Sir Fred Goodwin will not get his £650,000-plus pension even if he is legally entitled to it, Commons Leader Harriet Harman has vowed in the strongest Government attack yet on the former banking chief.
In what appeared to be a strong hint that the law could even be changed to recoup some of the cash, she warned the ex-Royal Bank of Scotland chief executive should "not be counting" on the money.
"The Prime Minister has said it is not acceptable and therefore it will not be accepted. It might be enforceable in a court of law this contract but it’s not enforceable in the court of public opinion and that’s where the Government steps in," Ms Harman told BBC1’s Andrew Marr show.
Sir Fred, blamed for leading RBS to near collapse and a taxpayer bail-out, has resisted demands to do the "honourable" thing and give up the lucrative package which he insists was approved by City Minister Lord Myners.
The peer, a former senior City figure who insists he believed Sir Fred was getting only what the bank was legally required to give him when the deal was approved in October, faced mounting pressure himself yesterday.
Shadow chancellor George Osborne said the minister’s future was "hanging by a thread" and challenged him to either produce a convincing explanation of his role or resign.
Mr Osborne backed the use of "any legal measure" to recoup Sir Fred’s pension but accused ministers of acting too late and trying to divert attention from their own responsibility by attacking Sir Fred.
In the strongest attack yet on the ex banking chief, Ms Harman said: "Sir Fred should not be counting on being £650,000 a year better off as a result of this because it is not going to happen."
As he was only 50 years old, it was hard to see how it could be a pension, she added.
"It is money for nothing, it is a severance payment, and to get a severance payment when you have led a bank to the brink of collapse with record losses and thousands of people fearing for their jobs and requiring the public to step in with loans to back up the bank, that is a matter of public interest."
She declined to say exactly what action could be taken but reports this week have suggested a special Act of Parliament was being considered by Downing Street as a last resort.
RBS, which is now more than 70% owned by the taxpayer following a series of state-backed interventions, posted annual losses of £24.1 billion this week, a UK corporate record.
Asked if he would back a law change to force the issue. Mr Osborne told BBC1’s Politics Show: "I will support any legal measure to try to get this pension back."
"But this is a bit like trying to bolt the stable door after the horse has itself bolted. It is no good now trying to distract everyone’s attention with this synthetic anger. They had their chance to stop it and they incompetently failed to do so."
Lord Myners "should be given a chance now to explain exactly who knew what, when...why his account of events differs from Fred Goodwin’s account", he said.
"But if he can’t give a satisfactory explanation of why he signed off on a £650,000-odd pension for Fred Goodwin then I can’t see how he can remain a Government minister."
Liberal Democrat Treasury spokesman Vince Cable said the Government should present Sir Fred with an ultimatum: accept £27,000 a year or sue for the rest.
"It seems to me the Government would be on strong ground to tell him he is entitled to pension payments available to employees of bankrupt companies under the Pension Protection Fund, which have a maximum of £27,000 a year. If he feels that’s inadequate he can sue," he said.
Housing minister Margaret Beckett said the nature of Sir Fred’s deal had not been fully disclosed to ministers.
"Without anybody making it really clear when the Government had to step into RBS, the board, on a discretionary basis, substantially enhanced his pension because he was taking early retirement," she told Sky News.