursuit of populist headlines.

AS POSTAL workers decide this afternoon whether to go ahead with this week’s walk-out, the impact of the dispute is spreading throughout the British economy.

The cost of the industrial action has already been estimated at about £1.5 billion (€1.67 billion), with businesses, including online retailers and mail-order companies, forced to put more expensive alternative arrangements in place.

It is also threatening the £720 million cash call from house- builder Barratt Developments, which yesterday issued an urgent plea to its shareholders to get their acceptances in early for fear they will not arrive by the November 3rd deadline.

Shareholders normally wait until the last minute but the group is advising investors taking up their entitlement to new shares to post early or to consider courier services or hand delivery to return their forms – and their cheques.

Fiona Walsh writes for the Guardian newspaper in London