Political sketch: committee round two and beyond

Four dull, suited men take to the stage; eyes now turn to Leveson.

Those who had seen Murdoch the Movie were always going to be disappointed by the sequel. No Capo di tutti capi, no Consiglieri, and certainly no Momma with Attitude. Just a box, and someone called Pandora.

The House of Commons has played host to a number of memorable women in recent years: Maggie's friend Tina, Gordon's inamorata Prudence; but Pandora may turn out to be the best remembered of all. She comes in many guises and chose yesterday to be portrayed as four rather dull men in suits who share one thing in common: they all used to work for Rupert, his boy James, and a close friend called Rebekah.

The venue was Portcullis House and the same room where but a few short weeks ago the Murdochs and Co. appeared in front of MPs from the Culture, Media and Sport committee to deny all knowledge of the industrial scale phone-hacking going on at the News of the World; not to mention confusing facts like News International paying convicted criminal and former reporter Clive Goodman £240,000 to go away after his sentence, and continuing to pick up the legal bills of equally convicted non-employee Glenn Mulcaire.

It was these matters and others which brought former senior execs, ranging from the Head of HR to the Legal Manager of NI, in front of the committee to cast light on the darkness and end the confusion.

Basically, the MPs wanted one questioned answered: Was James Murdoch right when he said he had no knowledge that the scandal which has so far led to 15 arrests involved only Goodman. After three and a half hours of forensic questioning, MP Louise Mensch (chick-lit novelist Louise Bagshawe, as was) summed it up thus: "It's a clear as mud".

To be fair to the not-so-famous four, they seemed willing to give the right answers but you were never sure all the members of the committee were going to ask the right questions.

The first two out of the traps were the HR man, Daniel Cloke, and ex-Director of Legal Affairs, Jon Chapman, who both had obviously decided on the "no recollection" defence. Mr Chapman got a laugh out of admitting he came to be News International's legal man after cutting his teeth at Enron.

No one asked them why they had so recently quit the employment of the Murdochs, and when they left after an hour Pandora wondered why she had bothered to turn up.

But the one that the MPs wanted to let loose on was still to come. The wonderfully named Tom Crone was the News of the World's legal backstop for 20 years until he, too, found himself at home permanently, as the hacking and bribery scandal reached out to the highest echelons of the empire.

Mr Crone was accompanied by the only ex-Murdoch employee happy to be there: the last editor of the News of the World, Colin Myler, who enjoys the pleasure of having been working abroad when his predecessors Rebekah Brooks and Andy Coulson were at the helm. Myler also had the pleasure of ten minutes notice when Brooks told News of the World employees the paper was closing, but she was staying.

Mr Crone was clearly not popular with the committee and spent most of the next two hours staring down at the table in front of him, as if praying it might morph into the Tardis and whip him off.

Instead, he sweated his way through 120 minutes revealing little gems such as Andy Coulson wanting to give Clive Goodman a job back at the News of the World after his prison sentence, and that he got his quarter of a million pound pay off out of "compassion"; a word clearly much bandied about at the News of the World. He admitted that giving £450,000 to Professional Football Association Chief Gordon Taylor was "large", but that it wasn't to buy his silence.

But had James Murdoch been right when he told the committee in July that he had never been told there was anyone other than Goodman involved in phonehacking? Not so, said Tom Crone. There was "clear evidence" that hacking went further, and that was why the Taylor case had to be settled:

We had to explain the case to Mr Murdoch and get his authority to settle, so clearly it was discussed.

An hour later, James Murdoch said he stood by his original testimony, which is "an accurate account of events". Meanwhile, down the road Lord Leveson made the first moves in his inquiry into just how bad things were in the Street of Shame. He invited interested parties to apply to be "core participants"; willing to provide evidence.

A host of newspapers immediately said they would; apart for the Mail and the Mirror. The Mail can't yet, because editor-in-chief Paul Dacre is still on holiday.The Daily Mirror said it would not be seeking to testify before the inquiry.

Pandora just smiled.

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

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