Phone-hacking, then rate-fixing – which industry is next?

The anatomy of a modern-day scandal.

Regardless of the outcome of the Leveson inquiry, one of the most long-lasting effects of the revelation of the phone-hacking culture in the tabloid press seems to be the creation of a blueprint for how to overhaul an industry.

In that respect, the revelation that Barclays had been systematically lying to the British Bankers Association about the rate they thought they could borrow at is just the latest step in a process that we have all been through before. Not for nothing have bankers been talking, in private and ever more frequently in public, about the Libor manipulation being a "Milly Dowler moment".

For years now – ever since the crash, but even before then – there has been widespread belief that the daily grind of a banker's life involves dishonesty. The popular understanding of the financial crisis is that it involved misselling of complex financial instruments (the infamous collateralised debt obligations, which allowed sub-prime mortgages to be sold in tranches disguising the inherent risk in owning them) causing a crash which the perpetrators didn't suffer from due to their closeness to the sources of political power. Not only were the institutions bailed out, but the allegations of widespread criminality resulted in not a single British prosecution, despite the pre-election talk of David Cameron.

Just as phonehacking was never confined just to the News of the World, despite the fact that it was their hacking of a murdered teenager's phone which brought the scandal into homes nationwide, so the Libor manipulation seems extremely unlikely to be just the work of Barclays. The Financial Times reports, for instance, that 

[Barclays] admitted that [it] understated its borrowing costs during the financial crisis because it believed other banks were doing the same.

And a post today from ZeroHedge claims that the Libor manipulation was common knowledge. "Everyone knew" and "everyone was doing it", apparently:

Everyone knew we couldn't borrow at Libor, you only needed to look at CDS to see that... with real Libor rates 3 to 4 per cent higher than the BBA's submitted Lie-bor.

The "everyone knew" defence was trotted out under similar circumstances for the phone-hacking scandal, seemingly in an attempt to minimise the perceived transgression. There at least it was easily proveable. Journalists seem to find it much harder to keep quiet about these sort of things than financiers, for some reason. So we have Piers Morgan's infamous passage in his autobiography from January 2001 revealing that:

Apparently, if you don’t change the security code that every phone comes with then anyone can call your number and, if you don’t answer, tap in the four digit code to hear all your messages.

And nearly every celebrity who has given evidence at the Leveson has given evidence of stories being published which couldn't have come from any source other than phone hacking.

In both cases, everyone did know, and it really did mean that the average person finding out afresh was less shocked. After all, if you and the fifth person in a room finding out something that everyone else already knows, it hits a lot less hard than if everyone finds out all together.

Even worse, the structure of both industries lends itself to minimising harm (harm, that is, caused to the industries). Newspapers inculcate an attitude that the scoop is all, that it should be earned at any cost and that the editors won't ask questions beyond whether it is true or false; banks want their traders to earn money and don't particularly care how its done. In each case, it is easy to pass anyone caught in the act as a rogue reporter or a rogue trader.

So in the end it takes a single, uncontrovertible piece of evidence to shake the foundations of the industries. The hacking of Milly Dowler's phone showed the nation that, even if it was just one rogue reporter, the structures that let it happen couldn't be allowed to continue; and when the thread began to be pulled, the whole thing unravelled, and the idea that it could ever have been "rogue reporters" looked laughable. With the Libor scandal, a similar process seems to be under way; the story that it was junior managers acting illegally looks unlikely to last the week, given we now know that Bob Diamond and the Bank of England's Paul Tucker had conversations which somehow metastisized into instructions to give fake submissions.

And we seem to be reaching the apotheosis of the scandal: the chancellor is expected to announce a full inquiry into Libor this afternoon, which he is hoping to keep one step short of a complete Leveson-style investigation.

The uncanny similarity between the two events raises two questions: can we handle them better? and where is the next one coming from?

After all, the idea that endemic criminality in an industry can just be "talked out" seems absurd; and yet it is looking less and less likely that the Leveson inquiry will result in anything other than a light being shone on the industry. Damaging for those used to operating in the dark, but a far cry from justice. And holding a Leveson-style inquiry up as the best outcome for the Libor scandal, when we don't even know how the Leveson inquiry itself will end, seems foolish.

But the bigger question should be attempting to pre-empt the next scandal. We don't have to leave it until the event which shocks everyone into action, if we learn to recognise the signs. Large amounts of independence on the ground, a culture that emphasises no-questions-asked successes, and the dismissal of anyone revealed to be acting out of line as a "rogue" element are the warnings we should be looking out for. And personally, if I were the Metropolitan Police, I would be wondering who my Clive Goodman is going to be. 

 

Former News International Chief Executive Rebekah Brooks leaves her lawyer's office in London. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Air pollution: 5 steps to vanquishing an invisible killer

A new report looks at the economics of air pollution. 

110, 150, 520... These chilling statistics are the number of deaths attributable to particulate air pollution for the cities of Southampton, Nottingham and Birmingham in 2010 respectively. Or how about 40,000 - that is the total number of UK deaths per year that are attributable the combined effects of particulate matter (PM2.5) and Nitrogen Oxides (NOx).

This situation sucks, to say the very least. But while there are no dramatic images to stir up action, these deaths are preventable and we know their cause. Road traffic is the worst culprit. Traffic is responsible for 80 per cent of NOx on high pollution roads, with diesel engines contributing the bulk of the problem.

Now a new report by ResPublica has compiled a list of ways that city councils around the UK can help. The report argues that: “The onus is on cities to create plans that can meet the health and economic challenge within a short time-frame, and identify what they need from national government to do so.”

This is a diplomatic way of saying that current government action on the subject does not go far enough – and that cities must help prod them into gear. That includes poking holes in the government’s proposed plans for new “Clean Air Zones”.

Here are just five of the ways the report suggests letting the light in and the pollution out:

1. Clean up the draft Clean Air Zones framework

Last October, the government set out its draft plans for new Clean Air Zones in the UK’s five most polluted cities, Birmingham, Derby, Leeds, Nottingham and Southampton (excluding London - where other plans are afoot). These zones will charge “polluting” vehicles to enter and can be implemented with varying levels of intensity, with three options that include cars and one that does not.

But the report argues that there is still too much potential for polluters to play dirty with the rules. Car-charging zones must be mandatory for all cities that breach the current EU standards, the report argues (not just the suggested five). Otherwise national operators who own fleets of vehicles could simply relocate outdated buses or taxis to places where they don’t have to pay.  

Different vehicles should fall under the same rules, the report added. Otherwise, taking your car rather than the bus could suddenly seem like the cost-saving option.

2. Vouchers to vouch-safe the project’s success

The government is exploring a scrappage scheme for diesel cars, to help get the worst and oldest polluting vehicles off the road. But as the report points out, blanket scrappage could simply put a whole load of new fossil-fuel cars on the road.

Instead, ResPublica suggests using the revenue from the Clean Air Zone charges, plus hiked vehicle registration fees, to create “Pollution Reduction Vouchers”.

Low-income households with older cars, that would be liable to charging, could then use the vouchers to help secure alternative transport, buy a new and compliant car, or retrofit their existing vehicle with new technology.

3. Extend Vehicle Excise Duty

Vehicle Excise Duty is currently only tiered by how much CO2 pollution a car creates for the first year. After that it becomes a flat rate for all cars under £40,000. The report suggests changing this so that the most polluting vehicles for CO2, NOx and PM2.5 continue to pay higher rates throughout their life span.

For ClientEarth CEO James Thornton, changes to vehicle excise duty are key to moving people onto cleaner modes of transport: “We need a network of clean air zones to keep the most polluting diesel vehicles from the most polluted parts of our towns and cities and incentives such as a targeted scrappage scheme and changes to vehicle excise duty to move people onto cleaner modes of transport.”

4. Repurposed car parks

You would think city bosses would want less cars in the centre of town. But while less cars is good news for oxygen-breathers, it is bad news for city budgets reliant on parking charges. But using car parks to tap into new revenue from property development and joint ventures could help cities reverse this thinking.

5. Prioritise public awareness

Charge zones can be understandably unpopular. In 2008, a referendum in Manchester defeated the idea of congestion charging. So a big effort is needed to raise public awareness of the health crisis our roads have caused. Metro mayors should outline pollution plans in their manifestos, the report suggests. And cities can take advantage of their existing assets. For example in London there are plans to use electronics in the Underground to update travellers on the air pollution levels.

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Change is already in the air. Southampton has used money from the Local Sustainable Travel Fund to run a successful messaging campaign. And in 2011 Nottingham City Council became the first city to implement a Workplace Parking levy – a scheme which has raised £35.3m to help extend its tram system, upgrade the station and purchase electric buses.

But many more “air necessities” are needed before we can forget about pollution’s worry and its strife.  

 

India Bourke is an environment writer and editorial assistant at the New Statesman.