It's bonus time at Northern Rock! Failed bank's staff share £9m pay day

'Crass': Staff will each get about £2,000



Disgraced bank Northern Rock will tomorrow lavish £9million in bonuses on its staff - simply for repaying part of its bail-out loan from the Government on time.

The taxpayer-funded handout - equivalent to £2,000 for each worker - was labelled ‘crass’ and ‘indefensible’ last night.

The payout, which applies to all 4,400 staff at the Rock, is only the first stage in an incentive scheme that could see the state-owned bank pay more than £50million to its workers over the next few years.

The figure does not even include the seven-figure bonus pool which senior executives will enjoy, less than 12 months after the Rock was brought to its knees and needed a £26billion taxpayer-funded bail-out in February last year.



The Rock’s new boss Gary Hoffman, 47, who is one of Britain ’s best-paid civil servants on a basic salary of £700,000, is also in line for a super-size handout.

Experts queried why the workers deserve bonuses simply for doing their job at a time when the rest of the country is facing the grim prospect of job losses or pay cuts.

Official figures published yesterday show unemployment rocketing to 1.92million with 2,500 people every day being made redundant.

But Northern Rock’s 4,400 workers will tomorrow enjoy a bumper pay day. In addition to their normal monthly wage, a bonus worth 10 per cent of their salary will land in their bank account.



On an average salary of around £20,000, this equals a bonus of £2,000. Staff can also look forward to another 10 per cent bonus in 2010 and 15 per cent in 2011 if the bank repays its government loan on schedule.

A fourth bonus, worth 25 per cent, will follow for lucky workers if the bank leaves state ownership and is successfully returned to the private sector.

For a worker on £20,000, this means total bonus payments of around £12,000.

Senior executives can expect bonuses rumoured to be worth 20 per cent of salary.

Unlike the bank’s workers, their bonuses will not be paid tomorrow and have not yet been decided by the bank’s remuneration committee.

Last night Liberal Democrat Treasury spokesman Vince Cable said: ‘This seems an extraordinary action from a state-owned bank which still owes billions to taxpayers.

‘When millions of people are facing pay cuts, or worse, unemployment, this seems extremely crass and indefensible.

‘This is bringing the worst of the City bonus culture into a public body. The Government should step in to stop this now.’

Matthew Elliott, chief executive of the campaign group TaxPayers’ Alliance , said: ‘This money does not grow on trees. It comes from the pockets of taxpayers who are struggling to get by in a recession.’

The bonus scheme is understood to have been agreed when the newly nationalised Rock submitted its business plan in March last year.



It was approved by the two state-appointed non-executive directors, Tom Scholar and Philip Remnant.

Many of those angered by the payouts are ordinary Northern Rock ‘victims’: those who bought shares which are now worthless or homeowners who were foolishly allowed to take out ‘super-size’ loans which have left them facing repossession.

Last night, the Prime Minister refused to condemn the payments despite having previously repeatedly attacked the banking industry’s bonus culture.

Today, Financial Services Authority chairman Lord Turner defended the payout, insisting it was not the same as rewarding 'fat cat' bankers.

'Those people were given a promise. These are ordinary workers who have done the job they have been told to do which was the job people thought was the sensible thing at the time,' he said.



'I think it would be unfair not to give what are relatively modest sums of money and completely detached from fat cat bonuses in trading rooms.'

