6 October 2009
Does anyone know why Gordon Brown’s government created United Kingdom Financial Investments as a hands-off organisation with zero interest in pushing for real change at the two basket-case Scottish banks it owns? Why UKFI has done nothing to root out the corruption that became endemic at Bank of Scotland Corporate and probably elsewhere? Or why UKFI green-lighted Stephen Hester’s £9.7m pay package?
The answer, my friend, is simple.
When Hester, a gardening fanatic and former CSFB investment banker, was tapped on the shoulder to take on poisoned chalice of succeeding Fred “the Shred” Goodwin at the helm of the bankrupted RBS, Hester basically told Alistair Darling, Lord Paul Myners, Baroness Shriti Vadera etc that he would only accept if they guaranteed that UKFI would be a “hands off” owner.
Hester informed Labour’s top brass he wouldn’t be leaving British Land unless they promised that UKFI would be a “commercial” investor and absentee landlord that would give him and the new RBS board free rein to manage the crippled bank as they saw fit. Of course Brown and Darling caved in — what else would one expect of a duo which, despite a degree of toughness last October and some recent pre-election bluster and rhetoric, remain firmly in the bankers’ thrall?
Other Labour MPs are perplexed by this. Why should a government that purports to care reforming banking or about the lot of ordinary people have allowed Hester (who is incidentally already a very wealthy man and owns a magnificent arboretum in Oxfordshire) to get his way and effectively write his own pay cheque? Sally Keeble, a Labour MP recently touched on this in an article in Progress magazine, in which she wrote: “Now that the government is majority shareholder in two of our largest banking groups, RBS and Lloyds, we have an opportunity to help create a different culture. Yet UKFI, which manages the government’s interests, has set out a high-level strategy strong on financial targets and weak on any social or ethical criteria for investment decisions, and has not delivered financial help to struggling businesses.”
Ms Keeble, hopefully part of your answer is above (and by the way, the notion that existing banks can be transformed into ethical or socially-responsible organisations is hopelessly idealistic. These are rapacious organisations with lax morals which are probably impervious to reform).
By the way: one should also treat claims that UKFI is “Fidelity with nukes” with caution. In my view this is thinly disguised government spin designed to lull us into thinking that UKFI is in some way a responsible or interventionist owner.