Fury at Northern Rock bonus plan

On the same day that figures revealed record numbers of people losing their jobs across the region, bank managers said they would be paying out £8.8m on top of basic salaries.

The bonus – which will be paid out tomorrow – is a reward to the Rock’s 4,000 staff for hitting targets on repaying the bank’s £26bn Government loan. But critics said the bonuses were inappropriate when thousands of workers were losing their jobs.

Unemployment figures released yesterday showed more than 8,000 people had joined the region’s jobless queues in November.

And the bank could face even greater criticism after it refused to confirm or deny reports that senior executives could receive even bigger bonuses worth up to 30 per cent – or £200,000.

The move appears to fly in the face of Gordon Brown’s pledge to clamp down on the banking “bonus culture”, and was condemned last night as being an abuse of taxpayers’ money.

Robin Ashby, spokesman for the Northern Rock Small Shareholders’ Group, said: “This is taxpayers’ money not being lent to people who want mortgages, this is taxpayers’ money that has been ploughed into the UK banking system being paid as staff bonuses.”

He added: “I think this is extremely insensitive for the people who have lost their jobs, for the people who have lost their homes, and for shareholders who have lost their company.”

A Northern Rock spokeswoman confirmed yesterday that the ten per cent bonus is to be paid to staff who meet the qualification criteria, under plans devised with the company’s new business plan last March.

Its introduction was deferred until restructuring was completed.

“This applies to all the staff as it is a company-wide policy, and those in positions of seniority are subject to more stringent conditions and the amounts they receive are up to a renumeration committee’s discretion,” she said.

Northern Rock was set a target of paying a quarter of its Government bail-out loan by a deadline of December 31, and pledged staff a bonus payment once that was reached.

The lender, which sparked the first run on a UK bank in 150 years when it hit troubles nearly 18 months ago, has paid back half of the loan and staff remain on course for further bonus payments when the 75 per cent milestone is reached.

While the company’s commitment to its remaining staff was commended by some, Northern Rock was also criticised for using its bail-out money in such a way.

Mr Ashby said that staff could have been rewarded in ways other than being given money.

“Something like two days’ holiday would surely have been more appropriate given the circumstances,”

he said.

“The Government is pumping tens of billions of pounds into the banking system to be used to stabilise the industry.

“Thousands of people have lost their jobs recently in this region.

Northern Rock itself has been cutting jobs to cut costs. What is happening here?”

Mark Wallace, campaign director with the TaxPayers’ Alliance, said: “These bonuses will be paid for by taxpayers, so people will be outraged if our money is handed out recklessly.

“Dishing out huge amounts of money when Northern Rock is still reliant on taxpayers’ help would be wrong and unfair to ordinary families.”

But Dennis Grainger, head of the Northern Rock Action Group, is a former employee, who at one point had shares worth £114,000.

He praised the company’s commitment to its workers. “I am pleased that the workers have been rewarded. Staff have gone through a difficult period,” he said.

“However, I wish the Government would be as fair to the shareholders as they have been to the staff.”

Vince Cable, the Liberal Democrat’s Treasury spokesman, said: “This is bringing the worst of the City bonus culture into a public body.

“This is an extraordinary action from a state-owned bank, which still owes billions to taxpayers.

“When millions of people are facing pay cuts or even unemployment, this action is indefensible.

“The Government should step in to stop this now.”