THE BRITISH are questioning the way in which capitalism works following the economic crisis caused by the banking collapse and mounting anger over top-level pay, British prime minister David Cameron has said.
The political ground over a fair version of capitalism has been fought for months between Mr Cameron and Labour leader Ed Miliband, who was the first to raise the issue, despite initial mocking from the Conservatives.
During a heavily promoted speech in London, Mr Cameron declared: “We won’t build a better economy by turning our back on the free market, we’ll do it by making sure that the market is fair as well as free.”
Later, taking questions, Mr Cameron hinted that former Royal Bank of Scotland chief executive Fred Goodwin could lose his peerage awarded during the Labour era in power, while new rules to govern top executives’ pay will be published next month.
Mr Cameron repeatedly sought to draw a distinction between top City of London bonus-fuelled salaries and those earned by entrepreneurs who make millions from setting up and perhaps later selling on their businesses.
“That is a world away from what we’ve seen in recent years, where the bonus culture – particularly in the City of London – has got out of control. The link between risk, hard work, success and reward has been broken,” he said.
The issue of bankers’ pay is set to come back on the agenda as bonuses are paid out from the end of this month, with reports that the RBS board wants to give a £1 million share bonus to chief executive Stephen Hester, even though the bank’s share price has halved.
Questioned yesterday, Mr Cameron deliberately emphasised that all RBS bankers would be limited to a £2,000 cash bonus, while the Chancellor of the Exchequer, Mr George Osborne, last week told a House of Commons inquiry that he will take a hands-on role in talks with banks on the issue.
Leading Conservatives have become concerned in recent weeks that the party is being linked to a high-pay culture by voters who are increasingly feeling the squeeze, particularly over the last four months of last year.
Mr Cameron said Tony Blair and Gordon Brown had made “a Faustian pact with the City” during the boom years, leading to “a debt-crazed economy”, neglecting to mention that the Conservatives had pressed Labour to regulate the City even less at that time.
“We are the party that understands how to make capitalism work, the party that has constantly defended our open economy against the economics of socialism,” he said.