Will John Vickers listen to Mervyn King?

Bank of England governor says it's time to separate retail and investment banking.

In his City and Finance column in this week's magazine, Alex Preston examines the annual results recently announced by two of the banks part-owned by the British taxpayer, Lloyds and Royal Bank of Scotland. Of RBS's announcement of an operating profit of £2bn in 2010, Alex says this:

The bank's chairman, Philip Hampton, described this as a "step change", a claim validated by the £7.4bn operating profit in the "core" businesses - the day-to-day retail, corporate and investment banking units. The drop in investment banking income (down 30 per cent from 2009) and rise in corporate and retail profits (up 65 per cent) are a sign that RBS is returning to what made it great in the first place - old-fashioned high-street and business banking.

Alex ends his column by looking forward to the recommendations of the Vickers commission on banking, which is due to report to George Osborne in the autumn, and wonders what impact a possible break-up of the banks or the separation of retail from investment banking would have on RBS's share price - this at a time when staff of UK Financial Investments are racking up the air miles canvassing possible buyers for the bank.

A fascinating interview by Charles Moore with Mervyn King in today's Daily Telegraph suggests that the governor of the Bank of England is hoping that Vickers will recommend far-reaching structural reform of the banking industry:

I quote to him the recent remarks of Stephen Hester, the chief executive of the largely publicly owned RBS, in which he seemed simultaneously to say that RBS should pay little tax because it had made little profit, but also that it should pay big bonuses because its investment arm had made big profits. Wasn't there some sort of contradiction? Mr King nods. The remark illustrates, he says, the clash between the needs of high-street banking and the ambitions of investment banking. The key question, in his view, is not why an individual bank says it needs to pay bonuses (the reason cited is always the need to keep talent), but: "Why do banks in general want to pay bonuses? It's because they live in a 'too big to fail' world in which the state will bail them out on the downside." They are tempted to excessive risk and excessive payments: "It is very unproductive to single out individuals. Bankers were given incentives to behave the way they did. That's what needs to change. We must resolve this problem." He has high hopes that the independent banking commission will do so. In the Governor's mind, this is not ultimately a technical but a moral question. It goes to the heart of whether people are ready to accept life in a free economy.

Will Vickers listen?

 

Jonathan Derbyshire is Managing Editor of Prospect. He was formerly Culture Editor of the New Statesman.

ELLIE FOREMAN-PECK FOR NEW STATESMAN
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Craig Oliver, Cameron's attack dog, finally bites

A new book reveals the spiteful after life of Downing Street's unlikely spin doctor.

It must be hard being a spin doctor: always in the shadows but always on-message. The murky control that the role requires might explain why David Cameron’s former director of communications Craig Oliver has rushed out his political memoirs so soon after his boss left Downing Street. Now that he has been freed from the shackles of power, Oliver has chosen to expose the bitterness that lingers among those on the losing side in the EU referendum.

The book, which is aptly titled Unleashing Demons, made headlines with its revelation that Cameron felt “badly let down” by Theresa May during the campaign, and that some in the Remain camp regarded the then home secretary as an “enemy agent”. It makes for gripping reading – yet seems uncharacteristically provocative in style for a man who eschewed the sweary spin doctor stereotype, instead advising Cameron to “be Zen” while Tory civil war raged during the Brexit campaign.

It may be not only politicians who find the book a tough read. Oliver’s visceral account of his side’s defeat on 24 June includes a description of how he staggered in a daze down Whitehall until he retched “harder than I have done in my life. Nothing comes up. I retch again – so hard, it feels as if I’ll turn inside out.”

It’s easy to see why losing hit Oliver – who was knighted in Cameron’s resignation honours list – so hard. Arguably, this was the first time the 47-year-old father-of-three had ever failed at anything. The son of a former police chief constable, he grew up in Scotland, went to a state school and studied English at St Andrews University. He then became a broadcast journalist, holding senior posts at the BBC, ITV and Channel 4.

When the former News of the World editor Andy Coulson resigned as No 10’s communications director in January 2011 because of unceasing references in the press to his alleged involvement in the phone-hacking scandal, Oliver was not the obvious replacement. But he was seen as a scandal-free BBC pen-pusher who exuded calm authority, and that won him the job. The Cameron administration, tainted by its association with the Murdoch media empire, needed somebody uncontroversial who could blend into the background.

It wasn’t just Oliver’s relative blandness that recommended him. At the BBC, he had made his name revamping the corporation’s flagship News at Ten by identifying the news angles that would resonate with Middle England. The Conservatives then put this skill to very good use during their 2015 election campaign. His broadcast expertise also qualified him to sharpen up the then prime minister’s image.

Oliver’s own sense of style, however, was widely ridiculed when he showed up for his first week at Downing Street looking every inch the metropolitan media male with a trendy man bag and expensive Beats by Dre headphones, iPad in hand.

His apparent lack of political affiliation caused a stir at Westminster. Political hacks were perplexed by his anti-spin attitude. His style was the antithesis of the attack-dog mode popularised by Alastair Campbell and Damian McBride in the New Labour years. As Robert Peston told the Daily Mail: “Despite working closely with Oliver for three years, I had no clue about his politics or that he was interested in politics.” Five years on, critics still cast aspersions and question his commitment to the Conservative cause.

Oliver survived despite early wobbles. The most sinister of these was the allegation that in 2012 he tried to prevent the Daily Telegraph publishing a story about expenses claimed by the then culture secretary, Maria Miller, using her links to the Leveson inquiry as leverage – an accusation that Downing Street denied. Nevertheless, he became indispensable to Cameron, one of a handful of trusted advisers always at the prime minister’s side.

Newspapers grumbled about Oliver’s preference for broadcast and social media over print. “He’s made it clear he [Oliver] doesn’t give a s*** about us, so I don’t really give a s*** about him,” a veteran correspondent from a national newspaper told Politico.

Yet that approach was why he was hired. There was the occasional gaffe, including the clumsy shot of a stern-looking Cameron, apparently on the phone to President Obama discussing Putin’s incursion into Ukraine, which was widely mocked on Twitter. But overall, reducing Downing Street’s dependence on print media worked: Scotland voted against independence in 2014 and the Tories won a majority in the 2015 general election.

Then came Brexit, a blow to the whole Cameroon inner circle. In his rush to set the record straight and defend Cameron’s legacy – as well as his own – Oliver has finally broken free of the toned-down, straight-guy persona he perfected in power. His memoir is spiteful and melodramatic, like something straight from the mouth of Malcolm Tucker in The Thick of It. Perhaps, with this vengeful encore to his mild political career, the unlikely spin doctor has finally fulfilled his potential. 

This article first appeared in the 29 September 2016 issue of the New Statesman, May’s new Tories