Britain is planning tough new laws to prevent a return to the 'bad old days' of huge bank bonuses and will penalise companies which fail to comply, said British Prime Minister Gordon Brown yesterday.

Speaking ahead of the annual conference of his ruling Labour Party, which began yesterday, Mr Brown also said there would be legislation to compel governments to reduce deficits by a set amount each year.

'Just as we will have a Fiscal Responsibility Act to deal with the public finances, we will come back and will have a new Business and Financial Services Act as well, that will ban the old bonus systems and make it impossible for firms to be able to use them,' he told BBC television.

Mr Brown said fellow leaders at the Group of 20 (G-20) meeting in the US city of Pittsburgh last week had agreed banks were seeking a return to the big bonuses they paid out before the global credit crisis.

'They are all reporting to me that the banks are just anxious to return to the bad old days. Some of them are ready to announce big bonuses that are completely unacceptable.'

The G-20 called for crackdowns on banker bonuses and sought a build-up in banks' capital bases.

In the US, the Federal Reserve is preparing sweeping rules to regulate the pay at banks across the country. The rules would apply not just to the pay and bonuses of top executives but also to traders, loans officers and other employees.

Fed officials will be scrutinising whether the structure of compensation, such as rewarding employees for the number of loans they give out, encourages excessive risk-taking.

Mr Brown said new measures to be brought before parliament in coming weeks would be 'the toughest action of any country in the world'.

The Prime Minister is seeking to revive dire poll ratings ahead of a general election he must call by next June.

'Where there is bad behaviour, the Financial Services Authority (FSA) will have the right to intervene, and where companies are not prepared to act in a way that is consistent with all these new proposals about the fair treatment of bonuses and remuneration, there will be penalties imposed on these companies,' he said.

The opposition Conservatives, on course to win the election, plan to abolish the FSA and give more regulatory power to the Bank of England.

The British government has a 70 per cent stake in Royal Bank of Scotland and 43 per cent of Lloyds Banking Group after bailing them out with billions of pounds last year.

Mr Brown gave no more details on legislative plans to cut a budget deficit forecast to exceed 12per cent of gross domestic product this year.

The government has said it will halve the deficit over the next four years.

Mr Brown also said he would not 'roll over' before the next election, which polls suggest he will lose badly, and dismissed gossip that his health was too poor to fight a strong campaign.

He rejected finance minister Alistair Darling's comment in an interview with the Observer newspaper that the party appeared to have 'lost the will to live'.