The strangest bank of all

Barclays first defied the Treasury by refusing to take its money. Now it won’t join the Chancellor’s

The gathering of Barclays investors at the Queen Elizabeth II Conference Centre in Westminster on 23 April was inevitably a strange affair. At one and the same time, the bank has managed both to infuriate its investors and to win their admiration.

The patrician leadership of the bank, headed by the former dealmaker Marcus Agius (married to a Rothschild) and John Varley (who married into one of the Barclays-founding Quaker families), has fought with tooth and claw, as the credit crisis descended on the financial system, to keep HM Treasury off its back. While Lloyds Banking Group (the old Lloyds TSB plus HBOS) and Royal Bank of Scotland (RBS) have allowed themselves to fall under direct rule from UK ­Financial Investments – the arm of government set up to own shares in the semi-nationalised banks – Barclays chose a different direction. It has been a case of taking money from anyone, at any price, as long as the interference from Labour and Whitehall can be kept at bay.

The anger from long-term Barclays shareholders (the pension funds and insurance giants who dominate investment decisions in the City of London) stems from last October’s decision by Barclays to eschew an injection of cash from HMG to solidify its crumbling balance sheet, and to look overseas instead. Using a rum collection of intermediaries, including the glamorous ­financier Amanda Staveley (a former girlfriend of the Duke of York), it secured for itself £7.3bn of new capital from the ruling royals in the Gulf statelets of Abu Dhabi and Qatar. It paid an enormous price for this injection of funds, some 14 per cent at a time when official interest rates are close to zero, and in effect gave away 15.5 per cent of the bank to new investors without first asking the permission of the existing owners, the long-term City investors. It was this abandonment of so called “pre-emption rights” that cast Agius and Varley as the City bad boys who should be excluded from class. So great was the anger that the Barclays board had to reopen the fundraising, offering shares to existing investors on similar terms and promising that the bank’s directors would submit their appointment to an annual vote of approval by shareholders. This was a big extension of normal shareholder democracy.

So why did Barclays go to so much trouble to preserve its independence? It was partly about pride and partly about ambition. Barclays is unique among the big names on the high street. The bank, which traces its history on Lombard Street back to the late 17th century, was formed as a result of a series of mergers a century later, which brought together banks from the English regions controlled by wealthy Quaker families.

Even though the founders have very few shares in the modern bank, somehow over the centuries, members of the extended families have managed to pop up in the top jobs. John Varley, the quintessential English solicitor who currently holds the job of chief executive, just so happens to be married to Carolyn Thorn Pease, a descendent of one of the founding Barclays dyn­asties. It used to be said that in the chairman’s ­office at Barclays, there was a secret register that monitored the progress of family members through the bank and fast-tracked their progress. Whatever the truth, this legacy – in which Quaker names such as Tuke, Pease and Buxton, crop up over the years – is decidedly different from that of the other high street banks.

Few bankers are so gripped by history as Varley. His predecessors were forced to retreat from apartheid South Africa in 1986, where Barclays was among the biggest players, by a combination of sanctions and shareholder activism. But when the opportunity to return presented itself nearly two decades later, Varley grabbed it with both hands, spending £2.9bn in 2005 on buying Absa, the biggest retail bank in the country. The honour of his predecessors had been restored.

The second big difference and reason for Barclays wanting to stay independent is its embrace of a US-style investment banking culture. Much of the current debate about the future of banking has been whether there should be new rules that prevent old-style Captain Mainwaring bankers joining up with the “casino” bankers who caused the credit crunch. More than any other UK bank, Barclays is a combination of both.

Barclays Capital, run by Bob Diamond who pocketed a £21m salary in 2007, embraced casino banking with great zeal, turning BarCap into a powerhouse of the debt and bond markets. Indeed, it is one of the biggest players in the securitised debt market – the slicing, dicing and packaging of loans at the heart of the credit crisis. This involvement in securitised debt, including sub-prime mortgages, has cast a large shadow over Barclays, which always claims that the mortgage debt it holds is of a “better vintage” than that of its rivals.

But Diamond’s ambitions are without limit and he has seen the credit crunch as an opportunity rather than a drag on the bank’s activities. When Lehman Brothers went under last September, BarCap saw it as an opportunity and moved to buy up Lehman’s New York staff and offices at a knockdown price.

In more recent days, Barclays has been studying whether it, like RBS and Lloyds, should become part of Alistair Darling’s insurance plan for banks: the “asset protection scheme”. Under this insurance policy, the Treasury essentially takes the toxic or bad debts off bank balance sheets in exchange for a premium. Barclays looked carefully at the plan and decided that, if it did so, it would lose the freedom to lend to whom it wants, and perhaps, as importantly, set its own wages and bonuses for staff. So it has decided to stay out and soldier on.

Once again, it has chosen to sell assets to raise the capital it needs to stay independent – on this occasion iShares, part of its investment arm. It will almost certainly mean higher losses in the short term since, unlike the banks with insured toxic debts, Barclays will have to take the direct hit through its profit and loss account.

No one wants to see the return of the bad old days when bankers ran riot. But it is hard not to have a sneaking admiration for Agius, Varley and Diamond. They place the independence of their bank above all else, and are determined not to cast off three centuries of history. It’s a bold gamble that sets Barclays apart from the crowd.

Alex Brummer is City editor of the Daily Mail

This article first appeared in the 27 April 2009 issue of the New Statesman, Rise of the Geek

Getty/Julia Rampen
Show Hide image

View from Paisley: How the Conservatives are wooing Labour's Scottish heartlands

Not so long ago, Conservative activists in Paisley could expect doors slammed in their faces. A referendum has changed that.

Tony Lawler, a Labour activist, was recently knocking on doors in the Scottish town of Paisley, when he came across a disgruntled resident. “I’m really disappointed in Douglas Alexander,” the potential voter complained. “I haven’t seen him. He used to be in Morrisons.”

Douglas Alexander, of course, has gone. He was the longstanding Labour MP and onetime International Development secretary who lost his seat in 2015 to a 20-year-old rival, the Scottish National Party’s Mhairi Black. He does not plan to stand again. But when I visit Paisley, a short train ride from Glasgow, I find that memories of him linger on. 

Two years after Alexander’s defeat, I meet Lawler and other local Labour activists in Morrisons, where Alexander used to hold his surgeries. As checkouts beep and trolley wheels roll over linoleum, they point to an empty table in the corner of this hallowed ground: “He used to sit just there.”

In 2015, the SNP’s victory in this former manufacturing town seemed to epitomise the earthquake in Scottish politics. But as the Labour activists know too well, no political fortress is undefeatable. And in Paisley, the home of one of the oldest workers’ festivals in the world, the party with the most to gain is one that previously never dared to canvass in the high street – the Conservative party. 

The town the Brexiteers forgot

In 1988, the historian Sylvia Clarke reflected on Paisley’s lost industries, wondering what was next for the former weaving towns. “Paisley as a tourist centre?” she wondered, in Paisley: A History. “Paisley as a place for visitors to come to, rather than a send-out of goods and emigrants?” 

For all Paisley’s industrial decline, it’s a pretty place. The town is in the running for the 2021 City of Culture, and has the second biggest number of listed buildings after Edinburgh. When I visit in the middle of April, blossom floats on the trees, and a river meanders through a neighbourhood of old, stone houses. It takes a moment to notice weeds tightening their grasp on the window frames. When I try the door of the ancient Paisley Abbey, it’s locked.

Perhaps if Paisley had been located the other side of the border, in Sunderland or Northumbria, it would be voting Leave and flirting with Ukip. But in the most deprived areas here, Labour activists tell me the EU referendum tally was still almost 50-50, and overall the town voted Remain.

There is a view that Brexit is an English concern. “We haven’t picked up anything about the EU referendum,” says Lawler of his doorstep conversations. “What people are talking about is the independence referendum, Jeremy Corbyn and the kids’ ward.” Scotland’s health secretary, Shona Robison, is due to make a decision on whether the specialist ward should be moved to a large hospital in the First Minister’s Glasgow constituency, against the wishes of many Paisley residents. The hospital in question is nicknamed “the Death Star”.  

Another concern, reminiscent of small towns across the UK, is the decline of the high street. When I walk down the historical shopping area Causeyside Street, I find mother and daughter Kate and Linda Hancy packing up what remains of The Pattern Café and Gift Shop. The wallpaper is a glorious Paisley print, but the scented candles are in boxes and a spray soap bottle hangs from a chair. After two years of trying, they are closing down.  

“People just don’t have money to spend,” Kate says. “A lot of people have been on the same wage for more than five years.”

Linda chimes in: “The cost of living going up but wages aren’t the same. I work in a supermarket, and people come in and say ‘How did I spend this much money?’ A lot of people are paying by credit cards.”

The Hancys voted to remain in the UK, and the EU. Although they knew Alexander, they have never met Mhairi Black, and feel devolution, if anything, has made politicians less accountable. “Why are we picking 1,2,3,4,” demands Kate, referring to Holyrood's voting system, which rejected first past the post. “Why can’t we pick one like we used to?”

Without the EU to blame, the most obvious culprits for Paisley town centre’s decline are the out-of-town shopping centres, where cinemas are opening just as historical ones in town close their doors.

Gavin Simpson, owner of Feel the Groove, a new record shop, remembers the 1980s, when a new release would have shoppers queuing round the block. However, he believes the town is over the worst. (As we speak, a customer comes in to reserve such a record and cheerfully warns Gavin that “even if I ask for my money back, don’t give it to me.”)

One thriving business is the longstanding butchers, Wm Phelps. Manager James Peacock tells me it is down to the trustworthy Scottish produce, which is carefully tracked and labelled. But the business has also embraced globalisation.  After noticing a large number of South African customers, Peacock began selling boerewors and biltong.

The other referendum campaign

If Paisley has been spared the divisions of the EU referendum campaign, its “buddies” – as residents are known – are still reeling with the repercussions of an earlier referendum, that on Scotland in the UK. In 2014, the town voted for independence, although the county overall opted to stay in the UK. 

The town is home to a particularly brash strain of indyreffers, including the “Smith Commission burners”, three SNP councillors who gathered in front of the council headquarters to burn a copy of the report setting out new powers for Scotland. One of them, Mags MacLaren, went on to manage Black’s constituency office.

But if the Paisley independence movement has been well covered, less is known about its opposite - the rise of pro-unionism. 

Of the three mainstream parties opposed to independence, it is the Scottish Conservatives, with their unconventional leader Ruth Davidson, who have most effectively capitalised on the pro-union message. In the 2016 Scottish Parliament elections, the Tory Jackson Carlaw captured the West of Scotland constituency of Eastwood, which had been held by Labour since its creation. 

In Holyrood, the Scottish Tories benefit from proportional representation, which allows voters to choose a constituency MSP but also rank parties. 

According to Paul Masterton, the Tory candidate for East Renfrewshire, and the secretary of the Renfrewshire and Inverclyde Scottish Conservative Association, the Conservatives are now getting huge numbers of first preference votes, including in neighbourhoods like the suburb of Ralston, where both Black and Masterton are from. So who are these voters? Masterton describes them as “New Labour voters who were happy with Tony Blair and Gordon Brown but didn’t like Jeremy Corbyn and get tied up into knots by [Scottish Labour leader] Kezia Dugdale flipflopping on the union stance".

The 2016 election saw the Scottish Conservatives surge to second place in Scotland – a superb comeback for a party once ridiculed as being rarer than pandas. The next electoral test is the local council elections. In Paisley, even Labour activists acknowledged the Conservatives were likely to be the most notable winners.

“For a long time we simply didn’t go out in Paisley," says Masterton. "We were written off and we allowed ourselves to be written off.”

But the referendum has changed this. “What I found was that last May, people weren’t shutting the door in your face," he adds. "Once you started the conversation they were far more receptive to that.” 

Like the Labour activists, Masterton argues that the constitutional question matters more than Brexit. “When Theresa May said ‘now is not the time’, I think a lot of people across Paisley did a small quiet fist pump,” he says of a second independence referendum.  

Ironically, after the early election is called, the Scottish Conservatives do everything they can to mention the prospect. “Don't mention the 'i' word,” crows a recent press release about the “SNP indyref ban”. Davidson tweets: “Nicola doesn't want to stand on her record. She knows the country doesn't want her #indyref2.” A Panelbase survey commissioned by The Sunday Times Scotland published shortly after the early election was announced finds support for the Conservatives at Scotland at 33 per cent, 18 percentage points higher than in 2015. 

What you stand for

For now, Paisley remains a Scottish National Party stronghold. George Adams, the MSP with an office off the high street, proves elusive – Labour activists confirm his reputation as a hardworking local. Black’s aide turns down my request for an interview for similar reasons, but I bump into her that evening at a protest against cutting child tax credits in Glasgow’s George Square.

Black, an admirer of the left-wing Labour figure Tony Benn, once said she feels "it is the Labour party that left me". I ask her if she, like her Labour predecessor, holds surgeries in supermarkets. Black says she’d considered it, but given the sensitivity of some of the issues, such as benefit problems, she thought her constituents might appreciate a more private space. “The main thing that crosses the door in my offices is Universal Credit changes,” she explains. She says she has raised her concerns about the children’s ward.

As for the independence debate, she argues that the Scottish government have been “incredibly compromising” since Brexit, but adds: “A lot of folk want another chance at the question.”

Black is standing for re-election. With a majority of more than 5,000, and neither of her previous challengers in the running, she’s likely to keep her seat, even if buddies' discontent over local issues rumbles on. 

Still, as I have discovered, the 2014 referendum continues to reverberate in towns like Paisley. It has divided friends and neighbours on constitutional lines, galvanised new strains of politics, and brought a Labour heavyweight crashing down, with no appetite to return. 

The Tories believe their unionist message is enough to flip seats like East Renfrewshire, once Conservative, then Labour, and now an SNP marginal. As the SNP's shine wears off, could Paisley, with its long tradition of the left, one day follow? It no longer feels implausible. “The one thing about the Scottish Conservatives - and this is true whatever you like us or not,” says Masterton. “You know what we stand for.”

 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

0800 7318496