By Gavin Finch and Andrew MacAskill March 2 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling urged pay restraint and moderation from U.K. banks, and still they raised compensation. Barclays Capital, the investment-banking unit of Barclays Plc, increased its pay and bonuses per employee by about 93 percent in 2009, according to company filings. Royal Bank of Scotland Group Plc, the U.K.’s biggest government-owned bank, raised total compensation per employee by about 73 percent last year. Of the U.K.’s three largest banks, HSBC Holdings Plc was the only one where pay declined slightly in its investment bank. “The banks are just paying lip-service to what they think politicians and the public want to hear while carrying on as normal,” said Chris Roebuck, a visiting professor at Cass Business School in London. “The apparent changes they’ve made to compensation are just an exercise in smoke and mirrors.” Banks are under scrutiny from governments worldwide to reduce compensation amid public anger about trillions of taxpayer dollars used to bail out lenders during the credit crisis. In December, Darling introduced a one-time 50 percent levy on discretionary bank bonuses of more than 25,000 pounds ($37,500) to encourage banks to build up their capital. The Treasury, which initially said the tax would raise 550 million pounds, now estimates it may net as much as 2 billion pounds, according to a government official who declined to be identified. Barclays, HSBC, RBS and Lloyds Banking Group Plc alone said they will pay about 685 million pounds to cover the tax. CEOs Waive Bonuses In an attempt to diffuse anger about the size of bonuses, the chief executive officers of RBS, Lloyds and Barclays waived their bonuses for 2009. HSBC CEO Michael Geoghegan will also forgo his bonus, donating as much as 4 million pounds to educational charities. “From a public relations point of view, the bonus tax has been a partial success because it’s made the government look like it’s cracking down,” said Daniel Naftalin, a partner at law firm Mishcon de Reya in London. “The bonus tax failed in the sense that it doesn’t appear to have significantly reduced the size of the bonuses.” Barclays paid its investment-bank employees about 191,000 pounds each in 2009 compared with an average payout of 99,000 pounds for the previous year, the filings show. RBS set aside about 173,000 pounds last year in total compensation per employee, up from about 100,000 in 2008. HSBC awarded each employee an average of about $166,000 in 2009. Revenue Increases The average compensation was calculated as a percentage of investment-bank revenue, or total staff costs at the individual banks, divided by the number of employees. Pay increased in 2009 as investment-bank revenue rose. Pretax profit at Barclays Capital, which expanded following the acquisition of the U.S. unit of Lehman Brothers Holdings Inc. in 2008, climbed 89 percent to 2.46 billion pounds after it absorbed 1.8 billion pounds of credit losses, the bank said. “The U.K.’s curbs on bonuses have gone further and faster than any other country,” said a Treasury spokesman, who asked not to be identified in line with departmental policy. “The bonus tax is intended to make banks think twice about paying large bonuses.” RBS CEO Stephen Hester defended the payment of bonuses, saying that his investment bank employees deserved the 1.3 billion pounds of payments, which was the “minimum necessary.” “We are treading an unenviable tightrope walk,” said Hester, who waived his right to a 1.6 million-pound bonus amid public anger about such payments. “We believe that within the context of the industry in which we operate we have been restrained and responsible.” Labour Party Gains Lloyds Chairman Win Bischoff said that while his bank is “sensitive” to the public debate about bankers’ pay, the responsibility for policing remuneration belongs with shareholders, not the government or the media. Executives should be allowed to accept bonuses without feeling pressure to waive them, he said. Lloyds declined to say how much it is paying in bonuses. The ruling Labour Party’s attack on bankers’ pay has helped narrow the Conservative Party’s lead in the opinion polls by shoring up the party’s core support, according to Anthony Wells at pollster YouGov Plc. Prime Minister Gordon Brown is on course to lead a minority U.K. administration after this year’s election with the polls the narrowest in more than two years, a YouGov poll found over the weekend. ‘Easy Crowd Pleaser’ “Banker bashing is an easy crowd pleaser,” Wells said. “It has been an easy way for Labour to shore up their core vote. The polling shows that people don’t like bankers.” Banks including Barclays, Credit Suisse Group AG and UBS AG have raised investment bankers’ base salaries as a percentage of total pay. HSBC plans to increase salaries as a proportion of compensation, the bank said yesterday. Leaders of the Group of 20 nations agreed in September to adopt compensation guidelines for banks that discourage bonus guarantees extending more than one year, encourage companies to defer bonuses for senior executives and other key employees, and permit pay to be clawed back if losses occur later. To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net

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