RBS chief: My staff are quitting to join rivals for more pay

Thousands of staff at taxpayer-owned bank RBS have quit amid claims that they are not paid enough money, its chief executive Stephen Hester said today.

Mr Hester sparked outrage after warning that employees are leaving because it was offering lower bonuses than City rivals.

He also said that profits at the bank, which is 84 per cent owned by the taxpayer, would have been about £1 billion higher if it had managed to stop staff leaving. The bank said it had "paid the minimum necessary to retain and motivate staff who are critical to the recovery of RBS".

But MPs warned that the public would be astonished that the bank was paying £1.3 billion in bonuses given that it today reported a £3.6 billion loss for last year.

Vince Cable, the Liberal Democrat Treasury spokesman, said: "Stephen Hester is trying to justify the unjustifiable. Most bankers owe their jobs to the taxpayer. His comments will just reinforce the view of bankers in many people's minds as greedy and selfish."

Shadow chancellor George Osborne echoed the views of Mervyn King, the Governor of the Bank of England, by telling BBC radio: "I do think the level of payment in the banking sector has got completely out of kilter with the rest of society.

"It is totally disproportionate to what doctors are paid, people working in industry are paid, teachers are paid and the like. We need to bring down pay across the sector — not just in one bank, across the sector — and things like a bank tax, internationally agreed, might help do that."

Mr Hester said the total bonuses paid to staff concealed a big shortfall compared with pay deals offered by rival banks. He said: "It is my belief that had the thousands of staff who left us last year not done so, our profits would have been about £1 billion higher."

RBS had kept defections to "a damaging but not destructive level" last year, but he added: "This year is going to a very worrying one for our staff and we will lose a lot more people."

The bank said it would be paying a £208 million in bonus tax.

Mr Hester denied the bank had been forced to cut the bonus pool by UK Financial Investments, which oversees the nationalised and part-nationalised banks, but added: "We now lie at the bottom end of the league table in terms of the incentives we are offering."