UNION leaders and politicians reacted with anger last night after it emerged that Northern Rock could pay lucrative cash bonuses to leading executives.

Chief executive Gary Hoffman told MPs yesterday that bonuses of more than £25,000 would be paid if the nationalised bank had substantially beaten targets for last year in results due in March.

Payouts above £25,000 would trigger a 50 per cent “supertax” on bank bonuses, introduced because of public fury about high earnings despite the taxpayers’ bailout of the industry.

Vince Cable, the Liberal Democrat treasury spokesman, leapt on Northern Rock’s plans as evidence that bank profits should have been targeted instead of bonuses.

He said: “Bankers tell us that their bonuses are a reward for their skills and ingenuity.

“This seems to involve borrowing taxpayers’ money at half a per cent from the Bank of England and then lending it back to us at eight, ten or even 20 per cent. It is hard to find the skill in that and even harder to see how bankers feel that they have a right to collect bonuses for it.”

Bob Bolam, from the Unite union, which represents hundreds of workers at Corus, in Redcar, east Cleveland, said the support given to Northern Rock should be matched at the steel plant.

He said: “The giving of bonuses at Northern Rock is totally and utterly immoral, firstly because hundreds of bank clerks and lower-grade workers lost their jobs because of the mismanagement of those at the top.

“It is nonsensical these peo- By Robert Merrick and Deborah Johnson newsdesk@nne.co.uk ple are now going to be paid bonuses.

“Furthermore, look at what is happening at Corus and in the Teesside chemical industry and how they are fighting for their lives.

“Thousands of jobs are at stake. The Government should be looking to match what is being done in the banking system to help Corus to fight on and remain open.”

Northern Rock, based in Newcastle, is not the only bank planning to defy the Chancellor. As a result, the supertax is now expected to raise at least £2bn, and possibly up to £4bn.

Under questioning by the Treasury Select Committee yesterday, Mr Hoffman said there was no evidence that senior staff had quit the bank because of a ban on bonuses and pay rises a year ago.

And he acknowledged that Northern Rock staff at its bases in Newcastle and Sunderland typically earned about £20,000 – less than the one-off bonuses planned.

The committee was also told it could take up to 20 years to pay off the outstanding £14.5bn of Northern Rock’s Government loan, following a decision to separate the bank into two parts.

The split paves the way for the sale of Northern Rock PLC – the so-called good bank, holding all savings accounts and some mortgages – but Mr Hoffman said that would not happen soon.

On bonuses, the chief executive, who earns £700,000 a year, said he expected the March results to be very encouraging, following a £1.4bn loss in 2008.

He said: “It is yet to be decided whether senior people will receive a bonus, but, if we have substantially beaten the financial and customer targets, then it is a possibility that some people will receive over £25,000.”

Mr Hoffman said that, even before other banks, Northern Rock had decided that bonuses would be paid over three years and be “clawed back” if performance dipped later on.

He said rank-and-file staff would also be eligible for bonuses, although he did not reveal how much or how little they would receive.

The bonuses are expected to be paid in cash rather than shares because Northern Rock is not a listed company.

Susie Squire, from the Taxpayers’ Alliance campaign group, told The Northern Echo that bonuses would be “deeply insensitive”.

She said: “As long as taxpayers have money in this bank, they should not be awarding bonuses, particularly not high-level executive bonuses.

“Northern Rock needed taxpayers’ money to bail it out.

The financial background is dire, and ordinary privatesector businesses are having a hard time and are really struggling.

“That makes it even more important that fully nationalised banks should not be allowed to make bonus payments.

“Once Northern Rock is back in the black and no longer the taxpayers’ liability, they can pay out whatever they want to their staff and executives.”