Tonight:
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SIR FRED Goodwin, chief executive of Royal Bank of Scotland when it recorded the biggest ever loss for a British company, has said he will “think about” giving up his £650,000-a-year pension. The Prime Minister has said he will look at legal action to see if any of the sum can be clawed back.
Yet ministers are said to have signed off Sir Fred's whole package last November. And while they may talk of legal action to recover some of the money, they may well be powerless to interfere with the rules of pension schemes, because retrospective action could set a bad precedent for other pensioners. What they should have tackled earlier was the boardroom culture that allowed directors to grant one another vast rewards regardless of outcomes — a culture criticised by the Governor of the Bank of England to MPs today.
Meanwhile, the details of the Asset Protection Scheme launched by the Treasury today have still to be assessed in full by markets. But what is already clear is that under today's agreement, the Government will raise its stake in RBS to 84 per cent and potentially to 95 per cent. There will inevitably be calls for full nationalisation.
While that might look like a gratifying punishment for bankers, it would remove the obligation for RBS to make regular statements to the Stock Exchange, thereby decreasing public scrutiny and potentially delaying the bank's return to the private sector.
Governments should not be in the business of running banks. Instead, ministers must ensure that they make the most of the commitment under today's agreement for RBS to increase mortgage and business lending to rise by an extra £25 billion this year and again in 2010. Meanwhile, Lord Turner, chairman of the Financial Services Authority, has made clear that the reason for the FSA's failure to deal with banks' business models was to do with political pressure: his finger pointed to the Prime Minister. Yet again, it seems the crisis returns to the door of Gordon Brown, the author of the regulatory system that was found so wanting.
No temp tax
THE GOVERNMENT, having cut VAT on the things we buy, seems set to reimpose it on the employment of temporary workers. For the past 12 years, employers have enjoyed a little-understood exemption from VAT when they employ temporary staff.
Now the Treasury is minded to bow to pressure from Brussels and impose it from April, a move which will fall hard on those sectors that cannot recover VAT from end-users: the City, the charitable sector and the health service.
Temporary staff are already vulnerable to staff-cutting. This could, at a stroke, mean the loss of 25,000 jobs in London alone.
Since the proceeds of VAT do not go to Brussels but to the Government, this will mean the Treasury will get £400 million from the move.
Against this must be set the costs of increased unemployment benefit and the fact that the Government will be charging itself VAT through the NHS. It really does not wash to argue that this is a development dictated by Brussels: when ministers want, they can defer implementing EU rules. After 12 years of VAT exemption, an extension for the duration of the recession would be quite possible. Right now, ministers should be wary of any move that makes for increased unemployment; this is a case in point.
High note
THE ENGLISH National Opera's remarkable production of Dr Atomic, about the dropping of the atom bomb, which is reviewed in this paper today, is yet further confirmation of the sheer vitality of London opera right now.
The ENO has a fruitful relationship with the New York Met, such as this shared production; box-office returns are flourishing and there are more exciting productions ahead. Long may it last.
Reader views (2)
No Temp tax....
You cannot argue boths ways. If 25,000 jobs go then the Government will not raise any extra revenue thro' imposing VAT on the temp industry - so where do you get the GBP 400 million from? From the 25,000 jobs that are not lost?
- Mark Newman, Hong Kong, 27/02/2009 08:02
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I've just realized. Weapons of Mass Destruction (WMD) were here with us all the time !
They were in 'Cabinet' working for the bankers.
- David Hill, bern, 27/02/2009 00:04
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