Labour calls to cap 'huge bonuses' of business leaders

The deputy leadership contender said he wanted to close loopholes that allow many of the highest earners to avoid paying taxes in this country.

Speaking at the launch of his campaign, Mr Hain railed against the "staggering" £8.8billion paid out by the City in bonuses last year. He said there should be a new culture of responsibility among top firms to curb "the most obscene excesses".

He cited Microsoft founder Bill Gates as a model of good practice.

Mr Hain, 57, warned that if the City failed to clean up its act voluntarily he might seek to legislate.

"Meanwhile we should take some immediate measures to promote a greater sense of responsibility in Britain's boardrooms. British citizens who do not pay their tax in the UK should not receive honours, write government reports or become members of quangos.

"They should not be allowed to serve in a reformed House of Lords," he said in his manifesto.

Earlier, the Welsh Secretary tried to jump-start his stalling Labour deputy leadership bid with an emotional speech about his time as an anti-racism campaigner.

The Welsh Secretary said his values were forged while growing up in South Africa under the "tyranny of apartheid".

Speaking at the launch of his campaign, he recalled being woken in the middle of night by the secret police and visiting his parents in jail after they were arrested for making a stand against racism.

"I learned something I have never forgotten from the courage of my parents, from friends thrust in jail or killed, and the example of thousands of people in South Africa and around the world who stood up to the evil of apartheid," he said.

Mr Hain, 57, said his time in South Africa inspired him to help found the Anti-Nazi League and to join the Labour Party.

Aides hope his highly personal speech will fire enthusiasm for his campaign amid fears his vote is being squeezed by Left-winger Jon Cruddas.

Other deputy leadership contenders include Alan Johnson, Hilary Benn, Harriet Harman and Hazel Blears.

Dagenham MP Mr Cruddas today underlined his credentials with an attack on Academy and Trust schools. He said that neither type of school, which have been at the forefront of Tony Blair's education reforms, had done much to improve standards.

Far from giving "choice" they are deepening divisions, he said.

Meanwhile, Ms Harman today said that Cabinet ministers' grace-and-favour homes should be scrapped to restore voters' trust.

She said the Prime Minister could keep Chequers but residences such as Dorneywood, previously used by John Prescott, should be given up.