'Arrogant' Lloyds to pay bonuses despite bail-out

There was a furious reaction today as it emerged chief executive Eric Daniels told employees that Lloyds TSB would continue with its bonus payments, despite the injection of up to £5.5 billion of government funds.

Mr Daniels said the bank faced "very, very few restrictions" on the way it conducts itself even with government nominated directors on the board.

In a recorded message, he added: "If you think about it, the first restriction was not to pay bonuses. I think our staff have done a terrific job this year. There is no reason why we shouldn't."

His words infuriated Eddie Weatherill of the Independent Banking Advisory Service. He said: "It's typical bank arrogance, to be blunt."

"Everybody else in the country is going to pay for the bankers' actions and unfortunately the bankers don't see they are the biggest problem.

"Banks do have to be restricted because this is a gigantic bail-out by anybody's standards and the taxpayers are taking the risk. The banks are avaricious when it comes to money for themselves and the taxpayers' money has to be protected."

Matthew Elliott, head of the TaxPayers' Alliance, said bonuses should be conditional on repaying taxpayer funds at a good rate.

He said: "There will be a huge backlash if ordinary families' money goes towards large bonuses in banks which needed taxpayers' help just to survive."

Gordon Brown said last week a curb on unjustified bonuses would be a condition of receiving money from taxpayers.

Lloyds TSB sees itself in a different situation from the two worst affected banks, Royal Bank of Scotland and HBOS. Lloyds TSB is acquiring crippled HBOS in a rescue takeover that could leave the taxpayer owning 40 per cent of the combined group.

However, Mr Daniels is clearly concerned about the impact on staff morale at one of Britain's stronger banks if bonuses to workers below board level are axed.

Britain's financial services sector received around two thirds of the £26 billion in bonuses handed out to employees last year.

The news comes as a survey of City workers revealed two thirds still expected to get a bonus this year, with many expecting to get even more than last year.