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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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle