Even his parents think he's overpaid, and that's before the bonus kicks in

LONDON BRIEFING:Bank of Scotland chief Stephen Hester won the prize for best soundbite in a Westminster grilling, writes FIONA WALSH

THEY MAY not be part of the mob baying for bankers’ blood but Mr and Mrs Hester, whose 49-year-old son Stephen runs Royal Bank of Scotland, appear to be as baffled as the rest of us.

As the banks prepare to unleash a torrent of bonus payments over the coming weeks, Hester admitted to MPs yesterday that even his parents think he is paid too much. The banker, who took over at state-controlled RBS last October following the departure of the disgraced Sir Fred Goodwin, is on a three-year pay-and-bonus package worth up to £10 million.

As the chief executives of Britain’s bailed-out banks endured another public grilling at Westminster, Hester stressed yesterday that, on joining the bank, he had asked only that he be paid “the going rate”. As every schoolboy knows, though, the going rate for bankers bears little relationship to the rewards on offer in other walks of life.

With the RBS price languishing well below 50p, the share-performance part of his package is worth nothing at all at the moment, he told the politicians. But, in response to predictably hostile questioning, Hester admitted: “If you ask my mother and father about my pay, they’d say it was too high as well.”

The softly spoken Hester certainly won the prize for the best soundbite, although the wags were yesterday expressing mock surprise that a banker should turn out to have parents at all. He may also feel a tad guilty at having brought his father, a semi-retired chemistry professor at York University, and his mother, a psychotherapist, to the attention of the media, albeit briefly.

Media attention on the banking sector will be anything but brief over the coming weeks, however, as thousands of bankers learn the level of their 2009 bonuses. With the public still paying the huge bill for the banking bailout, estimates suggest that as much as £40 billion may be lavished by the investment banks on their big hitters. This is despite recent government efforts to curb the bonus culture, such as the 50 per cent “super-tax” imposed by Chancellor Alistair Darling in his pre-budget report last month.

It is the banks themselves that are liable for the one-off tax, payable on bonuses above £25,000, rather than the individual bankers. The banks are thought to be willing to pay the additional levy rather than reduce rewards to their top staff only to see them defect to rivals.

Hester, described by MPs yesterday as Britain’s “best-paid public servant”, refused to give any detail on the RBS bonus pot and said staff themselves would not find out until the end of next month. He defended bonuses as vital in recruiting and retaining key staff, although he said the 84 per cent government-owned bank would pay the minimum it could get away with.

The Liberal Democrats have renewed their calls for the banks to be broken up and for their profits to be subject to a windfall tax. Treasury spokesman Vince Cable was scathing about the supposed “skills and ingenuity” of bankers which he said “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 per cent. It’s hard to find a skill in that,” he said – and he does have a point.

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Tesco has seen off the doubters in fine style, reporting its best Christmas trading figures in three years. Against analysts’ forecasts of like-for-like sales growth of just 3 per cent in the UK, still its biggest single market, Tesco checked in with an impressive 4.9 per cent growth over the festive period. Some retail sector experts – and rivals – queried the better-than-expected figure, saying it had been achieved only because the group blitzed its customers with £100 million of extra Clubcard points and vouchers in the run-up to Christmas, which accounted for almost a full percentage point of the growth.

But that’s where Tesco’s marketing genius comes in. Years ago it perfected the loyalty card system at a time when rival Sainsbury’s was still dismissing such incentives for customers as “electronic Green Shield stamps”. Tesco has also mined the mountains of data gleaned from its Clubcard usage far more effectively than its rivals.

Of the £100 million extra points and vouchers sent out to shoppers, only £34 million has so far been redeemed, so there could be a further benefit to sales as the stragglers come through.

The promotion certainly did the trick by getting customers through the doors, and spending more. Total UK sales were up by more than 8 per cent, an impressive achievement for Britain’s biggest stores group.

Fiona Walsh writes for the Guardiannewspaper in London