George Osborne wants controls on bonuses in the non-nationalised banks

Shadow Chancellor George Osborne has told The Guardian that large bonuses should be impossible in any financial institution that has received any sort of government guarantee:

"There are hundreds of billions of pounds of guarantees in existence: guarantees provided by the taxpayer to all banks, to guarantee inter-bank lending and the like. The reason those guarantees are in place is not so the bankers can pay themselves large bonuses. They are in place to keep a banking system afloat during a recession, and to allow the banks to rebuild their balance sheets, so they can function again, and start lending out in a normal fashion. If it's the case that banks are using those guarantees and actually engaging in pretty low-risk activity and making huge profits on the back of it, and then paying huge bonuses, I think action needs to be taken."

The Tory leadership is concerned at Labour attempts to paint the party as laissez-faire - Peter Mandelson tried it again on Wednesday.  A tough line on bank bonuses and the party's belief that the Bank of England should take charge of regulation are intended to counter this.

Within the full interview with The Guardian's John Harris Mr Osborne defends the Tory pledge to slash inheritance tax:

• "I would argue that a political party has to offer a broad programme. And part of what we've got to do in our society is to get people to save, right? There are all sorts of instruments to try to encourage that … A very important Conservative insight has always been that you want to encourage aspiration, and upward mobility. It may be an inconvenient truth to some people on the left, but the fact is, when I made my announcement on inheritance tax, it was very popular... I think it encourages people to save and work hard through their lives."
• "I think the simple message that only millionaires pay inheritance tax is a strong message of aspiration and encouragement... I think you are, dare I say it, rather demonstrating the obsession of the British press with the inheritance tax proposal, rather than looking at the other things we are doing to encourage aspiration and social mobility across all social groups."

ConservativeHome polling at the end of July found that 48% of Tory members agree that the inheritance tax pledge should be delayed. 48% think it should be maintained.

Tim Montgomerie