COVENTRY MESSAGE BOARD

The £7.7m pay package awarded to Royal Bank of Scotland's chief Stephen Hester has been approved by the UK government.



UK Financial Investments (UKFI), which manages the taxpayer's 83% stake in RBS, gave its support despite a widespread backlash over the deal.

The deal was rubber-stamped at the group's annual meeting in Edinburgh.

RBS, which made a loss of more than £1bn last year, insisted it had to pay staff "fairly" to retain talented and motivated workers.

It emerged last month that Mr Hester was awarded an additional £4.5m potential shares windfall on top of his £2m annual bonus and £1.2m salary for 2010, which was not originally revealed under the Project Merlin agreement with the government to rein in pay.

RBS also admitted it paid 323 core staff - those deemed to be in risk-sensitive roles - £375m last year despite remaining in the red by £1.1bn in 2010.

RBS chairman Sir Philip Hampton told the AGM it had tried to strike a balance between paying to motivate people and showing restraint.

"We need talented and motivated people and we need to be able to pay them fairly," he said.

"It is important to remember we have to motivate all staff and that only a tiny minority were responsible for the problems RBS encountered, all of whom have now left."