Brown at war with the City

He warned that the "days of big bonuses are over" and said bankers guilty of taking excessive risk with other people's money should be "punished".

The Prime Minister was speaking a day after launching a historic £500 billion rescue package for Britain's banking system. In some of his most critical comments about the Square Mile yet, Mr Brown said: "I am angry too," when told taxpayers were upset at having to bail out well-heeled bankers.

In an interview with GMTV he said: "I'm angry at irresponsible behaviour. And where there is excessive and irresponsible risk-taking, that is going to be punished."

The Prime Minister's criticism came as it emerged that London's tycoons have lost billions in the financial meltdown.

Meanwhile, in a calmer City the measures to ease the banking crisis — including a 0.5 per cent rate cut — received only a mixed reception. The FTSE-100 rose 57.28 points to 4423.97, but there were few signs that banks are any more confident about lending to each other. The three month LIBOR rate — a key measure of money market liquidity—was set at 6.28125 per cent, slightly up from yesterday.

Barry Moran, a currency dealer at Bank of Ireland, said: "To see little or no reaction is very disappointing. Things are still very stressed."

Experts have warned that the extra government borrowing needed to pay for the rescue package will mean long-term tax rises and public spending cuts. Mr Brown hinted that the "price" of the bail-out would be a new era of far tougher regulation of City and "fat-cat" pay. "The days of big bonuses are over," he said. "One of the conditions of us helping the banks is that we will have to reach an agreement about their executive remuneration."

Blaming the sub-prime loans scandal in the US for infecting the world's financial systems, he said: "But there have been abuses in our system as well and these have got to be dealt with too. Where these guys have taken irresponsible risks, that is completely unacceptable. The problem is they didn't know what they were buying from America."

Mr Brown added: "Our economy is built around people who work hard, who show effort, who take responsible decisions, and whether there is excessive and irresponsible risk-taking, that has got to be punished."

Today a forecast of City bonuses predicted the the total would be down by almost 60 per cent to just over £3.5 billion this year.

The wealthy tycoons who have flocked to London is recent years are also losing huge sums. The biggest single loser, steel magnate Lakshmi Mittall has already seen £20 billion wiped off the fortune that made him Britain's richest man.

Another big victim, British property magnate Robert Tchenguiz, is facing losses of up to £1 billion after borrowing heavily from Icelandic bank Kaupthing.