British Treasury chief Alistair Darling said yesterday that automatic annual bonuses for banking executives will be outlawed in an attempt to curb excessive risk taking in the country's huge financial sector.
The Chancellor of the Exchequer told the governing Labour Party's annual conference that new legislation to scrap the payments will be put to Parliament within weeks.
Leaders of the G20 rich and developing countries agreed last week to limit executive bonuses, but didn't set specific caps. Darling said bankers in Britain will in future be offered bonuses for their performance over several years, rather than over 12 months.
"We won't allow greed and recklessness to ever again endanger the whole global economy and the lives of millions of people," Darling said.
He told the rally that new laws would include a claw-back provision and help "end the reckless culture that puts short term profits over long term success".
"It will mean an immediate end to automatic bank bonuses year after year, it will mean an end to immediate payouts for top management," Darling said.
The plans, to be included in a new Business and Financial Services Bill, will be proposed formally in the Queen's Speech in December, the annual announcement of the government's legislative program.
Darling told the rally that Britain's economy has not yet recovered from the financial crisis, but predicted the UK is likely to come out of recession by the end of the year.
"Germany, France and Japan are showing signs of growth. There are many independent forecasters now believing too that the UK is coming out of recession," he said. "I think it is too early to say so with total confidence."
Prime Minister Gordon Brown's Labour Party trails badly in opinion polls ahead of a national election that must be called by next June.
Brown said on Sunday that his party could recover if the economy rallies and the public give him credit for averting a worse financial crisis.
"When the history of this period is written, this country and this party will be proud. Proud that the people who led the way in stopping recession turning into global depression were our government and our Prime Minister Gordon Brown," Darling told delegates.
In recent weeks Brown has acknowledged that the government will need to cut public spending to reduce mounting government debts, but insists his Labour Party would protect key services.
Darling said the main opposition Conservative Party, which is widely tipped to win Britain's next election, would put the country's economic recovery at risk by making fast and sweeping cuts to spending.