LONDON: The British government will amend a parliamentary bill to introduce the central recommendation of the banking commission to allow bankers to be jailed for reckless misconduct, David Cameron has told MPs.

The prime minister said that he wanted to introduce strong legislation to underpin the recommendations of the “excellent” banking commission, chaired by the Conservative MP Andrew Tyrie.

The commission called for the creation of a new criminal offence of “reckless misconduct in the management of a bank” and for new powers to be given to regulators that could force bankers to wait up to 10 years to receive their bonuses.

Asked by Ed Miliband, leader of the opposition Labour party, at prime minister's questions whether he supported these two proposals, Cameron said: “Yes, I do support both those measures. Obviously we need to take time to read this excellent report and I commend (Andrew Tyrie) for the excellent job that he has done. But penalising, including criminal penalties against bankers who behave irresponsibly, I say yes. And also making sure that banks who are in receipt of taxpayers’ money — that you can claw back bad bonuses I say yes too.”

Asked by Miliband whether he would amend the financial services (banking reform) bill, which has reached the report stage in the House of Commons, to introduce the new criminal offence, the prime minister said: “We will be using that bill to take these important steps.

“The key thing is we have that opportunity first of all because we said there should be a parliamentary inquiry that could be done rapidly rather than a public inquiry that he supported. If we had done that we'd just about be getting going with the inquiry. Instead of that we have a good inquiry, good results and we can have strong legislation too.”

The prime minister also voiced support for the commission's recommendation to curb bonuses by forcing bankers to wait up to 10 years for the payments.

The Labour leader seized on figures from the Office for National Statistics, which show a 64% increase in bonuses over the past year, to attack the prime minister for giving bankers a tax cut. The cut in the top rate of income tax from 50p to 45p was introduced in April.

The prime minister said bonuses were now a fifth of the size they were when Labour was in power. Miliband said: “He cannot deny the figures I read out to him. He doesn't even know the facts. Bonuses are up so that people can take advantage of his massive tax cut. Here is the truth: for all his tough talk the reality is he is dragging his feet on banking reform. Business lending is still falling, bonuses are rising and while ordinary families are suffering he is giving a massive tax cut to the bankers.”

Cameron cited remarks by Lord Myners, the former Labour business minister, who said that Labour has to admit that regulatory oversight of banks was not as effective as it should have been.

The prime minister said: “It doesn't matter what he says - he cannot get over the fact that they presided over the boom and bust, the collapse of the banks, the failure to regulate.

We remember what they said in 2008 - no more boom and bust. They said a golden age for the City. They cannot hide their dreadful record and they ought to start with an apology.

“[This] is just another display of extraordinary weakness. They had 13 years to sort out this problem - they did absolutely nothing.”

By arrangement with the Guardian