RBS and Lloyds using taxpayers' cash to lobby MPs

Britain's two state-owned banks have hired eight separate lobbying and public affairs companies at a cost of hundreds of thousands of pounds a year, i has learnt.

The Royal Bank of Scotland, which is 83 per cent owned by taxpayers, paid six firms last year despite losing more than £750m in six months. It also employs its own team of internal corporate lobbyists to influence ministers.

Lloyds Banking Group, which is 41 per cent owned by the Government, retained two lobbying companies. It reported £3.3bn of pre-tax losses in the six months to June 2011. Neither RBS nor Lloyds would specify exactly what the firms were doing on their behalf, but the extent of their use will fuel concerns that banks are using taxpayers' money in an attempt to water down banking reforms and planned caps on executive pay.

It comes despite a ban by ministers on recipients of taxpayers' money hiring public affairs firms to lobby other arms of Government.

The Communities Secretary, Eric Pickles, pictured, has said: "Taxpayer-funded campaigns conducted by private lobbying firms mean ... public policy is weakened and public discourse becomes a soundbite battle."

Last night, Downing Street sources said it "seemed ridiculous" for banks such as RBS and Lloyds to be spending shareholder money on PR consultants. They insisted, however, that doing so did not buy influence with ministers.

Labour said the revelations were "outrageous". Jon Trickett, the shadow Cabinet Office minister, said: "It is hard to explain how a state-owned company should need lobbyists to lobby the state. They should be spending their money providing better services."

RBS retained the services of APCO, Finsbury, Bell Pottinger, Open Road and Lansons in 2010. Lloyds hired Burson Marsteller and College Public Policy.

RBS has unveiled plans to pay the head of its investment banking division a bonus of £4.3m despite the company's share price falling by half in a year.

Later this month, the Government is due to bring forward plans to regulate the lobbying industry. However, it is uncertain how far they will go because it has been under pressure from the lobbying industry itself to water down the proposals.

A spokeswoman for RBS said: "Like most large companies, RBS and its subsidiaries employ consultants for communications advice. We do not, however, employ third parties to lobby politicians or government on our behalf."

A spokesperson for Lloyds said: "All of our public affairs activities are completely in line with the requirements that apply to FTSE-listed companies."