RBS boss bows to pressure and gives up £1m bonus

Stephen Hester, head of the Royal Bank of Scotland, gave way to heavy political pressure last night to forego his £963,000 bonus.

The final straw for the RBS chief executive appears to have been the looming threat of a vote in the House of Commons condemning the Government for failing to block the payment.

He is reported to have feared becoming "a pariah" over the controversy.

Just a few hours before Mr Hester made his decision known, Ed Miliband announced he would force a Commons vote at the first opportunity. Labour strategists were anticipating that a substantial number of Tory and Lib Dem MPs would support them, giving them a chance of defeating the Government.

This would have created an acute embarrassment for the board of RBS, who would have been in conflict with Parliament and public opinion, when more than four fifths of the bank's shares are held by the Government. Labour also intended to use the row over Mr Hester's bonus to humiliate Prime Minister David Cameron, who had previously promised that he would block any bonus of £1m or more.

Mr Miliband believed that the issue had become a focus for public anger at irresponsibility in the boardroom and showed up a weakness in Mr Cameron's leadership. On his blog last night, the Labour leader claimed: "He's been found out on this issue. He was asked if he would veto £1m bonuses at RBS. He replied: 'The short answer is yes.' Having said that, it is ridiculous for him either to suggest he cannot do anything about it now – or pretend he has achieved that pledge by ensuring Mr Hester's bonus comes just short of seven figures.

"He and George Osborne are caught between what they really believe and what people think. They do not give a monkey's about tackling irresponsible capitalism or indeed the bonus culture."

The news came after two Cabinet ministers were quizzed on the bonus in television interviews yesterday.

The Works and Pensions Secretary, Iain Duncan Smith, and the Treasury Chief Secretary, Danny Alexander, both insisted it was not the Government's role to decide how much Mr Hester is paid, though they hoped he would forego his bonus. London Mayor, Boris Johnson, said it was "very peculiar" that a bank that is almost entirely state owned rewarded executives on this scale. He said he hoped the RBS row would not affect the whole financial services industry.

"It would be absolutely nuts to think that they are all somehow tarred with the brush of the fat cats who take excessive bonuses," he said.

Mr Duncan Smith said: "The contract that we inherited from Labour meant that the board takes the decision on this. You can't interfere and tell them what to do. And if we didn't like that, the only option would be to get rid of the board. Now if you do that, imagine what would happen in the banking sector and imagine what would happen to RBS. You'd have chaos."

Hester's £35.5m pay deal fuels renewed anger over excess

Stephen Hester, the chief executive of Royal Bank of Scotland, is in line for an extra payout of £3.3m which would dwarf his controversial bonus of £963,000, it emerged last night.

Disclosure of the staggering figure amounts to political dynamite as the Prime Minister fought off suggestions that he should veto the near-£1m bonus, announced last week, for the boss of the taxpayer-owned RBS.

The extra bonus of £3.3m, revealed yesterday, would be on top of the £35.54m total remuneration package Mr Hester has received since joining RBS in 2008.

As the political storm surrounding executive pay at RBS grew, Ed Miliband called on David Cameron to intervene and urged RBS shareholders to block the £963,000 bonus at its AGM in April.

The Labour leader will call for Mr Cameron or George Osborne, the Chancellor, to make an urgent statement to the Commons tomorrow on the affair at a time when the Government is capping benefits for the poorest in society. It will cast doubt on the vow by the Business Secretary, Vince Cable, to tackle executive pay.

In a further ratcheting-up of pressure on Mr Hester, it also emerged that the RBS chairman, Sir Philip Hampton, has decided to waive his £1.4m shares bonus.

But the Prime Minister, who earlier this year made great play of calling for Sir Fred Goodwin to be stripped of his knighthood for presiding over failure at RBS, yesterday refused to bow to political pressure.

Apparently uncomfortable at being asked by journalists about the bonus following talks with the Afghan President, Hamid Karzai, at Chequers yesterday, Mr Cameron insisted that Mr Hester's bonus was "a matter for him" and that installing a new top team at the failed bank, which is 82 per cent owned by the taxpayer, would be even "more expensive" than it is now.

The PM said: "It's obviously his decision. My decision is to make sure the team at RBS get on with the job of turning the bank round and we made our views very clear on the bonus and that's why it was cut in half compared to last year.

"The fact is Stephen Hester was brought in by the last government, a contract signed by the last government to turn round RBS – a bank that had got itself into a complete mess. The Government has made its views known and that is why his bonus was cut in half compared to last year. We do have to bear in mind that the alternatives to what's happening now could be even more expensive if you had a whole new team coming into RBS."

The RBS remuneration committee awarded the £963,000 – 60 per cent of what Mr Hester is entitled to – in an apparent attempt to avoid the politically toxic threshold of £1m.

Yet the new figures revealed last night dwarf the controversial bonus and will escalate pressure on the Government to block it.

Mr Hester's portion from the "share bank" set up for bonus payments would be worth some £3.3m at present prices, based on 12 million shares – although he would not be able to cash them in for three years.

The £3.3m is on top of Mr Hester's total package of £35.54m since joining the bank in 2008. That year, when the then Labour government bailed out RBS, Mr Hester was awarded £4.99m in restricted shares, forgoing pay and bonuses. In 2009, his package was worth £6.9m. In 2010, his total package rose to £8.16m. Last year, the total was £8.08m, including a long-term incentive plan (LTIP) worth £4.8m, bonus £1.66m and salary and pension contributions. For 2012, the total figure is £7.38m – including LTIP worth £4.8m, his bonus of £963,000 and £420,000 pension contributions and £1.2m salary..

Mr Hester, who presided over losses of £3.6bn in 2009 and £1.13bn in 2010, has so far remained silent. Ministers insist they cannot prevent the payout as it was enshrined in the contract agreed by the Labour government after Mr Hester took over RBS in 2008.

However, despite the continuing economic problems, Mr Hester's generous remuneration package is not unusual and several more senior RBS executives will still be in line for multi-million pound awards. A plan to monitor top pay is being launched today by a new independent body, the High Pay Centre. Its director, Deborah Hargreaves, said: "The concept of any bonus in these circumstances is insensitive. But if Hester knew that £3m of shares were about to be vested for him, their insensitivity in awarding this bonus is even greater."

The Shadow Business Secretary, Chuka Umunna, said: "The public will find these sums to be completely unacceptable at a time when public sector workers are having pay freezes imposed on them."

Archbishop warns against gay marriage

Ministers should not overrule the Bible by allowing same-sex marriage and David Cameron would be like a "dictator" if he lets homosexual couples get married, the Archbishop of York has said.

Dr John Sentamu, the second most senior cleric in the Church of England, said marriage must remain a union between a man and a woman.

In an interview with the Daily Telegraph, the archbishop said marriage is set in history and the state cannot change it overnight.

He said: "I don't think it is the role of the state to define what marriage is. It is set in tradition and history and you can't just (change it) overnight, no matter how powerful you are.

"We've seen dictators do it in different contexts and I don't want to redefine very clear social structures that have been in existence for a long time and then overnight the state believes it could go in a particular way.

"It's almost like somebody telling you overnight that the Church, whose job is to worship God (that it will be) an arm of the Armed Forces. They must take arms and fight. You're completely changing tradition."

The Government will open a consultation on the issue in March.

Dr Sentamu said the bishops in the House of Lords did not try to stop Labour introducing civil partnerships in 2004, giving same-sex couples improved legal rights.

He added the Church was also content with last year's move to allow civil partnership ceremonies in places of worship, as long as it is voluntary and agreed by the governing body of any particular denomination.

But Dr Sentamu said the Government would face a rebellion on any changes in legislation on gay civil marriage.

"The rebellion is going to come not only from the bishops. You're going to get it from across the benches and in the Commons.

"If you genuinely would like the registration of civil partnerships to happen in a more general way, most people will say they can see the drift. But if you begin to call those marriage, you're trying to change the English language.

"That does not mean you diminish, condemn, criticise, patronise any same-sex relationships because that is not what the debate is about.

"The Church has always stood out - Jesus actually was the odd man out. I'd rather stick with Jesus than be popular because it looks odd."

Dr Sentamu has previously expressed concern over the "gay marriage" of homosexual clergy after two reverends exchanged rings and vows at a service held in St Bartholomew the Great Church in the City of London in 2008

In a joint statement with the Archbishop of Canterbury Dr Rowan Williams, he said: "Those clergy who disagree with the Church's teaching are at liberty to seek to persuade others within the Church of the reasons why they believe, in the light of Scripture, tradition and reason that it should be changed.

"But they are not at liberty simply to disregard it."

Government shake-up for vocational qualifications

Just 70 vocational qualifications will count towards a school's GCSE performance in league tables in future - a cut from more than 3,000 under the current system.

The move is part of an attempt by the Government to stop schools encouraging youngsters to take qualifications that boost their league table position but do not help a pupil's prospects.

Ministers today confirmed that just 125 vocational qualifications will be included from 2014. Of these, only 70 will count towards the main performance measure - the percentage of pupils getting at least five Cs at GCSE, including English and maths.

The other 55 will count in the tables, but will not contribute towards the main measure.

Plans to slash the numbers of “equivalent” qualifications were first announced by ministers last year following Professor Alison Wolf's review of vocational education.

Under the current system, 3,175 vocational or “equivalent” courses count in the league tables, and some of these are multiple GCSEs.

For example, a level 2 BTEC in horse care, one of the qualifications to be cut from the new style tables, is worth four GCSEs at grade C or higher.

The new system will see every qualification count equally in the tables.

Among the others that will not be included in the future are the Level 1 certificate in practical office skills (worth two GCSEs), the BTEC level 2 extended certificate in fish husbandry (worth two GCSEs) and the level 2 certificate in nail technology services (worth two GCSEs).

Qualifications that will still count include many of the diplomas introduced by the last government and a number of BTECs and OCR Nationals covering areas such as performing arts, sport, health and social care, media, music and engineering.

Some of the courses which will count in the tables are still subject to further review because they are either too new, or still have to demonstrate they have all the characteristics needed to be included, the Department for Education said.

Education Secretary Michael Gove said: “The weaknesses in our current system were laid bare by Professor Wolf's incisive and far-reaching review. The changes we are making will take time but will transform the lives of young people.

“For too long the system has been devalued by attempts to pretend that all qualifications are intrinsically the same. Young people have taken courses that have led nowhere.”

Qualifications that do not meet the set standards can still be offered by schools but will not count in the league tables.

Prof Wolf said there had been a 40-fold increase in the number of vocational qualifications being taught in schools in just five or six years.

“It would be lovely to think that was just because these were qualifications that were good for children but some of that is chasing league table points,” she told BBC Radio 4's Today.

“There are a number of schools which are going out there and basically trying to pile up GCSE-equivalent points.”

Even after the reforms, the UK was likely to remain the European country which awarded the most vocational qualifications to 14-16-year-olds, she pointed out.

“I am very keen on vocational qualifications but they need to be good ones, and ones that employers recognise and value. The most important thing the Government can do is make clear to people which vocational qualifications and which practical and applied qualifications are really valuable.”

Former education secretary David Blunkett said it was “entirely wrong” if schools were deliberately seeking to skew league tables but warned that the tone of reforms risked discrediting important vocational qualifications.

“If there's a problem, let's root it out. But let's encourage youngsters to mix and match. I got my qualifications by getting a vocational qualification in business studies and going to evening classes to get A-levels at the same time.

“By all means slim them down but do not send the message out that this is a wholesale trashing of what was there and that somehow vocational education has been downgraded.

“If you do that, you will do us a very grave disservice.”

He questioned whether schools really were offering some of the subjects being reported.

“I don't know anybody in my neck of the woods who takes horse care. I think the only people in my constituency who have horses are the police” he said.

Shadow education secretary Stephen Twigg said: "Labour will support attempts to maintain rigour in our qualification system. It is not right that some young people are told they can get a qualification which won't be valued by universities, colleges or employers.

"However, we need to be careful not to throw the baby out with the bath water. As employers like JCB have said, the Government is undermining important subjects like the engineering diploma.

"However, the Tory-led Government should talk to teachers, parents and pupils rather than rushing a decision. We saw with the cancellation of the schools building programme, how ill-thought-through changes can cause chaos.

"Practical and vocational skills are important to our economic success and the Government need to make sure they don't devalue them."

Russell Hobby, general secretary of the National Association of Head Teachers (NAHT), said: "The Government seems determined to construct a rigid system of incentives that constrains and crowds out the professional and moral judgment of teachers.

"Playing with the equivalencies of vocational qualifications is part of the problem rather than the solution. A system which placed more trust in teachers would help them make judgments that are right for children rather than the school's position in a league table. Instead, the approach is an escalation of restrictions.

"Schools must focus on what is right for every individual pupil, not on their standing in the league tables. However, when your school can be closed and your staff sacked for a fall in league table standings, it can be hard to do so.

"Vocational qualifications are an essential part of the mix, and should not be treated as second-class courses. Of course, they need to be rigorous and they need to be relevant to the expectations of employers."

Royal Navy destroyer set for Falklands

One of the Royal Navy's most advanced new warships is being sent to the Falkland Islands, the Ministry of Defence said today.

Officials said the deployment was long planned, however, and not a riposte to increased tensions over the sovereignty of the islands.

HMS Dauntless, a Type 45 destroyer, is due to set sail for the South Atlantic on her maiden mission in the coming months to replace frigate HMS Montrose.

It comes amid a diplomatic war of words over renewed Argentinian claims to what it calls Las Malvinas, with David Cameron accusing them of "colonialism".

The issue is especially sensitive as the 30th anniversary approaches of the liberation of the islands by Britain from an Argentine invasion.

A Royal Navy spokesman rejected suggestions the decision to send the ultra-modern destroyer to the region represented an escalation of the UK's position.

"The Royal Navy has had a continuous presence in the South Atlantic for many years. The deployment of HMS Dauntless to the South Atlantic has been long planned, is entirely routine and replaces another ship on patrol," he said.

Sister ship HMS Daring has already been sent to the Gulf for her first mission amid heightened tensions with Iran over threats by Tehran to block a busy shipping lane.

They are the first of six new destroyers which will replace the Type 42 vessels which started service in the 1970s.

With crews of 180, they are the first to be built with a futuristic design that makes it difficult to detect using radar.

The Type 45s are armed with high-tech Sea Viper anti-air missiles and can carry 60 troops. They also have a large flight deck which can accommodate helicopters the size of a Chinook as well as take on board 700 people in the case of a civilian evacuation.

Foreign Secretary William Hague told Sky News: "These are formidable vessels - the Royal Navy packs a very considerable punch - but it's a routine deployment.

"We will always be in a position to defend the Falkland Islands if necessary, not that we are aware of any military threat to the Falkland Islands at the moment.

"We will always reaffirm that capability and we will always make sure that it's there.

"There's nothing unusual about this deployment. It doesn't reflect any change in the situation of any kind."

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