The Barclays Bailout

As between one quarter and one third of Barclays shareholders prepare to vote against their top executives' remuneration package, recall last August's wise words of George Eaton:

It's payday for the man Peter Mandelson once described as the "unacceptable face of banking". Sky News's Mark Kleinman reveals that Barclays boss Bob Diamond has been awarded a bonus of £6.5m for 2010. In a risible attempt to demonstrate "restraint", £1.8m of the bonus will be paid in shares and £4.7m in "deferred incentives". But the pay-out still makes Diamond the best paid boss of the four big high street banks.

In response, we can expect Barclays to remind us that it did not receive a pound of taxpayers' money. But this seemingly plausible defence does not bear scrutiny. Though it was not bailed-out by the state, Barclays benefited immensely from the emergency measures introduced by the government to prevent a sector-wide collapse.

As John Varley, the former chief executive at Barclays, conceded in 2009:

"There are two ways I would say the system as a whole benefited generically.

One was in the injection of liquidity undertaken by the Bank of England and a new structure put in place in March 2008.

And the other was the making available of guarantees from government for funding undertaken by banks. It is important to recognise that in each case the banks were encouraged to use these new structures that were put in place and we did.

It is also important to recognise that we were required and we did pay a price for these things, but I'm not trivialising the importance of the intervention. It was important."

Without the state-led bailout of RBS and Lloyds-HBOS, there would have been a run on all the banks, including Barclays. It was for this reason that George Osborne, while shadow chancellor, called for a ban on bonuses at banks that had received any sort of government guarantee. He said: "It is totally unacceptable for bank bonuses to be paid on the back of taxpayer guarantees ... it must stop." Having utterly failed to live up to this pledge, Osborne now insists that it's time to move from "retribution to recovery". But as Mervyn King pointed out at the weekend, few share this view.

Last month, Vince Cable rightly denounced the decision to award RBS chief executive Stephen Hester a bonus of £2m as "offensive". Will the coalition's conscience speak out today?