Saudi embarrassment

The killing or the homosexuality – which seems worse to the folks back home?

The news that a Saudi prince is on trial in London for killing an aide who was reputedly also his gay lover will be enormously embarrassing to the government back in Riyadh. Saudis dislike bad publicity intensely, and especially when it involves a case as horrific as an alleged princely murder — as we in Britain should know well. In 1980, the Saudi government expelled our ambassador and banned Concorde from its airspace after ITV screened Death of a Princess, about a young member of the royal family who was executed for the "crime" of conducting a secret relationship.

In the opinion of David Gardner, author of Last Chance: the Middle East in the Balance (and who wrote a fascinating essay on Saudi Arabia for the NS last year): "This prince has become a very hot potato for the Saudi ruling family. Though a minor princeling, he is the grandson of a king who has tried to project an image of austere probity, to limit the power of the clerical establishment and curb the excesses of the more wayward and corrupt royals.

"Then along comes this . . . which presses just about every Wahhabi button in its transgression: murder and homosexuality against a backdrop of phenomenal quantities of alcohol and drugs."

Shamefully, however, just as humiliating for the royal family will be the revelations that Prince Saud bin Abdulaziz bin Nasir al-Saud, who is King Abdullah's grandson, is homosexual. The details of the case make this plain — something called the Spartacus International Gay Guide was found in his room, and two male escort agencies testified he had used their services since checking in to the hotel.

It is not as though homosexuality is unknown in Saudi Arabia. In a daring piece for the NS in 2007, Harry Nicolaides wrote of one attempted pick-up he experienced. (So daring was the piece, in fact, that at the time I couldn't believe his lack of regard for his own safety. My worries proved well founded, as Harry's bravery, or recklessness, was later to land him in jail in Thailand for violating lèse majesté laws.) And Robert Lacey devoted a section of his recent book Inside the Kingdom to an account of the prevalence of lesbianism in Saudi — a chapter to which some reviewers paid rather overenthusiastic attention.

But officially this "vice" is not tolerated, and sodomy is punishable by death. This is in line with a society that likes to insist on its version of the truth and airbrush awkward episodes from the official record. If you look up the country's second ruler, King Saud, for instance, on the kingdom's official government website you will not be told that he was an obese, lazy, spendthrift playboy who proved so incompetent that the almost unthinkable step of deposing him was taken in order to make way for his brother Faisal. No, you merely find a bland paragraph listing his "achievements" and dates on the throne.

The Saudi government, however, cannot control coverage of Prince Saud's trial. Surprise, surprise, if you try to look it up on the website of Arab News, a Saudi-owned English-language newspaper, the closest you get is a four-day-old story about Russia commending a different Prince Saud (the king's nephew) as a diplomat. But as this fascinating article in the Atlantic shows, internet restrictions are easily bypassed by the kingdom's citizens, not least by those logging on to gay dating sites.

Prince Saud's story will soon be known. Perhaps some of those reading it will shudder, and give thanks that nothing similar happened to them — after all, they may have met him online already . . .

Sholto Byrnes is a Contributing Editor to the New Statesman
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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