A fresh dispute over rewards for banker failure erupted yesterday as Northern Rock said that it was planning to pay bonuses to senior executives even as it reported a £1.4bn loss.

The controversial pay scheme emerged as the nationalised bank – with the backing of the Treasury – announced a spectacular strategic U-turn, abandoning its drastic slim down policy in favour of a new £14bn mortgage lending splurge.

The bank said that 100 senior executives were eligible for the 2008 bonus scheme, which was necessary to ensure that it could continue to recruit and retain good people.

Financial Times, Daily Telegraph