Political sketch: Laying the Sun King to rest

Rupert takes away all of the blame - none of the responsibility.

 

In the end the Sun King just rambled on as might befit someone in his eighty-first year, and thus Rupert Murdoch was finally laid to rest on the Strand - fittingly at the end of Fleet Street where it all began 45 years ago. 

On the journey we discovered the man with his hand around the throats of all our political leaders believed that if you scratch my back I'll scratch yours - but not when it comes to our political leaders. He did them no favours and they did him none. 

We discovered he had not really liked the News of the World, the newspaper which brought his empire to crisis, and he wished he had closed it years ago. 

We discovered he took all the blame for what has gone wrong but none of the responsibility. 

We discovered he was seriously distressed by what had happened and some people were to blame but clearly not those close to him. 

As dramatic events go, the (probably) final public appearance of the media mogul who has so dominated parts of British public life was almost embarrassing.

At times, he was almost Alex Ferguson in his replies to charges that he had to accept his part in the scandal tied to his newspapers, but as soon as he flared he failed back into the gaps of someone who has remembered the answer but not the question. 

We learned it has cost him hundreds of millions of dollars and it was a serious blot on his reputation. 

We learned that son James might have been too inexperienced for the job that an editor of the Sun said he had been drunk all the time he had the job - but nobody noticed and that the Sun was, and is, his pride and joy. What the Sun says is what Rupert thinks. Or maybe the other way round. 

We learned too that if he had not taken the print unions, some of the papers doing him down today would not have been able to afford it. 

Sadly, or deservedly, he was asked by Lord Leveson to sum up the future of newspapers and he lost his way - maybe just like them. 

His many enemies, well earned and well deserved, will have to settle for the demise of the News of the Screws and the evisceration of son James. But they have also been present for the humbling of Rupert Murdoch - and that should be remembered. 

 

Peter McHugh is the former Director of Programmes at GMTV and Chief Executive Officer of Quiddity Productions

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation