Sir Fred’s return is one more sign that the storms are over — at least for now
Of course it’s too early to declare an end to the economic crisis — who knows what storms the Gods have in store for us in the autumn, not to mention swine flu — but I think we can be forgiven for feeling relatively upbeat as we head into the holiday season. The FTSE 100 index has just enjoyed one of its longest unbroken rallies of modern times. The price of copper, a useful predictor of manufacturing activity several months ahead, has been rising since February. The price of oil is more volatile than we’d prefer it to be, but as George Trefgarne explained here recently, there’s plenty more in the ground. The 0.8 per cent shrinkage of the UK economy in the second quarter was worse than most analysts expected, but much less frightening than the 2.4 per cent fall in the first quarter. Unemployment has been rising at a record rate and will carry on climbing into next year, but retail sales, car registrations and consumer confidence have all been showing signs of perkiness. Banks are not lending to corporate customers as enthusiastically as the Chancellor says they should, but he knows full well that the urgent need to reinforce the banks’ balance sheets makes that highly unlikely — and that they are a lot closer to doing business as usual than they were six months ago. Finally, ‘quantitative easing’, the Bank of England’s emergency cash- dispensing machine, looks set to be switched off this week. So let’s pack the buckets and spades with a sense of mild optimism — and come back in September to worry over whether it’s all about to kick off again.
My two-for-one RBS offer
Another recent sign of the change of mood was a sighting in London of Sir Fred Goodwin, the fugitive former chief executive of Royal Bank of Scotland. He flew in from his French exile for a lunch at Clarence House to mark the end of his six-year tenure as chairman of the Prince’s Trust — an organisation which does a fantastic amount of good work for disadvantaged young people, including helping them to start businesses, and for which neither Sir Fred nor, more importantly, his host the Prince of Wales has ever been given much credit. The word is that Fred hopes soon to be able to move his family back to Edinburgh — where their house and car were smashed up in March by vandals spurred on by Downing Street’s shameless spin campaign to make him, rather than Gordon Brown, Public Enemy Number One.
Since June, when Sir Fred agreed to hand back a slice of his giant pension cake — reducing his annual entitlement from £555,000 to £342,500, having already collected a lump sum of £2.7 million which reduced it from the headline-provoking figure of £703,000 — the heat has gone off him and the public have discovered all those expense-fiddling MPs to hate instead. And that, in turn, has distracted attention from what is in some ways the most scandalous pay deal of the lot: the £9 million-plus package awarded to Fred’s government- appointed RBS successor, Stephen Hester. This includes a base salary of £1.2 million and a fat sack of long-term incentives which, in the original version, Hester was to pick up after three years if RBS’s share price doubles in that time and the bank meets a set of performance targets relative to its competitors. Subsequently, Hester offered to defer collecting most of the swag until 2014. Much was made both of the ‘no reward for failure’ clause in his contract and of the fact that, if his targets are met, then many billions’ worth of shareholder value in RBS will have been restored to the taxpayers who now own 70 per cent of the bank. It was even said that some City institutions were concerned Hester was not being offered enough.
But in awarding him such full terms, the opportunity has been missed to set a benchmark for more moderate City pay scales, which most of us believe are essential to long-term stability in the financial sector and which will be far better achieved by self- denying examples from the top than by Sir David Walker’s proposed combination of a voluntary code, naming and shaming, and tougher scrutiny by non-execs. Hester has been called up to perform the kind of public service that in less money-driven times would have been rewarded with an unspectacular salary and a gong at the end, rather than a bonus bonanza with bells on. What’s more, if those targets really are met, it will have at least as much to do with the turn of the economic tide as with the skills of the chief executive — just as, when the pendulum of fate swung the other way, the sins of which Sir Fred was accused were made to look so much worse by the unforeseen ferocity of the credit crunch.
It’s too late now, but here’s my proposal for what Hester should have been paid until such time as RBS is fully fit for a return to the private sector: precisely £212,500 a year, which is more than the Prime Minister or a High Court judge, and happens to be the sum that Sir Fred surrendered from his pension. It’s a formula that would instantly find support among a recession-stricken public: two for the price of one.
This year being the bicentenary of Haydn’s death, I spent the weekend in 18th-century costume, impersonating the old boy as the narrator of a concert performance of his opera Philemon und Baucis in our joyful Ryedale music festival. There aren’t many jokes in this ancient tale of virtue rewarded by the Gods, but I got a big laugh when I explained, in what I imagined to be a comic Austro-Hungarian accent, why our fine young soloists Daniel Turner and Louise Lloyd were doubling up both as the honest peasants Philemon and Baucis and as their dead son and daughter-in-law, Aret and Narcissa, whom Jupiter brings back to life midway through the show. ‘Zis is not ze palace of Esterháza,’ I explained. ‘Zis is your liddle festival in ze middle of ze economische crisis.’ Here in Yorkshire, whether it’s low-budget opera or a picnic at the local agricultural show, we still know how to enjoy ourselves, whatever ill fortune the Gods may send to punish the sins of our City cousins. I hope you do too, and I wish you happy holidays.