Brown's Crumbliest Flakiest Answer

As the Government owns 84% of the Royal Bank of Scotland is the Government therefore 84% liable for the £12bn loan they have given Kraft to buy Cadbury's putting British jobs at risk.

That is the question (iPlayer Nick Starts at 17:54) that Nick Clegg the Lib Dem leader asked Gordon Brown at PMQ's today. Also why are they lending such amounts to American based multi-nationals when they still refuse to lend to British businesses trying to invest in British jobs and British products. The Prime Minister responded with the crumbliest, flakiest answer. An answer that did not taste like the question before.

Indeed he went off listing economic achievements of his Government rather than answering the specific charges of Nick's question. Brown's default position even though that looks more dodgy the more he quotes his economic achievements in response to economic disasters.

Vince Cable has made a follow up statement on this issue.

"Cadbury is a national institution which provides thousands of jobs in the UK and there is a real danger its takeover by Kraft will lead to job losses.

"It is particularly galling then that state-owned RBS should part fund this takeover when it is clearly not in the interests of the UK economy.

"This takeover also raises broader questions about how hedge funds, out to make a quick buck, can destabilise even the most established companies.

"We have seen Cadbury shares rapidly bought up by hedge funds that are keen to accept the Kraft takeover regardless of whether it is in the long-term interests of the company.

"As the City minister Lord Myners himself notes, it is becoming too easy for good British companies to be taken over by foreign predators."

So there you have it the Government has aided an abetted a predatorial take over of a British institution. Anyone who have ever tasted American chocolate will know we have far the superior product.

UPDATE: Now that Hansard has issued the 3 hour later official record here is the exchange. I've added a few comments in red.

Mr. Nick Clegg (Sheffield, Hallam) (LD):......

I should like to return to the issue of Cadbury’s. Last month, Lord Mandelson declared that the Government would mount a huge opposition to the Kraft takeover of Cadbury’s, so why does the Royal Bank of Scotland, which is owned by this Government, now want to lend vast amounts of our money to Kraft to fund that takeover?

The Prime Minister: If the right hon. Gentleman is really suggesting that the Government can step in and avoid any takeover that is taking place in this country overnight (Actually I think Lord Mandelson suggested it when he said "If you think you can come here and make a fast buck [you] will find that you face huge opposition from the local population... and the British Government"), and then tell a bank that it has got to deprive a particular company of money by Government dictate (Again Mandelson "We expect long-term commitment, not short-term profit, to rule."), his liberal principles seem to have gone to the wall.

Mr. Clegg: I thank the Prime Minister for the little economics lecture, but there is a simple principle at stake. Tens of thousands of British companies are crying out for that money to protect jobs, and instead RBS wants to lend it to a multinational with a record of cutting jobs. When British taxpayers bailed out the banks, they would never have believed that their money would be used to put British people out of work. Is that not just plain wrong?

The Prime Minister: Putting the words “liberal” and “principle” together seems very difficult now—[Interruption.] I have to tell the right hon. Gentleman that no Government are doing more to try to protect and increase jobs than this country’s (actually quite a number are doing better). Unemployment is falling today (except in Scotland where is it up 9,000) as a result of the actions we have taken (This time I'm quoting Jim Murphy who isn't so certain "After previous recessions the jobs market has taken longer to bounce back than the economy, and we know that we are still in very uncertain times."). If we had taken the advice of the Liberal (I assume he means to insert Democrat here) party (the Banks wouldn't have been given the free reign they had and income tax and capital gains would be in parity), unemployment would be a great deal higher than it is now (I dispute this as around here many jobs were lost when the banks no longer where willing to lend). He has nothing to offer the debate on the economy at all—[Interruption.]

A bit of a visual update:

Hat tip to Subrosa Video from Ollie at the Red Rag

RBS Board Adopting SNP Tactics

The SNP tactic leading into budgets and was (until it actually happened) the same about votes of confidence in their ministers to resign en masse and cause a new election they thought. Well it appears that the Royal Bank of Scotland board are to take the same approach over their bonuses.

The bank is looking to pay £1.5bn* in bonuses to its investment arm up from £900m last year. The board says it needs to pay this money to keep its top personnel with them and to keep them incentivised. Saying they need to act in the interests of all shareholders, not just the major one, a bit much after how those same shareholders were treated in recent years. Personally many of the rest of us have taking lower pay rises, reductions, loss of overtime payments, loss of bonuses with the only incentive to keep a job during the financial crisis. However, the issue does raise the issue of what type of bank the RBS is.

The Government bailed out the bank not to protect the investment arm but to protect the banking interests of the ordinary clients of the banks and their savings and banking facilities. These had been put at risk by that investment arm and its casino banking practices. Lib Dem Treasury Spokesman Vince Cable has been one of the most vocal proponents for breaking up the banking sector so that the high street banking sector that is all that most of us every have direct concerns about is separate from the speculative nature of the investment banks.

I recall when I first started studying economics the two were discussed totally separately, but soon after banking regulation was relaxed to allow both aspects to be carried out by the same company. However, maybe it is time for the Government to go back to those earlier principle to shore up confidence in our high street banks, after all you don't find an insurance company operating in the same premises as a bookmaker.

However, the issue with the bonuses is that the banks and the bankers were bailed out at tax payers expense and the government is going to look to get the taxpayers money back at some point. To spend £1.5bn of it on bonuses to staff, especially when many of those who bank with them are still struggling to make ends meet is lording it over everyone. Indeed if any other company director in any other line of business were to get a bail out from someone taking over 70% of the business in an interim agreement the profit would generally go to paying back that investor, even their own share of the profits to get out of the control quicker.

*This equates to 25% of the £6bn profit made by the investment arm of the bank this year.

Edinburgh on Alert for RBS AGM

Following the G20 trillion dollar package attention moves to Edinburgh where the Royal Bank of Scotland is holding its AGM today.

The peaceful group People & Planet had been handing out invitations in London asking people to join them in protest as the Bank's shareholders meet in the Edinburgh International Conference Centre. However, that are fears that after the high profile attack on the RBS London Headquarters during the week and on Sir Fred Goodwin's home last month that not all the protests in Edinburgh will be peaceful. The Scottish Government and People & Planet have both issued calls for protesters to behave in a peaceful and responsible manner.

Hopefully the banks shareholders will be allowed to go about their business peacefully. Some of these will no doubt be asking serious questions of the board about the business that led to this years record loss and bail out from the Government.

Harriet's Heffalump Trap Hell

As if her comment to overwrite the European Convention on Human Rights to try and cease Sir Fred Goodwin's private property (his pension) off him. Saying they could retrospectively change contracts, which would be a real disincentive for foreign investors to invest in the UK. Harriet Harman was at it again in her personal vendetta to get at Sir Fred Goodwin.

She claimed during PMQs. while standing in for the act performing to US Congress in Joint Session later that Sir Fred's pension was for his work with the Prince's and not for Banking, but for his work for the Prince's trust.

Whoops! Even Downing Street said of his award when given "[Goodwin] undertook many challenging projects that benefited both his company and the Scottish economy as a whole."

Of course it was for Banking he'd just overseen a record £6.2bn profit for RBS back in 2004 when he was awarded it. However even at the time of this award it was noted:

"However, he also came in for criticism from unions who branded him a fat cat for accepting a £900,000 bonus on top of his annual salary of £1m."

Oops, obviously not Teflon Fred then.

However, the fact that she was being asked the question by Elfyn Llwyd should have made Harriet cautious if she did not know the answer. But she fell right into that Heffalump trap and had to apologise immediately after PMQs.

Not Just a Police State of the Future

Harriet Harman this morning on the Andrew Marr show said something which had far reaching ramifications. She said of Sir Fred Goodwin's pension:

"The prime minister has said that it is not acceptable and therefore it will not be accepted.

"And it might be enforceable in a court of law, this contract, but it is not enforceable in the court of public opinion and that is where the government steps in."

So be wary. This current Labour regime is eroding more and more into our civil liberties. They have already shown they see themselves as above the law when they invade Iraq on false pretences. Now they are seeking to overturn the law, their own ministerial approvals all for the sake of making up for a mistake that they have made in the past. So they are not just content with rewriting history they want to rewrite laws you may not have known you'd fallen foul of.

Prescott is Right: Don't Award Failure

John Prescott has asked:

"how the hell the former RBS Chief Executive Sir Fred 'The Shred' Goodwin can claim without a guilty conscience a £650,000 annual pension a year from the age of 50.

"His greed and reckless nature got us into this mess and necessitated us bailing out the bank to the tune of £20 billion to try and keep people in their homes and
jobs. "

He ran a survey which asked amongst other things:

"Should RBS rip up his contract and take the risk of legal action."

Well lets look the record of an even bigger pension holder £1.5million all of that publicly funded. Who has been responsible as a senior participant in the running up of a £2.2 trillion debt. Part of that comes from an illegal take over of another's assets, liberties and well being, on false claims which were retrospectively agreed by the regulator of such things. Part of that was from failure to set stern enough regulations in place that would have seen Sir Fred unable to stretch the bank's risk to the degree he did.

So for costing the nation £1bn a year and 179 lives. Supporting a run up of the national debt, which not includes covering toxic debt from the banks his party could have regulated better which exceeds GDP. In his own words, how an earth can John Prescott claim without a guilty conscience such a pension?

Join the LDV cause on Facebook to Shred Prezza's Pension he clearly has a thing about people not being rewarded for failure, so we should look at clawing back his pension then.

Alternative View: Sir Fred Goodwin's Pension

Found this on YouTube and it does ask some very pertinent questions.

When Gesture Politics Fail

Lord Myners appears to have hit the wrong end of things when calling on Sir Fred Goodwin to make a gesture of giving up part of his pension. The former head of the Royal Bank of Scotland wrote back to the Treasury minister once it became clear to his surprise that his pension plans had been leaked to the BBC's Robert Preston.

He wrote back (letters available at The Times) saying he had no objection to his response being made public, before as the Times tell us he made it available himself. The outcome is that he sees that gestures he has already taken, refusing his notice period salary and share options, was already an ministerially approved gesture. Going back to October not the last couple of days as the Prime Minister seems to want to have us believe. Goodwin was in discussions with Myners "at the time".

It is a marvel that the as Myners claims the UK Financial Investments (UKFI) only found out about the discretionary choice of the RBS Board over Goodwin's pension last week. You'd have expected someone to be going over with a fine tooth comb details that had been discussed with Ministers over the past months. Especially in light of discussions over the previous chairman's pension arrangement before assenting to any agreement over what was appropriate.

Having been a former civil servant I'm sure that someone somewhere had enough wit to think outside the box and think about looking into it. I'm sure it also was flagged up on some bit of correspondence that was flying around the Treasury in October or whenever the UKFI first took a stake in RBS. These sorts of minutiae are never totally overlooked, especially when they are no so much minutiae. What I suspect did happen in the last week is that with the whole bonus brouhaha somebody remembered some memo about Goodwin's pension, that had been filed away. As the public outcry rose it bugged them so that one morning they came into the office and asked one of the Administrative Assistant to dig out some files. Then after a bit of reading, ignoring things that had been planned, the memo or margin note or position paper was found and an almighty panic ensued.

But the damage had been done, the Minister had given assurances and was now left trying to back pedal facing further public relations disasters.

RBS Cut's Back Sports Sponsorship

A few weeks ago, before the whole debacle over their bonuses, the Royal Bank of Scotland had extended their sponsorship of the RBS Six Nations to 2013. After the fall out from that today's news that they are to scale back their sponsorship substantially.

What it entails is the end of their sponsorship of the Williams Formula 1 team when the current contract expires in 2010. Also a reduction of the contribution to their sports ambassadors including Andy Murray, Zara Philips and Jack Nicholas as well as other lesser deals. The net effect is a 50% reduction of their tens of millions in sponsorship.

Dr Andrew McLaughlin, RBS group director said:

"We recognise that we are now operating in a very different economic
environment and have been reviewing all of our activities since
October.

"It is imperative that we respond to the reality of the situation we face
and that we do so in an orderly way that respects the commercial agreements we
have in place and the implications for our partners and the jobs they support."

As a sportsman in my past I well recognise the benefits that sponsorship can bring to events and individuals. But as an Economics graduate I also realise that investment in sponsorship does not have a direct impact on the money making potential of a company and when times get tough will be seen as needless luxury that is hard to justify. Therefore RBS are making a sound business decision for themselves. Those they have sponsored will have to get on the treadmill and find out if anyone(s) else will take up the slack and the hole left in their budgeting.

Although Williams will have to replace their £10m per annum deal Sir Jackie Stewart is beleived to he holding out for his £4m deal, unlike Andy Murray who is happy to renegotiate his deal.

Loaning to Get Around Bonuses

The Royal Bank of Scotland is offering loans, against the deferred bonuses, to hard up lower paid staff who will not be receiving their expected bonus of hundreds or thousands of pounds just now. This is not extended to the investment bankers who were expecting their seven figure bonuses. No doubt these will be at the bankers special repayment rate or even better than normal, that detail is missing.

However, will the bank look kindly on customers who have had their salary frozen, not receiving their increase of hundreds or thousands of pounds? Will they go easier on issuing loans or overdrafts to help them out?

The answer is probably not. How else are they going to pay to look after their own. The RBS staff will be getting their salary increase and easily secure a loan to cover their bonuses. Many others will find it hard to secure a loan, and even if they do not at the same rate and face uncertainty when or even if they will get their salary increased.

While the lower paid staff are not fat cats, they certainly are more content cats than many of the general population.

Bank Bonuses Curtailed

The Royal Bank of Scotland are the first of the banks supported by public money to have their bonuses hemmed in. Following public outcry that the bank that was bailed out with public money was still paying out bonuses of astronomic proportions when making such a heavy loss it issued its new plan after discussions with UK Financial Investments (who oversee the Government's shareholding in banks). The new deal is (from the bank's full statement):

• No Reward for Failure: No bonuses or pay increases will be made to staff associated with the major losses suffered in 2008.
• Board Remuneration: As previously announced Board Executive Directors will receive no bonus for 2008 performance and no pay increase in 2009.
• Pay 2009: Agreement has been reached with Unite in the UK for staff which they represent below managerial grades. Ongoing discussions with staff representatives are taking place in other regions. This will mean a pay freeze for Directors and Executives in the Group worldwide, and for most staff in the US and the Global Banking & Markets division. On average, other staff will receive below inflation pay rises.
• Bonuses for 2008: No discretionary cash bonuses will be paid in 2009 for performance in 2008. Only legally binding guaranteed bonuses will be paid. Total cash bonus payments for 2009 will amount to £175 million. Therefore total cash spend overall will have been reduced by more than 90 per cent.
• Protection for lower paid staff: The existing Profit Share "bonus" scheme worth 10% of salary will not be paid for 2008, and will be terminated for all future years. An equivalent payment will be made as part of the existing monthly award package to staff below managerial grade, beginning in 2009. The average salary for this group is £18,979.
• Deferred awards: Staff who are essential to the bank's recovery and who might otherwise be at serious risk of leaving, and who remain with the Bank will receive a deferred award for 2008. The deferred award will be released in three equal annual instalments beginning June 2010 and payable in sub-ordinated debt of RBS i.e. not in
• Claw back of deferred awards: In individual cases up to 100 per cent of these deferred awards will be subject to forfeiture at the discretion of the Remuneration Committee and if future losses arise in relation to their 2008 activities . Awards will therefore be based on sustained long-term performance, not on short-term revenue generation.
• Deferred Amount: The total amount of deferred awards will be finalised following our forthcoming company announcement relating to the Group's Strategic Review. However, the total amount will represent a very significant reduction on the comparable prior year totals and the settlement overall will be as tough as that at any other comparable bank.
• Future Policy: RBS is undertaking a fundamental review of its approach to future remuneration to ensure that incentives are well aligned to the interests of shareholders over the long-term. The intention for 2009 is to follow the same approach and deferral periods as outlined for 2008 while ensuring the Group pays competitively overall with other international banks. More details will be provided in the Group's forthcoming Annual Report and Accounts.

The net effect is that there is a 90% reduction in the bonuses that were to have been paid out for now. To counter the argument that key staff needed to get the bank back on its feet will be deferred (but they'd better see a turnaround or the claw back option will take effect). The counter staff, who obviously were not involved in the decision making will get their bonus as a performance related salary increase.

With the short term bonus culture employees have looked possibly to their own pockets rather than the health of the bank when making crucial decisions. So the move is to reward for longer term objectives rather than short term profiteering. Lloys who are seeking Government money have also submitted their bonus plans to UKFI for scrutiny.

Although with millions of others facing a salary freeze employees at RBS, who will be receiving below inflation pay increases, are still luckier than many other employees, and many of the unemployed, in the UK this morning after the year the bank has had.

Lesson for RBS from Barclays

I've received an email from John Prescott updating me on his campaign for the Royal Bank of Scotland to give up their bonus. Last night it you were watching BBC's Question Time you would have heard Kelvin Mackenzie try and defend the bonuses being given by the RBS with one basis being that other banks were giving them.

Therefore you can imagine how hollow that message sounded when I read Prescott's email. In it he points out the fact that Barclays, who haven't taken any Government money, have already reviewed their bonuses for the year. Even in parts of their business performing strongly such as commodities, foreign exchange and currencies will see their bonuses shrink from the average they would have expected. But more telling is that 20-30% of their staff will be receiving no bonus at all.

This is a bank that did not have to rely on the Government for money; it is still standing on its own two feet. Yet they are having to cut back on the bonuses they are paying because of the crisis. How much more should a bank, whose employees have survived by the good grace of the Government, also reconsider just what level of bonus if any should be going to any sector of its business?

RBS to Overhaul Pay Structure

The have received a mauling in the press and blogosphere about the amount being paid in bonuses following their Government bail out. But yesterday Royal Bank of Scotland boss Stephen Hester has announced there will be an overhaul of the bank's pay structure.

Amongst the admissions yesterday to the Treasury select committee was that pay in some areas of the business were too high. But is this too little too late in reaction to the public outcry that while others in other lines of work are struggling, the bank had announced the go ahead to £1bn in bonus payments in a year when billions were lost. However he did say that the bonuses would be being paid saying "if [he] thought it was a responsible move, [he] would not pay a penny". He said that many of the employees did exactly what was expected of them and deserved their bonuses.

However, without the back up from the Government the bank would have failed many of those employees and they wouldn't even have had jobs let alone the ability to pick up a bonus. Surely that is the crux of the matter. These bonuses are not being paid out of the bank's profits from last year, as there were none just a whopping £28bn loss, but from the public purse as we bailed them out.

During the grilling before MPs he admitted that it could take as long as five years for the bank to merely reverse the serious failing of the last annus horribilous. Whilst Hester admitted that the risk-management systems side of the business needed a major overhaul, it was their spin at the roulette wheel that overstretched the bank, he somehow still fails to see that the public cannot understand. Nor will they accept that when a business has failed so dramatically that they should have the ability to hand out bonuses of the scale that some have been mentioned. Merely claiming that no bonus of any sort would be given to people associated with the vast losses the bank had made is not enough the others have to be reviewed too in light of the current financial state of the institution.

First the Apology Then the Fallout

Earlier today Sir Tom McKillop, former chairman of the Royal Bank of Scotland was amongst those apologising to the Treasury Select Committee at Westminster. This afternoon news came from Alan Dickinson, chief executive of RBS UK that the company plans to shed 2,300 jobs. He said:

"We recognise that any news of this nature is unwelcome at any time. It is essential, however, that we consistently review our business to ensure that we are able to operate as efficiently as possible, especially in the current economic circumstances.

"We will be consulting with our recognised trade union, Unite, and our employees throughout. We fully agree with Unite that we must keep compulsory redundancies to a minimum and we will."

I trust that as a result of this review the bonuses that they are giving out. Of the £20bn that the Government has used to bail out the back £1bn is earmarked to pay RBS employees bonuses. How much of this could be used to retain some of those 2,300 employees is a question that should be being asked by the Prime Minister as well as asking for those bonuses back.

Earlier today fellow Lib Dem blogger Charlotte Gore, who I normally consider far more economically liberal than me, claimed the Government should lay off the banks and their bonuses. There is one difference now to in the past when Charlotte worked from them. In the case of RBS the Government owns 68% of the bank and has every right to see that investment spent wisely. Why should the banks be a special case when other employees across the country are facing the possibility of a freeze on pay, not even getting their salary reviewed or may have to make further savings as their employers are feeling the pinch. If the market doesn't allow for it surely bonuses shouldn't be being paid?

When I was a Civil Servant my bonus was performance related and not a foregone conclusion, if I added value to the branch that I worked in I would be rewarded if I didn't then I wouldn't. This was a salary increase bonus not a one off payment. This year being in the public sector in an industry that is directly affected by the well being of other firms I wait with baited breathe. So maybe the banks should look at rewarding performance, but also be prudent about doing so, especially when many of their own customers are uncertain about their own financial futures.

Jim Murphy Wants Sackings and to Decrease Unemployment

Scottish Secretary didn't have that good a night on question time last night. Whilst he attacked monetary stimuli as not saving people's jobs he failed to take any blame for the the banking sector failings despite Labour, and more crucially Gordon Brown being heavily involved in that line since 2007. Then to cap it all he want 4 more people to lose their jobs speaking on the John Sergeant scenario he said "I think we need to get rid of the judges rather than John". I mean there's off message then going off you own message.

But how long are Labour going to continue to blame the USA for everything regarding this latest situation. We had a chancellor, now Prime Minister, Telling us that the days of boom of bust were over. Fact is there was no buffer being built up in the good times in case any issue came up to alleviate the economy should bust be on the horizon.

Even Jim Murphy admitted last night that certain economies were in better shape that the UK is at present to face this crisis, but seemed adamant to not take any responsibility despite 11 years of Labour for this situation. However, his foreign policy experience may well rank with that of Sarah Palin as he also listed China, who currently are the world's lender of first resort, as being in financial crisis.

Maybe Labour, and indeed the whole banking sector, could learn a little from Sir Ian McKillop chairman of the Royal Bank of Scotland. At least he has put his hand up and made his apology for his share of the difficulties.