Criticism of pay-outs is �grossly simplistic� says Mathewson
By Paul Hutcheon

ALEX Salmond's chief economic adviser was under fire last night after he described criticisms of bonuses for bankers as "grossly simplistic and populist".

Sir George Mathewson said the attacks were based on "revenge" and questioned why the former executives of banks bailed out by the taxpayer had felt the need to apologise.

He also contradicted Salmond by saying that a cap on large payouts would "certainly" lose the banks key staff.

MPs and MSPs across the political divide have hit out at plans by banks rescued by the taxpayer to lavish bonuses on staff.

The Royal Bank of Scotland (RBS), which is 68% owned by the public, is to cut bonuses by more than 90% after complaints by UK government ministers.

But Mathewson, the chair of the first minister's council of economic advisers, said many criticisms of the bonus culture were "grossly simplistic and populist".

The former chairman of RBS said while he had never been a "great advocate" of the bonus culture, he was wary of the current debate: "I distrust blanket rules and blanket statements. Bonuses cover a wide range of issues, from branches working their socks off to individuals who can make a lot of money for the bank."

Salmond said yesterday that a cap on bonuses was a "perfectly workable solution", a belief not shared by his economic adviser.

Asked if capping bonuses could result in banks losing key staff, Mathewson said: "You will certainly lose them. There's no question about that.That is what will happen."

On whether bailed-out banks should pay bonuses, he said: "It depends on whether the taxpayer wants to maximise his investment or not. It is not necessarily sensible to play I must get my revenge on the banking community.'"

Asked if a blame culture had developed around bankers, he said: "Of course there is, I think there's more people to be blamed than the bank executives."

Mathewson also appeared to defend the four banking executives, Sir Fred Goodwin, Andy Hornby, Lord Stevenson and Sir Tom McKillop, who earlier this month apologised to the Treasury Select Committee for events that led to RBS and HBOS being saved by the taxpayer.

He said: "I don't believe in all this sorry bit. What could they say? Did they do what they thought was best at the time? I would suppose they did."

He added: "The new chief executives, those appointed through government, all benefited from massive payments in the past. Nobody is asking the new chief executives of the banks the same questions as were asked of the last chief executives and chairmen."

Mathewson declined to criticise the RBS acquisition of Dutch bank ABN Amro: "No-one anticipated the market fall, and did anybody really know the market exposure of ABN Amro to these instruments?"

He also took a swipe at the Financial Services Authority, which regulates UK financial services: "The government, through its regulators, are responsible for the economy of the country. The regulators have failed to safeguard the economy of the country. And I think they should be held responsible for that."

Labour finance spokesman Andy Kerr said: "It is time for Alex Salmond to recognise that George Mathewson is part of the problem, not the solution. Mathewson is a supporter of short-selling against the banks, and of continuing bonuses to even the highest paid bankers. None of this is suprising, since Mathewson has been a key figure in the Edinburgh banking system that has led them to the edge of the cliff. By continuing to rely on Mathewson's policy support, Salmond is acting against Scotland's best interests."

A spokesman for the first minister said: "Sir George is perfectly entitled to his views. It should be said that when he was chief executive of RBS it was a highly profitable private-sector institution."

He added: "The first minister believes that now RBS is majority-owned in the public sector, a different set of values is required.

"He also thinks that a monetary cap on bonuses is perfectly workable and necessary, protecting the relatively modestly paid staff without allowing unacceptable large bonuses in an institution which has been making record losses."