Osborne hopes to shape EU rules on bankers' bonus caps

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George Osborne was in Brussels today for talks on EU caps on bankers' bonuses. Photo: PA

The Chancellor is now on his way back from talks in Brussels on the deeply troubled issue of bankers' pay and new rules for the banks.

He has not come back clutching a victory over his European counterparts, but never really expected one.

The UK has lost the overall battle on whether to put a cap on bankers' pay. What George Osborne hoped to do was to shape how that system will operate.

A source said: "So, we move on to another day".

The meeting this morning agreed that 'technical discussions' will look at how the cap on pay will work in terms of the balance between bonuses paid annually and those paid out over the long term.

There will be more talks over the timetable of bringing in the new rules.

But George Osborne did not suggest tearing the whole thing up. Getting rid of the idea altogether was never suggested.

You may wonder why in any case the government is taking the political risk of standing up for bankers' pay.

City insiders suggest that by limiting bonuses to the same size of salaries would drive those very same salaries up.

And there are fears of the legal precedent of allowing the EU to set pay limits at all.

But there was no expectation that the Chancellor would be able to use those arguments to defeat the idea, even though there are suggestions that the banks themselves may take to the law.