A pantomime is being staged in Parliament – Christmas has come early for Sir Fred Goodwin.
Cast List:
Sir Fred ‘The Shred’ Goodwin (former Royal Bank of Scotland Chief Executive) –Abanazar, who snatches the Treasury lamp.
Lord Myners (Financial Services Secretary and Government Spokesperson) – Baron Hardup.
Rt. Hon. Gordon Brown (Prime Minister) and Rt. Hon. Alistair Darling (chancellor) – The Ugly Sisters.
Scene: Confusion reigns in the Palace of Westminster – who has control of the Treasury keys?
But the comedy is fast becoming a tragedy and we are missing a hero. Who is holding who to account? Who is sorting this mess out?
Why was Sir Fred, who presided over a £24 billion loss – the biggest loss in UK corporate history:
1.) Allowed to resign instead of being dismissed?
2.) Allowed to receive a pension at the age of 50, when RBS might cut 20,000 jobs, as the taxpayer injects £25 billion to save this failing bank?
We are told the Prime Minister has demanded “a rejection of the old short-term bonus culture” in banking. Lord Myners, in charge of Government owned UK Financial Investments Ltd, says that the company is doing all it can to persuade Sir Fred Goodwin to give up the £703,000 a year that he is receiving.
But are you aware that UK Financial Investments staff will receive bumper bonuses of their own? This extraordinary hypocrisy is approved of by Lord Myners himself, who wrote to me stating: “Some element of performance-related pay is now the norm in the great majority of organisations…UK Financial Services will be no exception”.
Perhaps, if the situation wasn’t so serious, there would be laughter instead of tears. But the audience will not be giving a standing ovation. Unfortunately, we cannot ask for our money back.
What level of bonus are UKFI staff going to get? Some sort of bonus isn’t a bad thing, I wouldn’t mind them getting £1,000-£2,000 bonus if they do a good job and it’s not seen as a “right” of employment.
Just so long as it isn’t tens of thousands, or hundreds of thousands per person, then I think some incentive is good. There has to be a distinction between legitimately rewarding good work with modest bonuses, and throwing money at people for mediocre (or worse awful) work like some of the banks seem to have done.
No matter what Sir Fred Goodwin is thought to have done – and I probably have the same opinion about him as everyone else – the political scapegoating, threats of acts of parliament to strip him of his pension are an outrage. Governments have no place getting themselves out of bungles that they are largely to blame for by resorting to such undoubtedly unlawful measures.
In the context of the 100s of billions now being pumped directly or indirectly into the banks 700k is peanuts. The numbers are so large it’s ironically easier to fixate on a his pension which is small enough to get your head around.
That said, the decision to have bankers sign off/decide upon the perks and benefits of other bankers does seem like the inmates running the asylum/’Quis custodiet ipsos custodes’ (as you prefer) Personally I was never convinced the government could not have rushed legislation though parliament to allow some form of pre-pack administration for the banks in question – as this frees companies of many contract limitations – closer to the US Chapter 11.
As to pay, it is a source of constant exasperation when I see new offices or posts created by parliament which, include provision for a large salary, often for a few days a week, which go though on the nod by MPs or peers on exactly the same ‘industry pay equivalent’ arguments. Or to hit closer to home it is hypocrisy of the highest order to have MPs bleating about Goodwin’s pension for failure when MPs and ministers have setup the best indexed pensions and benefits for themselves.
Stripping him of his knighthood wouldn’t recover a penny but it would probably be a symbolic gesture that would be more realistic than futile attempts to remove the pension.
Genius post!
Sometimes Politics does look like a bit of a pantomime (e.g. the exchanges between Harriet Harman and William Hague last night).
However, I am worried about the Government’s proposal to take Sir Fred Goodwin’s pension off him (especially in the light of John Prescott’s statement on the Today programme that it should be done whether or not there was a legal way of doing it) as, whatever the arguments about whether he deserves it or not, it reminds me too much of Mugabe’s land grab of white-owned farms. Let us not forget that those moves were popular in Zimbabwe when they first occurred.
Whatever we do we need to work within the law and any actions taken against Sir Fred need to be done for the right reasons (i.e. not to get the Government out of uncomfortable political position).
The government was more than happy to encourage the moral hazard-ridden remuneration schemes while they were benefiting from the windfall they got from the various ponzi schemes masquerading as “investment vehicles”. As a result Sir Fred has a contractual right to his pension, and any government action to remove it from him would either be illegal and unconstitutional or alarmingly radical and a dangerous precedent.
Should the Prime Minister be asked to give back his salary now that his boasts that we have ended the cycle of boom and bust have been shown horribly false?
People like Sir Fred are not the proximate cause of the recent crisis, they are just another symptom of an economic system built on myth and foolishness – and one which far predates Mr Brown or even Mr Blair, might I add. Until we have the chutzpah to shatter some of our most sacred cows we shall keep creating Sir Freds to lumber foolishly through our economies like drunken elephants.
I’d say it was our own fault for electing incompetent governments, but given our party political choices at present I don’t really see how we could do otherwise.
Excellent post !!
And we certainly have a candidate for the ‘Joker’…
http://www.planestupid.com/
Perhaps Lord Soley and Lord Mandelson could be Tweedle Dum and Tweedle Dee ?
Wonderful isn’t it how retrospectively wise we all are after the banking debacle? Any of you lot out there think you’d have done better? I doubt it myself. Whenever something disastrous happens the public looks around to stick mud on whoever’s nearest. Fred Goodwin was a hero, now he’s got feet of clay. Folk don’t like what he earned, even less his pension but then the public don’t much like anyone earning very much more than the average;many of you might think my NHS pension was overgenerous. Ok Fred’s pension is vast to you and me but it’s legal and it was all agreed with a Minister who probably didn’t see it as enormous at all, being one of that circle himself. But all this posturing by Labour ministers about levels of salary in the financial sector when in private they complain like mad about their own inadequate salaries (and in my view they are inadequate) just seems hypocritical. The press pillorying of bankers is just today’s blood sport, the nearest we get to the public hangings of yesteryear. We all benefitted from the boom years. Yes let’s learn from the mistakes but can’t we be a bit less sure we are pointing our fingers at the right target?
@Croft: I accept what you say. Wouldn’t it be nice, though, if he were to bail out, say, 10 families each year that have been thrown out of their houses caused by the ‘products’ he endorsed?
@baronessmurphy There are many banks across the globe which haven’t collapsed or been effectively nationalised by their governments. Specific individual banks’ leadership had broken business models which destabilised them and poisoned the water for other institutions; implying that somehow it was inevitable that anyone/team would have made all the same decisions and taken banks into the same problems is plain wrong.
(Blog audiences can be a wide mix. For all any of us know we may have some business grads/professionals reading this who may think they could have done a better job.)
When those buying pension annuities today have seen their potential value fall by 1/3 the cast iron protections on ministerial pensions is not going to engender any sympathy.
baronessmurphy “Yes let’s learn from the mistakes but can’t we be a bit less sure we are pointing our fingers at the right target?”
But we can be sure that, in general, we are witnessing a huge rise in people using power for their own ends – politicians and bankers alike. The person in power, who is working for the general good and not for personal greed, seems to be an endangered species. The few of you left must feel very vulnerable as your reward is to be sidelined, laughed at or sacked. This disease is destroying Britain and unrest seems to be the most likely outcome.
I am beginning to see a pattern. When we are given someone like Sir Fred to put in the public pillory, there is normally an attempt going on to cover up something far worse. I’m not sure what it is this time, but it will soon become very apparent. Maybe it is just to distract us from the disaster that is stemming from huge borrowing to get out of debt; an utter folly that even the most junior economic student can recognise.
(Great post BTW)
Thank you for all your comments. Sir Fred Goodwin features so highly at present because, although he has done nothing illegal in accepting his extortionate pension, he represents what is wrong with the banking system in this country.
The pension that Sir Fred receives seems morally wrong when, under his guidance, RBS all but collapsed and many people will suffer as a consequence. Greed has played a large part in creating the current economic crisis and Sir Fred epitomises that greed.
My greatest concern is not with Sir Fred but with the Government. I agree, Croft and Ade, that politicians and the media are shifting the blame onto one man and that is not right. No one person is solely responsible for this recession but the ‘obscene banking bonus’ system, previously endorsed by the Government, is wrong and needs to be changed.
Whilst Gordon Brown claims that he supports such changes, his Government are promoting the old system. In my opinion, James, UKFI staff – who are creating banking rescue packages for the Government – should not receive bonuses that are being paid with “bail out” money sourced from the struggling British taxpayer.
@Baroness Murphy
I am not sure I could have done a better job than Sir Fred in the banking sector. Further, I am not so self-righteous as to believe that I would turn down the offer of hundreds of thousands of pounds for *any* job. Everyone’s a whore, we’re just haggling over the price.
On the other hand, as has been pointed out at length my more skilled writers than I, the claims by those in government and the banking sector that “nobody could have foreseen” this crisis make me wonder just how good a job they did do. I, personally, saw it coming years ago, as did many people in pubs all over the UK with no real financial training who nonetheless could not believe that the housing market could sustain million-pound bike sheds in Islington. Mr Daniel Davies, well known swearword user who’s known to be some sort of expert on this stuff called it back in 2002.
Now, politics is as politics does. Were I personally landed with the job of Chancellor in the period 1997-2007 there’s a chance I wouldn’t have hitched the UK’s wagon quite so firmly to the rocketship packed with TNT that the American Economy turned out to be, and would probably have been more cautious about moral hazard at the top of the ladder and less so about those scraping around at the bottom. Taking the money we would have spent trying to work out if people on disability were lying about their bum leg and spending it on making sure rich people paid all their taxes and didn’t pay themselves ludicrous bonuses for finding new ways of inventing money out of thin air isn’t something I’ve only just thought of with 20:20 hindsight, but it’s nice to know that my way of doing things would have been approximately a whole order of magnitude cheaper for the taxpayer in the long run.
On the other hand, not only would I not have been able to point to this alternate future where my genius went unrecognised to vindicate my fool-proof plan, I would have had to try to sell a pretty slow economy to an electorate who, much as they disliked the Tories, had been sold on the idea that the economic pie was stuffed full of magical cream cheese just there for the greedy licking out and that consequences of decisions over timescales of a decade or more were irrelevant. I might have been a brilliant Chancellor for four years and then found myself on my arse and replaced with a guy who really believed in all that lovely cream cheese and promised every voter a great big spoon. We can never be sure quite how much freedom of action exists in politics when so much political behaviour is fairly deterministic.
So I take your point, Baroness, about not pointing fingers too strongly, but nonetheless do reserve the right to at least make some knowing gestures with my eyebrows and talk behind my hand about some of the schmucks who’ve been in charge of the economy for the last three decades. I may not have done better, but I probably wouldn’t have done worse and, importantly, I wasn’t getting paid lots of money to do the job right in the first place.
Lord Taylor yours is a disgraceful post but not untypical of a political peer. You give no credit to the exceptional hard work that Sir Fred Goodwin did in building up the RBS brand. His pension and salary always reflected this.
The governments twelve years of sustainable growth and encouragement from the rest of Commons is all the Banks ever needed to dig the ever deeper hole that would eventually consume them.
What is equally lamentable is that as a member of the synthetic aristocracy that is the life peerage you are quite comfortable with your position in the Lords as a reforming chamber instead of an independent power that can challenge the Commons on its ambition and control of the Treasury. This is indeed pantomime! When will the Commons allow the Lords such powers as the American Senate now enjoys in its scrutiny of money matters in its lower house?
But let us talk of Parliaments pantomime. An MP called Groucho can come straight from university into the Commons. There he will learn that the secret of life is honesty and fair dealing. If you can fake that then you have got it made. This is the perception of the electorate of career politicians and many a life peer promoted from the Commons to the Lords.
The perks are good too, final salary pensions, salaries, all outlined in the Green Book. The Labour party historically must be thanked for this. The pensions too are particularly good for Ministers.
What did Lloyd George say of our MPs circa 1909?
“When we offer £400 a year as payment of Members of Parliament it is not a recognition of the magnitude of the service, it is not a remuneration, it is not a recompense, it is not even a salary. It is just an allowance, and I think the minimum allowance, to enable men to come here, men who would render incalculable service to the State, and whom it is an incalculable loss to the State not to have here, but who cannot be here because their means do not allow it. It is purely an allowance to enable us to open the door to great and honourable public service to these men, for whom this country will be all the richer, all the greater, and all the stronger for the unknown vicissitudes which it has to face by having there to aid us by their counsel, by their courage, and by their resource”.
I fail to see the concept of service at work anywhere in Parliament except in the House of Lords. In the Commons they see themselves as part of a business that should have comparable salaries and pensions. Is this why they fail us? It seems to me that a committee on a par with the 1831 Select Committee on the Reduction of Salaries (1830-31 HC 322, Vol III, p445) should be formed to restore the electorates faith in Parliament and perhaps encourage the concept of service.
Ref: Groucho Marx Quotes, par 16:
http://www.mindspring.com/~hsstern/maewest/groucho.htm
The Green Book:
http://www.parliament.uk/documents/upload/hofcpsap.pdf
A Salary for Members of Parliament:
http://www.parliament.uk/documents/upload/M05.pdf
Ministerial Salaries:
http://www.parliament.uk/documents/upload/M06.pdf