Stephen Hester's magical misdirection: defending RBS's £5bn losses and £679m bonuses

RBS has announced losses of over £5.1bn and bonuses of £679m, after being bailed out by the taxpayer. Through Stephen Hester's sleight of hand, we are expected to believe that this has been a “chastening year” for the bank.

There is one essential ingredient to almost every magic trick: misdirection. Dangle something with your left hand, while your right pulls all manner of rabbits, bouquets, bonuses and silk handkerchiefs out of a top hat. Stephen Hester used it truly magnificently today, when he announced that RBS had posted losses of over £5.1bn, while doling out bonuses of £679m. This bonus pool is certainly not the “far lower” figure Treasury minister Danny Alexander had in mind, with commentators having predicted last month that it would be in the region of £250m.

Fret not, however. This figure is very modest, indeed the result of a “chastening year”, Hester argues, in an act that would leave Penn and Teller shaking their heads with bafflement. Modest compared to what? At which question, Hester starts pulling a number of shiny coins from behind our ears.

This figure is very modest, we are told, compared to the bonuses Barclays are expected to announce. Hang on, Stephen. Barclays is a privately owned company which has turned profit for the last couple of years. Your bonuses come directly from the money all of us stumped up to bail RBS out. What else have you got?

Oh, sorry, this figure is modest – punitive even – when you take into account that it has been reduced in order to recoup Libor-related fines to the tune of £300m. One momentito, if you please, Stev-o. Is what you are telling us, essentially, that if we compare it to an even higher and totally fictional figure, the actual figure is lower? Anything else?

This figure is modest when you compare it to last year’s figure of £800m. Sorry to interrupt again, but if one adds the £300m Libor fines, by which you claim to have reduced the bonus pool with the very specific purpose of penalising traders for manipulating the rate, then it would have been bigger than last year’s. Add to that the fact that you have engaged in a programme of redundancy of tens of thousands of employees – reducing the staff in the investment arm alone by roughly a quarter – and this must represent a real increase. Or am I missing something?

It seems that I am. The missing piece of the puzzle, as articulated by Hester, is that RBS needs to remain competitive by offering performance-related bonuses, in order to attract the best people. This includes a very competitive £2m paid to Hester himself. This view was fully endorsed by our beloved Prime Minister only today in a European context, in which, disgracefully in my view, he is gearing up to resist a move to cap bankers’ bonuses at EU level to 100 per cent of their salary or 200 per cent of their salary with board approval.

This is where reality and rhetoric disconnect – the latter flying off Hester’s outstretched finger, like a white dove. Which group of people – other than those working in the highest echelons of the financial sector – would view doubling or tripling their annual salary, after performing so exceptionally badly that the company lost over £5bn, as a snub?

This is the fundamental proposition which all this misdirection attempts flamboyantly and flagrantly to hide. At a time when millions are being made redundant all across Europe and unemployment rates hit record highs, at a time when everyone else’s salaries are being frozen or reduced in real terms (including lowly RBS staff), at a time when RBS itself, like most other banks, is laying off thousands of employees specifically from its investment banking arm – we are asked to believe that, at this time, investment banking is the only industry which is not an employer’s market.

And now turn your attention to what the other hand is doing: people being forced to work for nothing in order to maintain their basic benefits. Public servants – including the people who heal you when you are sick, protect you when you are threatened and teach your children – being told to do more with less. Tax credits vanishing for ordinary families. Benefits being capped for those being exploited by landlords. Drawn curtains. Closed blinds. Strivers and shirkers.

Contrast those two attitudes and a further policy assumption emerges. It is at the heart of everything this government is doing. While the poor can only be bullied into productivity by the threat of more poverty, the rich can only be coaxed into it by the promise of more wealth.

Perhaps we might hope for a shareholder revolt, similar to those recently observed in other large companies. Only,the one powerful shareholder in this case is the government and they have made their position clear on many occasions: it is time to stop with this banker-bashing and let the crème de la crème get on with the difficult work of losing billions and leading us into the next phase of this crisis, unfettered by regulation, decency, logic or morality.

Take a bow, Stephen Hester. Next stop, Las Vegas.

Protesters outside Royal Bank of Scotland HQ in London. Photograph: Getty Images

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

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No, William Hague, there's nothing anti-democratic about opposing Brexit

The former Tory leader appears to be suffering from a bout of amnesia. 

William Hague just made an eyecatching claim in the House of Lords during the debate over Article 50. He attacked those Remainers still seeking to restore Britain’s European Union membership in general and Tony Blair in particular, saying that if he had called on voters to “rise up” against New Labour after he lost the election, Blair would have told him to listen to the voters.

To be fair to Hague, it has been sixteen years since he went down to crushing defeat to Blair, so he may have forgotten some of the details. Happily, the full text of his resignation speech the morning after is still online.

Here’s Hague, 2001:

"The people have spoken. And just as it is vital to encourage everyone to participate in our democracy, so it is important to understand and respect the result. The Labour party have won the election and I have already congratulated them on doing so. But they have done so without great public enthusiasm….It is therefore a vital task for the Conservative party in the coming parliament to hold the government to account for the promises they have made and the trust people have placed in it.”

And here’s Blair, 2017:

“I want to be explicit. Yes, the British people voted to leave Europe. And I agree the will of the people should prevail. I accept right now there is no widespread appetite to re-think. But the people voted without knowledge of the terms of Brexit. As these terms become clear, it is their right to change their mind. Our mission is to persuade them to do so.”

And here’s Blair’s last line which has so offended William Hague:

“This is not the time for retreat, indifference or despair; but the time to rise up in defence of what we believe – calmly, patiently, winning the argument by the force of argument; but without fear and with the conviction we act in the true interests of Britain.”

This is funny, because here’s William Hague’s last line in 2001:

"I wish I could have led you to victory but now we must all work for our victories in the future.”

 Here’s what the “you lost, get over it” crowd have to explain: what is the difference between these two speeches? Both acknowledge a defeat, acknowledge the mountain to climb for the defeated side, but resolve to work harder to secure a better result next time.

It’s particularly galling when you remember that taking Britain back in would not require a second referendum but a third: because the Brexiteers, far from losing in 1975 and getting over it, spent four decades gearing up to take Britain out of the European Union.

There’s a more valid criticism to be had of the value of a continuity Remain campaign which appears to hold many of the people who voted to Leave in distaste. Certainly, at present, the various pro-Remain forces look more like the unattractive fringe that lost in 1975 than the well-disciplined machine that won the replay in 2016. But the fact there was a replay in the first place shows that there’s nothing anti-democratic about continuing to hold on to your beliefs after a defeat. What is anti-democratic is trying to claim that the result of any electoral contest, however narrow or how large, means that everyone who disagreed with you has to shut up and pretend you were right all along. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.