Sunday, 29 January 2012

Tankers and bankers

Give the - I was going to say, the poor man, but that wouldn't exactly be accurate - the rich man a break. A few years ago, my late aunt bequeathed to me some Royal Bank of Scotland shares, which was very kind, not least because they were worth quite a bit. Sadly, I didn't cash them in, and now, as everyone knows, they're practically worthless, thanks to the good offices of the benighted and knighted Fred Goodwin. They're worth about a twentieth of what they used to be, which is a massive fall by any count. Now I'm not too fussed about my personal wealth, to be honest. We have enough to get by and to enjoy life. For example, we've have just booked to see Dreamboats and Petticoats when it comes to Oxford in the summer, including the wise-in-hindsight line: 'It's no good living beyond your means. If everyone did that, the whole country would go bankrupt.'
Dreamboats and Petticoats © The Guardian 

Of course, that's what Northern Rock and RBS did massively, and at the time it seemed impossible not to bail them out - hence the government owning a whopping 84% majority shareholding of newly created RBS shares. I'm not complaining, as my shares were a gift in the first place, but I have been interested in their fate ever since. RBS was clearly built on foundations of endebted sand (like of course many Western economies, including our own). Sir Fred Goodwin was hoofed out and in 2008 Stephen Hester was shoe-horned in to rescue the company.

I am not happy with the huge disparity of wealth existing in our country in a time of economic austerity. I don't like the £millions salaries and bonuses that executives award to themselves and each other. In my view there is no justification for them. No one needs such vast sums year after year, and frankly I don't buy the talent-drain argument. But I actually can see some logic in offering Mr Hester a £2000 cash plus almost a million in shares package, if, as he seems to be doing, he steers the loss-making RBS tanker off the rocks and turns it around. What more effective incentive could there be for a banker than to see the value of his shares rise as the company enters profitability? In the meantime, we, the taxpayers, would have the prospect of eventually recovering the £85 billion we sank into the out-of-control vessel four years ago - or even making a profit.... That could, given the political will, be useful in reviving the economy and creating jobs for our young people.

Of course, £85,000,000,000 is not a bottomless pot in national terms, but it's not peanuts. Unless Mr Hester and co succeed in turning round the company, it'll be more like a bottomless pit. I sometimes wish populist politicians, like Mr Miliband, would ignore the tabloid pack and pause to think what the cost of failure at RBS before taking pot-shots at the messenger his government appointed.

Meanwhile, in order to be even-handed, I scarcely believed when Jane told me that the cost of the opening and closing parties of the Olympics and Paralympics had jumped from £40 million to £80 million, and the budget for security had also doubled to £553 million. Maybe the security is necessary. Maybe we have intelligence of a major Al-Quaida threat. The minister, Hugh Robertson, blamed the Arab Spring, which his leader supported to the tune of £950 million in Libya. It seems to have increased insecurity here.

But the opening? Apparently we're going to have the biggest bell in Europe cast - er? Why? "Ask not for whom the bell tolls," perhaps. So we can ring the death  knell for the British economy? We're going to call the ceremony, 'The Isles of Wonders', to celebrate both Shakespeare (The bell is to be inscribed with Caliban's description of the island in The Tempest, "Be not afeard, the isle is full of noises".) and the National Health Service... The Tempest's island is of course not part of Great Britain. I was mildly amused to see an academic article beginning, "The evidence is overwhelming that Shakespeare not only set The Tempest on a Caribbean island,..." - Jamaica, possibly, home of Usain Bolt and tipped by Asafa Powell to make a clean sweep of the men's 100 metres? Even were the bard thinking of England, the end of the play is not exactly encouraging, as it leaves Caliban and his two drunken companions in charge of the island, and we're left to speculate what sort of government they'll end up being - while the rest return to the civilization of Italy!

In the "Austerity Olympics" of 1948, Janie Hampton, Olympic historian, told the Today Programme that "no money was spent at all". There were young people, choirs, orchestra and military band. And it was a jolly good show. The Edinburgh Tattoo is pretty impressive too. I'm not sure why we need to have all the latest gizmos, light shows, professionals and excessive fireworks - and try to outdo other openings. The Government constantly tells us we have to economise and that we're in a time of austerity. Too right! And yet all of a sudden, there go our taxes (or our national overdraft) on what are only games. A better way to celebrate the NHS would be to divert £40 million in its direction, rather than use the money as a prodigal means of telling the country how much the coalition loves the health service despite the cuts it's making.


  1. Have you seen Stephen Green's book Good Value? I read it a couple years ago and quite enjoyed it. Towards the end there is an interesting section where he speaks frankly about how his Christian faith shapes his view of the business, and non-business, world.

    1. I've not read it. What would he have said about Mr Hester, do you think?

  2. I imagine he would be reluctant to comment in public on specific cases, but in the past he has criticised large bonuses, while also arguing that bonus payments of some form must be made in order to match compensation to performance. I think he's in favor of granting shares or deferring cash payments, so as to lessen incentives for the reckless pursuit of mere short-term gains.