Banking: New Northern Rock chief walks into bonus row

Senior Barclays Bank executive Gary Hoffman is to take over as chief executive of the nationalised Northern Rock, the Treasury said yesterday. Hoffman will collect a salary of £700,000 a year and three £400,000 bonus payments to compensate for the loss of some Barclays bonuses due to him, making him one of the highest earners in the public sector. He will take up the new job in October.

The move means executive chairman Ron Sandler will move to a non-executive role. Hoffman will replace the acting chief executive, Andy Kuipers, who stepped into the job in December last year, replacing Adam Applegarth, just months before the bank, crippled by the credit crunch, was taken into public ownership.

Hoffman, 47, joined Barclays in 1982 and has held a number of senior roles, including chief executive and chairman of Barclaycard. He was made vice-chairman of the bank in 2006.

Sandler praised Kuipers, saying he had performed "admirably" in difficult circumstances. Kuipers had been with the Rock for 20 years. Sandler described the appointment of Hoffman as a "major step forward" for Northern Rock and said his skills and experience made him an outstanding candidate for the role.

Sandler was put into the bank by the Treasury when it was nationalised in February and said at the time he planned to revert to a non-executive role when a chief executive was recruited.

Barclays said the decision to release its group vice-chairman and executive director had been made "reluctantly". John Varley, chief executive, said: "Gary has been with Barclays for 26 years and has contributed much during this time."

Hoffman has been an executive director of Barclays for the past four years and became group vice-chairman in 2006. He said: "I am excited by the prospect of leading the company back to a position of strength, delivering our plan and returning Northern Rock to private ownership as a thriving, stable business."

Matthew Sinclair, policy analyst at the TaxPayers' Alliance, said: "This is an extremely generous pay deal, and when you take into account the extra payments, benefits and potential bonuses, Mr Hoffman stands to become the best-paid person in the public sector. It looks worryingly like the government has used large amounts of taxpayers' money to tempt Mr Hoffman into a job that no one else would touch with a bargepole. We must be extremely vigilant to make sure taxpayers get good value for money."

The most recent public sector rich list published by the TaxPayers' Alliance in November 2007 showed that Adam Crozier, chief executive of Royal Mail, was the best-paid public sector employee, earning a £1.25m pay package.

Hoffman will have to take over the process of halving Northern Rock's £100bn mortgage book, repaying a £25bn Bank of England loan by 2010 and releasing the government from its £75bn of guarantees in 2011. And as part of the post-nationalisation restructuring, staff numbers are being slashed from about 5,400 to 3,400 by 2011, with most jobs going this year.