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

Photo: Getty Images
Show Hide image

Our treatment of today's refugees harks back to Europe's darkest hour

We mustn't forget the lessons of the Second World War in the face of today's refugee crisis, says Molly Scott Cato.

In the 1930s, thousands of persecuted people fled Europe. Our own press ignominiously reported these as "Stateless Jews pouring into this country" and various records exist from that time of public officials reassuring readers that no such thing would be allowed under their watch.

With the benefit of historical hindsight we now know what fate awaited many of those Jews who were turned away from sanctuary. Quite rightly, we now express horror about the Holocaust, an iconic example of the most shocking event of human history, and pledge ourselves to stop anything like it happening again. 

Yet as Europe faces its worst refugee crisis since the Second World War we are witnessing a deafening cacophony of xenophobic voices in response to people fleeing their own present-day horror. We must therefore reflect on whether there is an uncomfortable parallel in the language being used to describe those seeking asylum today and the language used to describe Jews seeking refuge in the 1930s.

Our response to the current refugee crisis suggests we feel fearful and threatened by the mass movement of desperate people; fearful not just of sharing what we have but also of the sense of disorganisation and chaos. Does the fact that these refugees are from Syria, Libya, Iraq and Afghanistan, and so not part of our continent, provide an excuse to allow them to be bombed at home or drowned during their desperate journey to safety?

We are not helped by the poorly informed public debate which—perhaps intentionally—conflates three quite different movements of people: free movement within the EU, irregular or unauthorised migration and the plight of the Middle Eastern refugees. While our misguided foreign policy and unwillingness to tackle change may give us a moral responsibility for those fleeing famine and conflict, our responsibility towards refugees from war zones is clear under international law.

Due to our commitments to the UN Refugee Convention, the vast majority of Syrian refugees who reach our territory are given asylum but the UK has taken fewer Syrian refugees than many other European countries. While Germany admitted around 41,000 asylum-seekers in 2014 alone, the UK has taken in fewer than 7000.

The problem is that any sense of compassion we feel conflicts with our perception of the economic constraints we face. In spite of being the fifth largest economy in the world we feel poor and austerity makes us feel insecure. However, when actually confronted with people in crisis our humanity can come to the fore. A friend who spent her holiday in Greece told me that she saw local people who are themselves facing real poverty sharing what they had with the thousands of refugees arriving from Turkey.

A straightforward response to the growing sense of global crisis would be to restore the authority of the UN in managing global conflict, a role fatally undermined by Tony Blair's decision to go to war in Iraq. Our role should be to support UN efforts in bringing about strong governments in the region, not taking the misguided ‘coalition of the willing’ route and running foreign policy based on self-interest and driven by the demands of the oil and arms industries.

We also need EU policy-makers to show leadership in terms of solidarity: to co-operate over the acceptance of refugees and finding them safe routes into asylum, something the European Greens have consistently argued for. The EU Commission and Parliament are in clear agreement about the need for fixed quotas for member states, a plan that is being jeopardised by national government’s responding to right-wing rather than compassionate forces in their own countries.

Refugees from war-torn countries of the Middle East need asylum on a temporary basis, until the countries they call home can re-establish security and guarantee freedom from oppression.

The responsibility of protecting refugees is not being shared fairly and I would appeal to the British people to recall our proud history of offering asylum. Without the benefit of mass media, the excuse of ignorance that can help to explain our failure to act in the 1930s is not available today. We must not repeat the mistakes of that time in the context of today’s crisis, mistakes which led to the deaths of so many Jews in the Nazi death camps. 

Molly Scott Cato is Green MEP for the South West of England.

Molly Scott Cato is Green MEP for the southwest of England, elected in May 2014. She has published widely, particularly on issues related to green economics. Molly was formerly Professor of Strategy and Sustainability at the University of Roehampton.