Soundbite City

Hector Sants, the former investment banker who is chief executive of the FSA, hit back at “politicians looking for soundbites” on Thursday, insisting it was up to lawmakers to decide whether to cap bankers’ bonuses. “We are not mandated by government to limit individual pay for social reasons,” he said in a BBC interview. Mr Sants also denied the FSA had watered down its code, saying the new rules were in some ways “tougher” than what had been previously proposed.

A number of ministers, including Lord Mandelson, the business secretary, are understood to be unhappy with the FSA's position on bankers' pay. Lord Mandelson thinks the guidelines do not reflect public concerns that the City is returning to “business as usual” after receiving "billions in state support".

“Ordinary businesses are paying the price,” he said in an interview. “We have not heard the last word on this subject.”

The Treasury says it is still “pursuing all options” to clamp down on "excessive and risky bonuses" and may introduce legislation in the next financial services bill.

Of course none of it will happen, but it will fill up parliamentary time and newspaper columns before the next election. Mandelson knows that capping or taxing pay will simply mean that many bankers and traders will switch countries just as easily as they move jobs, but it is a vote-winning tactic, much like the Hunting Bill. The idea is not to pass the Bill into law, although if that does happen it will most likely affect a Consevative government, but to draw a line between the political parties and force the opposition to support the electorally indefensible.