Gordon Brown and the Labour party are the unashamed architects of this banking balls-up

Craig Barrett 10.08am

It comes as no surprise to me that Ed Miliband is calling for a full public inquiry into what has been going on at Barclays regarding LIBOR.  In the absence of any contrition for the devastating effect that his Labour party’s policies had on the British economy, and in the apparent absence of any serious policy for economic recovery, Mr Miliband and Mr Balls seem to think that a public flaying of hate-figures is the only way to get back to power.

Conveniently, they forget that the phone hacking scandal, for example, actually occurred under their watch; worse still, the Barclays / LIBOR issue arose under a regulatory model of which they were the architects.

The danger is, however, that they are onto something. With nothing but bad news about the economy, there is a pervasive and wider belief that the public seem intent on baying for the blood of anyone who can be deemed culpable of anything.  With journalists, this isn’t the case. Most people, assuming that such things as phone hacking have gone on for years anyway, are uninterested in Murdoch et al, the story being kept alive only by the non-Murdoch press and the increasingly blinkered BBC.

With bankers, on the other hand, the public are very interested. Logic goes out of the window and the Labour party has been able to manipulate matters to the extent that bankers are now deemed up there with paedophiles and sheep rapists in terms of human evil.

The fact is that 99 per cent of bankers aren’t evil and the remaining 1 per cent are probably, at worst, misguided.

Most bankers are simply getting on with their jobs. One-tenth of tax revenues come from banks, while bankers’ bonuses, because of the different rates of corporation tax and income tax, are actually a more efficient way of getting money into the hands of the government.

Yet we see that Stephen Hester has foregone his bonus this year, thanks to an IT glitch for which he cannot have been responsible, but which undoubtedly the Labour party would have demanded regardless. Despite having written his contract, those Labour party figures who remain are conveniently forgetting that an agreement was signed – just how much do they think Mr Hester should be paid? If you want a loss-making business turned around, it’s going to cost more to hire the best.

And now that Bob Diamond has resigned - one suspects for reasons of peace and quiet rather than any admission of guilt or otherwise - it does seem that the Labour party shall not stop until they have hounded out every competent manager in Britain.

This aside, calls for a banking inquiry show that the Labour party is driving the agenda and this Government is on the back foot.  An inquiry will only keep open the wounds and, given that the public associates the City with the Conservative party, will do us no favours at all. It’s doubtful whether it would even get to the bottom of the LIBOR scandal. The inquiry that is to be headed by the fiercely independent chairman of the Treasury Select Committee, Andrew Tyrie, must focus on the dramatic failings of the FSA and the tripartite regulatory system that Gordon Brown and Ed Balls created, because it is entirely clear to me that this is the root of the troubles.

When these issues were debated by the House of Commons in 1997, it was obvious to the Tory benches that Gordon Brown’s regime was not going to keep the City in check.  The new Chancellor’s motivations were less about regulation and more about his obsession with inflicting iconoclastic changes on fully functioning extant systems that he viewed as brimming with enemies.  Mr Brown hated the City and hated the Bank of England, so he sought to transfer powers to a new quango of his choosing.  A couple of choice lines from Peter Lilley, then Shadow Chancellor:

“We know that funding policy is an intrinsic part of monetary policy, and the Bill will leave the Bank as a one-club golfer without even a putter left in the bag. How will the Treasury, the Bank and the new board co-operate to handle monetary policy? If they need to get together, why is it necessary to separate them in the first place?

“The coverage of the FSA will be huge: its objectives will be many, and potentially in conflict with one another. The range of its activities will be so diverse that no one person in it will understand them all. Its structure will be as complex as those of the organisations that it replaces, if not more so.”

Like so much of what Mr Brown ‘achieved’, it was borne of the clunking hatred that drives him and his desire to complicate matters to such an extent that the Government becomes all powerful, even if it itself does not itself comprehend its own role.

The FSA, or ‘Fundamentally Supine Authority’ as Private Eye rightly called it, was destined to be a disaster - something foreseen by the Conservative party. The separation of roles was a creation of Gordon Brown’s loathing of an establishment that he perceived as Tory-leaning. The Labour party’s role in the LIBOR scandal becomes all too clear when you realise that it was their system of regulation that failed. It is that which should be the focus of an inquiry, not simply a digging around the files at Barclays bank.

The Labour party cannot be allowed to claim that this is somehow the Tories’ fault. For once, I am prepared to let Gordon Brown have the last words, after a fashion, from two Mansion House speeches, in 2007 and 2004:

I congratulate you on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London … I believe it will be said of this age, the first decades of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created.”

In Budget after Budget I want us to do even more to encourage the risk takers.”

As ever, re-reading his utterances, I find myself wondering what planet the man was on.

Follow Craig on Twitter at @mrsteeduk

Labour’s hypocrisy over knighthoods, bank bonuses, railway bonuses and the vilification of success

Craig Barrett and Nik Darlington 10.42am

Given some of the recent hysteria about bankers’ bonuses, Mr Fred Goodwin and Labour’s leap on to the let’s-hate-the-wealthy bandwagon, people might be forgiven for thinking that this Government was guilty of misunderstanding of that famous misquotation of Calvin Coolidge: “the business of America is business.”

I do my best to avoid burdening readers with statistics but I should like to echo the wise words of Fraser Nelson, who pointed out over the weekend that the so-labelled “1%” earn 13 per cent of wages but pay 28 per cent of all income tax.

In the light of the Labour party’s apparent belief that it is fine for those of us who work and pay taxes to subsidise those who do not work to the tune of an equivalent of £35,000 per annum, it is easy to understand why the middle might be feeling a little bit squeezed.

The middle has neither the luxury of a substantial guaranteed income for being idle nor do they have the stratospheric income that some people would have us believe is commonplace in financial services.

In fact, bankers’ pay appears to be falling and pay increases among FTSE 100 directors are close to 3 per cent, rather than the misinformed reporting of figures like 49 per cent.

The outrage at bonuses at RBS betrays a fundamental misunderstanding of the nature of the Government’s involvement in the bank.

RBS was effectively nationalised by the last Labour government in order to bolster the bank’s balance sheet. However, unlike the nationalisations of Rolls-Royce in 1971, British Leyland in 1975 and (to a certain extent) Railtrack in 2002, RBS remains a public company listed on the stock exchange.

It represents an investment for the British taxpayer, not an exercise in the Government in-sourcing financial services, as some seem to believe. The hope is that sensible management and some vision will steer RBS back to prosperity, at which point the Government can sell its stake and perhaps make us all a profit.

Referring to RBS constantly as being “taxpayer owned” gives it something of the status of a Government department, which is to confuse entirely what the RBS rescue was all about.

Everyone would be rather shocked to see Arsenal being sponsored by the Department for Energy, for example - naturally, because it has no commercial role to play and no need to attract business. RBS, on the other hand, will only recover if it remains competitive and is able to attract business, hence its continued presence as a sponsor of sporting events and other marketing activities.

In the same way, it will only be able to recover if it is permitted to run its internal management like any other commercial organisation.

Stephen Hester is not a civil servant subject to a pro-forma contract of employment, sanctioned by countless HR executives and trade union representatives. He is a successful businessman hired on a negotiated contract to work his socks off turning around a failed financial institution. Mr Hester’s contract was negotiated on the basis of normal industry practices. Like it or not, those industry practices include performance-related bonuses and, like it or not Edward Miliband, it was your party (and a Cabinet of which you were a member) who signed off on the deal.

What is more, the Labour party has since leapt on the bonus payments to executives at Network Rail. Its chief executive, Sir David Higgins, was set to receive a bonus of £336,000. Another five senior colleagues would have received up to 60 per cent of their standard pay in bonuses.

But Labour is the political party which, when in Government, was quite relaxed about Network Rail paying its board of directors bonuses of £437,000 in 2004, £871,000 in 2005, £1.1 million in 2006, £648,000 in 2007 (lower as awards were partially deferred because of investigations into the Grayrigg derailment), £1.5 million in 2008 (normal services resumed) and £1.2 million in 2009.

In those six years, Labour ministers did not bat an eyelid at Network Rail paying its directors approximately £5.75 million in bonuses and incentive schemes on top of their already sizeable salaries.*

The attitude of the Labour party - whether directed against Mr Hester, Mr Goodwin (the man knighted by Gordon Brown) or others - does nothing for this country’s credentials as a serious player in the world economy.

The politicians responsible for deregulation and setting up plans for growth remain obsessed with executive pay - something Nick Boles highlighted in his recent Macmillan Lecture.

And worst of all, the cowardly behaviour of the Government over the Stephen Hester bonus furore sends out a signal to the rest of the world that success is no longer appreciated in Britain. In particular, the notion that employees should somehow have the right to sit on remuneration committees misunderstands completely the entrepreneurial spirit that made this nation great.

The correct Coolidge quotation is: “the chief business of the American people is business.” This is correctly linked to the people. It applies equally to ‘UK plc’ because our country will only grow if we can go back to being a business-friendly environment, where companies like RBS are able to get on with things without the need to satisfy baying blood-lust through embarrassment, shame and meek hand-wringing.

Success benefits us all - a rising tide lifts all boats - and a strong financial sector will stimulate growth.

Bruce Anderson, channeling the past once again, yesterday resurrected the phrase “brain drain”, recalling a time when Labour’s perverse taxation drove so many smart and industrious people out of this country.

Stop and think. With 1 per cent of people paying 28 per cent of income tax, that means it shall take a lot more of us to cover the deficit if just one of that 1 per cent leaves. We must not allow this country to become one that appears to tolerate uncapped benefits for those who don’t work, yet vilifies those who do.

*Incidentally, the Office for Rail Regulation (ORR) has begun criminal proceedings against Network Rail for breaching health and safety law preceding the Grayrigg derailment. The first hearing in the case is in a couple of weeks. If Network Rail is found guilty, will the directors who deferred bonuses at the time of the derailment return the bonuses they received in subsequent years?

Follow Craig on Twitter @mrsteeduk

Follow Nik on Twitter @NikDarlington