· News

The prime minister demands tough action on banker's pay and bloated financial sector

The prime minister, Gordon Brown, has pledged "tough action" on excessive bankers' remuneration.

In an interview with the Financial Times, Brown said bonuses should be based on long- term success and banks should claw back bankers' rewards if their performance suffered in subsequent years.

He also said the financial sector was "bloated" and needed to be "cut down to size".

Brown added: "The first test, really, of the financial supervisory system is whether you can make a global agreement stick on principles governing remuneration.

"I think you've got to be absolutely clear that remuneration has got to be based on long-term success, not short-term speculative deals, that there's got to be a system in remuneration itself so that if things are not working in year two then there is a clawback that is possible as an example.

"I would add a further thing that there is a debate, of course, about caps on bonuses and everything else, and I think Adair Turner himself, who was discussing it, said that in an international economy it's very difficult for one country to do something that other countries would then create a loophole for."