The Royal Bank of Scotland infuriated unions tonight by announcing plans to cut 2,300 jobs only hours after its former chief executive Sir Fred Goodwin had publicly apologised for the Edinburgh-based bank's downfall.
At a packed meeting of the Treasury select committee of MPs, Goodwin had been joined by three other bank executives who were ousted after the £37bn bail-out to offer apologies for the banking crisis that has left the taxpayer owning 70% of RBS and 43% of the new Lloyds Banking Group.
Goodwin's successor, Stephen Hester, who faces the committee tomorrow, can expect to face hostile questions about the job cuts in the retail banking operation as the taxpayer-controlled bank plans to pay £1bn in bonuses to its investment bankers.
Hester has already admitted that the retail bank is profitable but that profits will be wiped out by £28bn of losses caused by the investment bank and ill-timed acquisitions. In one of the more hostile exchanges between the MPs and the bankers, the Conservative MP Michael Fallon told Goodwin: "You've destroyed a great British bank."
Goodwin, who has become the public face of the banking crisis, was quick to say he "could not be more sorry" for what happened. "If you want to blame it all on me and close the book, that will get the job done very quickly, but it's not going anywhere near [finding a solution]," he told the committee.
Sir Tom McKillop, the former RBS chairman, also insisted he was sorry while Lord Stevenson, the former HBOS chairman, thanked the committee for being allowed to use the "s word". Former HBOS chief executive Andy Hornby, who is receiving £60,000 a month as a consultant to the Lloyds Banking Group, issued a "full apology".
He will give up the consultancy after three months, he said, as he tried to demonstrate that he had personally lost out from the collapse of HBOS. "In the two years that I have been chief executive, I have lost simply more money in my shares than I have been paid," said Hornby.
Goodwin, who was paid more than £4m in 2007, also stressed that his pocket was also hurting after he bought £5m of RBS shares shortly after the ABN deal was completed.
Goodwin and McKillop also gave MPs the starkest admission yet that the decision to pay nearly £50bn for Dutch bank ABN Amro two years ago was a "bad mistake". The deal, one of more than 20 conducted during Goodwin's eight years at the top, was now worthless, they conceded.
"With retrospect, we bought ABN Amro at the top of the market. In fact, we are sorry we bought ABN Amro. The bulk of what we paid for ABN Amro will be written off as good will," said McKillop.
McKillop tried to defend his own tenure on the board, insisting Goodwin had not been overbearing and that the ABN deal was agreed by the entire board. It was "wrong to characterise it as a transaction driven by Sir Fred", he said.
But shortly after Goodwin spoke, RBS admitted that 2% of its 106,000 UK workforce would be cut. Derek Simpson, Unite joint general secretary, said: "On the day that 'sorry' appears to be the easiest word for the bosses, 2,300 employees are left paying the price for management mistakes. The announcement by Royal Bank of Scotland that they plan to cut thousands of jobs marks a disastrous day for staff at the bank and represents a further blow to workers across the financial services sector."
Last month Barclays announced it was cutting about 4,000 jobs in its retail bank while the Lloyds Banking Group is also expected to cut thousands of jobs.
The row over banks and their behaviour over bonuses led to divisions in cabinet , with Labour deputy leader Harriet Harman leading calls for the party to clamp down on city bonuses as the centrepiece of a wider Labour campaign for justice and fairness.
One member said the cabinet meeting, held against a backdrop of a run of increasingly difficult opinion polls, revealed some of the clear divisions between old and new Labour that still exist inside the party.
Some cabinet members, including Harman, are worried that they could be outflanked by the Tories on bonuses, even if David Cameron has not produced any specific policy proposals on how to control them, apart from moral persuasion.
Harman has been voicing criticism of bonus levels for more than a year, but some cabinet critics claimed she was trying to position herself in the event of a Labour defeat so she can credibly claim that she had pressed to regulate capitalism, but had been let down by her colleagues.
It was suggested that at today's meetings the business secretary, Peter Mandelson, and the communities secretary, Hazel Blears, warned against throwing away Labour's hard-won reputation as an ally of business. All sides agree that the current system of bonuses has been structured to reward excessive risk-taking and needs revision. There was a widespread acceptance that the government needed to respond to the public anger at bankers.
The government is facing a dilemma on how to deal with RBS bonuses, and whether contractual obligations to pay them to some senior executives can be torn up, as has been suggested by the former Labour deputy leader John Prescott.
Downing Street and RBS have been discussing a £25,000 cap on bonuses with any extra variable rewards coming in the form of share options. It is possible Hester will set out the proposals it has put to the Treasury in the last few days when he gives evidence to the select committee tomorrow. The chancellor, Alistair Darling, was not at today meeting, but the treasury chief secretary, Yvette Cooper, has said RBS bonuses must be both curtailed and minimised.She said the government was trying to make a distinction between senior executives and ordinary staff. Pressure from Labour backbenchers to act over bonuses grew today when Labour backbench MP Frank Field called on the government to take a decisive position, adding: "What the government also has not realised is that failure to act decisively here will see the anger of voters against bankers being transferred to politicians.
"This anger is likely to be such that the only way that Labour MPs will be able to go out in public will be in heavy disguise - such will be the public ridicule."
