Lord Stephenson - dishonest or delusional?

Ex-chairman of HBOS called to account.

The Bank of England has said that the economic impact of the financial crisis was on a par with the Second World War. And the wannabe Inglorious Basterds on the Parliamentary Commission on Banking Standards continue to call to account the war criminals.

It all feels a bit like old news now… We know full well that HBOS was badly run. We know about the secret bailouts, the “spirit of optimism” that led to disaster.

This week it was the turn of Lord Stephenson. The ex-chairman of HBOS was - and still is - suave and silver-tongued. He is the kind of man who you believe when he says something like

..there was just no way we [the HBOS leadership] were encouraging a culture of excessive risk-taking.

But one committee member – Lord Lawson – wasn’t having any of it. “You are living in cloud cuckoo land,” he said.

And to remind ourselves just how risk-averse HBOS was in the lead-up to the melt-down, we should recall the story of Benny Higgins. A bona fide banking superstar, Benny Higgins joined HBOS in 2006 from RBS, where he had overseen the successful integration of NatWest into the group.

After less than two years, he left HBOS under a cloud, having presided over the dramatic reduction of the bank’s  mortgage book. With hindsight it sounds prudent and praiseworthy action. At the time, however, he was universally pilloried for presiding over such a huge loss in market share.

And in the wake of this “disaster”, silver-tongued Stephenson was there to reassure twitchy stakeholders that the bank would bounce back and regain its position in residential mortgages. Not only that, but he wrote to the FSA (a letter since published by the Commission), emphasising that HBOS was a “highly conservative institution”.

I am not aware of any lurking horrors in our business or our balance sheet. Quite the reverse ... HBOS in an admittedly uncertain and insecure world is in as secure a position as it could be.

Happy to be crossed questioned on this but I hope you know me well enough to know this is neither a bravura nor an ill considered statement.

There you are – a man in control… Confident and reassuring. A year later the bank had been merged with Lloyds and was being bailed out by the taxpayer to the tune of £17 bn.

We could rely on Lord Lawson to remind Stephenson just how much bravura there was in that statement. “Either you were being dishonest when you wrote that or, if you believed it, you were delusional,” he said.

“Spirit of optimism” at HBOS: Photograph: Getty Images

James Ratcliff is Group Editor of  Cards and Payments at VRL Financial News.

Photo: Getty Images
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How can the left make the case for immigration?

All too often, we drift into telling people we want to convince that they just don't get it.

We don’t give the public enough credit. You’ll often hear their views dismissed with sighs in intellectual circles. In fact on most issues the public are broadly sensible, most are these days supportive of cutting the deficit and dubious about political giveaways, but in favor of protecting spending on the NHS and education. Yet there is one issue where most, “knowledgeable” folks will tell you the public are well out of step: immigration. 

With [today’s] net migration figures showing yet another record high, it is an ever more salient issue. On a lot of measures ‘too much immigration’ ranks highest as the number one concern (see Ipossmori). The ongoing rise of right wing political parties across Europe demonstrates that simply enough. But concerns about immigration don’t just sit with those with more extreme views, they’re also shared across the mainstream of public opinion. Yet unlike thinking on cutting the deficit or funding the NHS the public consensus that immigration is bad for Britain, flies flat in the face of the intellectual consensus, and by that I mean the economics. 

Given the intense public debate many a study has tried to spell out the economic impact of immigration, most find that it is positive. Immigration boosts the nation’s GDP. As the theory goes this is because immigrants bring with them entrepreneurialism and new ideas to the economy. This means firstly that they help start new ventures that in turn create more wealth and jobs for natives. They also help the supply chains to keep ticking. A example being British agriculture, where seasonal workers are are needed, for example, to pick the strawberries which help keeps the farms, the truckers and the sellers in business. 

Most studies also find little evidence of British jobs being lost (or displaced) due to immigrants, certainly when the economy is growing. Indeed economists refer to such “ “they’re” taking our jobs” arguments as the “lump of labour fallacy’. On top of all that the average migrant is younger than the native population and less likely to rely on welfare, so their net contribution to the state coffers are more likely to be positive than natives as they don’t draw as much state spending from pensions or the NHS. 

So why haven't the public cottoned on? Many progressive types dismiss such views as racist or xenophobic. But it turns out this is to misunderstand the public just as much as the public ‘misunderstand’ immigration. When you study people’s views on immigration more closely it becomes clear why. Far from being racist most people asked by focus groups cite practical concerns with immigration. Indeed if you go by the British Social Attitudes Survey a much smaller number of people express racist view than say they are concerned about migration.  

The think tank British Future broadly set out that while a quarter of people are opposed to immigration in principle and another quarter are positive about it the majority are concerned for practical reasons - concerns about whether the NHS can cope, whether there are enough social houses, whether our border controls are up to scratch and whether we know how many people are coming here in the first place (we don’t since exit checks were scrapped, they only came back a few months ago). But more than anything else they also have very little confidence that government can or wants to do anything about it. 

This truth, which is to often ignored, begets two things. Firstly, we go about making the argument in the wrong way. Telling someone “you don’t understand immigration is good for our economy etc etc” is going to get a reaction which says “this person just doesn't get my concerns”. Despite the moans of progressives, this is precisely why you won't hear left leaning politicians with any nous ‘preaching’ the the unconditional benefits of immigration.

More importantly, the economic arguments miss the central issue that those concerned with immigration have, that the benefits and effects of it are not shared fairly. Firstly migrants don’t settle homogeneously across the country, some areas have heavy influxes other have very little. So while the net effect of immigration may be positive on the national tax take that doesn't mean that public services in certain areas don’t loose out. Now there isn't clear evidence of this being the case, but that could just as well be because we don’t record the usage of public services by citizenship status. 

The effects are also not equal on the income scale, because while those of us with higher incomes scale tend to benefit from cheep labour in construction, care or agriculture (where many lower skilled migrants go) the lower paid British minority who work in those sectors do see small downward pressure on their wages. 

It’s these senses of unfairness of how migration has been managed (or not) that leads to the sense of concern and resentment. And any arguments about the benefit to the UK economy fail to answer the question of what about my local economy or my bit of the labour market. 

Its worth saying that most of these concerns are over-egged and misused by opponents of immigration. Its only a small factor in stagnating wages, and few local areas are really overrun. But the narrative is all important, if you want to win this argument you have to understand the concerns of the people you are trying to convince. That means the right way to make the argument about immigration is to start by acknowledging your opponents concerns - we do need better border controls and to manage demands on public services. Then persuade them that if we did pull up the drawbridge there is much we’d loose in smart entrepreneurs and in cultural diversity. 

Just whatever you do, don’t call them racist, they’re probably not.

Steve O'Neill was deputy head of policy for the Liberal Democrats until the election.