"The Daily Malicious, sorry, the Daily Mail"

Naivety and aggression at the Leveson inquiry.

"The Daily Malicious, sorry, the Daily Mail." You knew from the moment that faux-slip passed his lips that this wouldn't be a run-of-the-mill appearance at the Leveson inquiry by Richard Desmond, owner-founder of Northern and Shell, owner of Channel 5 and proprietor of the Daily Express, Sunday Express, OK! Magazine, Daily Star and Daily Star on Sunday. And arch-rival of the Daily Mail.

There was plenty of knockabout stuff to entertain. "The Daily Mail is Britain's worst enemy," snipped Desmond, given the chance to talk about his 'worst enemy'. When asked of the notion of a non-aggression pact between the Mail and the Express, he retorted: "Two weeks ago Dacre vilified me in his horrible rag."

The mention of Paul Dacre, Daily Mail editor, clearly stuck in Robert Jay QC's mind, and he accidentally called Desmond "Mr Dacre" to howls of laughter shortly afterwards. "He's the fat butcher," chuckled Desmond. There didn't seem an awful lot of love lost.

The Express owner, like fellow Leveson attendee Paul McMullen, is a pen-twiddler. He spoke calmly and slightly boringly - not as boringly as Mail on Sunday editor Peter Wright, whose statements the other day were in the bland monotones of a hynoptherapy tape. But there was a clenched fist and a sense more animation when he became passionate about his business: "You have to love these products, you have to live these products."

He explained how he made cutbacks in staff when he arrived - "There's more to life than the chess correspondent based in Latin America" - as well as 'a very secretive reporting area'.

"We cut it out within a week or two weeks. If we didn't know what they did, we got rid of them." Was that for ethical or commercial considerations, he was asked? "We do not pay out cash without receipts. That was the ethos of the company."

Shortly afterwards, he was a little less sure of the meaning of those words: "Ethical, I don't know what the word means." Jay pointed out his own statement, where he had spoken of how 'everybody's ethics are different, we don't talk about ethics or morals'. Ah yes, that ethical.

Desmond made it clear he was a proprietor whose background was in advertising, not editorial: "With respect to journalists, (putting money on the front cover or giving away DVDs) is the only way you increase circulation." Later, he added: "Editors have to believe that by putting a good story in they're going to sell more newspapers. That doesn't necessarily correlate."

He also recalled the way in which he was greeted by his former Fleet Street rivals: "The Mail were the worst because they were upset they hadn't bought the Daily Express. The Mail were upset, the Telegraph were upset because they had this joint venture with a printing company. The Guardian were upset because we came from leftfield and nobody knew who we were. We were cutting their friends' jobs so they didn't like us. The Sunday Times, they wrote lovely things about us. The Independent, the Mirror and the Sun, I can't remember."

Desmond clearly felt he had on the wrong end of a character assassination, saying: "The only thing I wasn't accused of was murder."

Before too long, the conversation turned to Kate and Gerry McCann, who actually were accused of murder, in his newspaper, which reported the suspicions of Portuguese police with regard to the parents of missing Madeleine. Jay said: "In relation to McCanns, if one accepts other newspapers also defamed the McCanns, given the systematic and egregious defamations which your newspaper perpetrated on the McCanns it's a bit rich to blame the PCC to fail to provide you with guidance, after all it was up to your editor not to behave in such a way."

Desmond replied: "Every paper, every day for that period of time was talking about the McCanns. It was the story. Poor old Peter Hill, he thought I was going to fire him. He'd done to the best of his ability report the facts. Unfortunately when it came to it, it's fair to assume the Portuguese police would have been a reliable source."

It was interesting how Desmond's sympathies appeared to be with 'poor old Peter Hill' as the victim in that scenario.

Later, Desmond unwisely returned to the subject when talking about the role of the PCC. "With the McCanns, it took them a long time to get in a dispute with us. They were quite happy as I understand in articles being run about their poor daughter. It was only when new lawyers came along who were working on contingency..."

"That was grotesque characterisation," interjected Leveson. "Your newspaper had accused them of killing their daughter. Are you seriously saying they were 'quite happy'?"

Desmond apologised to the McCanns. He kept apologising to the McCanns, and made it clear that he was apologising to the McCanns, but couldn't leave the subject alone. He said the Express had been unfairly scapegoated over its coverage, even though 'everyone else' was doing it, saying that if there were 38 bad articles out of a total of 102, that meant there were a majority of positive articles.

With regards to the PCC, Desmond seemed flippant. His main gag was that it should be called the "RCD" (Richard Clive Desmond), though that joke fell a little flat after the tense exchanges over the McCanns. He seemed unwilling to want to talk about regulation, as if it were falling into some trap - the bad jokes were as good as it was going to get.

Earlier, Dawn Neesom, the editor of the Daily Star, had seemed similarly awkward when pressed on restructuring the PCC and regulation of the press, chuckling a rather bizarre comment to Leveson himself. "You're far more intelligent than I am so I know you're going to come up with something very good," she said. It seemed rather too deferent and cap-doffing for someone in such a high-ranking position, particularly with regards to self-regulation, where newspapers usually seem so keen to be involved.

But then if you take a lot of witnesses at their word, there is a lot of that kind of naivety about. People who have risen to the top positions in the highly competitive and cynical world of journalism do appear, at face value, to have an awfully kindly and trusting nature, and seem to like to see the best in others.

Hugh Whittow, editor of the Express, explained that he was aware that the newspaper had used search agencies, but not private investigators - a similar distinction to the evidence from Sun editor Dominic Mohan the other day. How was he sure that it wasn't going on? He said it hadn't been 'flagged up' to him. How did he know that sources weren't being paid? "I assume because no-one has come to me it hasn't happened."

You have to marvel at how a tabloid journalist could be such a trusting soul.

Patrolling the murkier waters of the mainstream media
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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