Category Archives: Alistair Darling

Long gone are the days of budget purdah, when the Chancellor would cloister himself away for weeks on end prior to emerging from No 11 clutching his red box.   Ken Clarke brought an end to that tradition.

However, no budget in recent years has been more heavily trailed than this year’s, which is also the latest in recent memory.  You can read about it here and here and here.  And if you want to see the Chancellor making a brave pre-budget face of the downturn, you can view his viral YouTube video here.

All this authorised leaking has been done for one very good reason: you get the electorate used to the idea of bad news, rather than hit them with it on budget day.  So when Alistair Darling announces the £15 billion “efficiency savings” (not spending cuts, you understand), the £160 billion public sector borrowing, and the estimate of a decade to sort out the public finances, it won’t seem too bad.

Instead, attention will be focused (Labour hope) on the metaphorical rabbit Darling pulls out of the hat on budget day.  There’s bound to be one, at least; there always is.  Expect some apparent largesse for pensioners or some funny business with tax credits.

But remember what happened when Gordon Brown announced the 10p tax band in his 2007 budget.  Hailed as a triumph by his back benchers, who waved their order papers in immoderate glee, it was later shown to be an enormous con when the Red Book was examined.

That’s the way it is with Labour budgets; there is always a legion of devils in the detail. 

And this year, given the bombed-out state of the economy, it is likely that the Chancellor will be obliged to be even more creative than usual.

The historian Thomas Babington Macaulay once remarked that: “We know no spectacle so ridiculous as the British public in one of its periodical fits of morality.”

That was very much my reaction when I read the following pronouncement delivered yesterday by our august Prime Minister to the Scottish Labour party conference in Dundee (and what a fun event that must be):

“Only government can make the markets work in the public interest and not their own interest.

“We believe that markets need not just money men but morals, that being fair matters far more than being laissez-faire and that banks must always serve the public, not just serve themselves.”

“Being fair matters more than being laissez-faire” has a nice, alliterative ring to it; on the other hand, so did “British jobs for British workers”, and look where that landed the Prime Minister.  No doubt some No. 10 backroom boy burned the midnight oil very late to craft that particular piece of New Labour humbug.

Politicians who talk of morality are setting themselves upon a pedestal that is frequently rocky and unstable.  So, indeed, it is in the case of this Government.

Was Labour acting in the strict public interest and not its own, for example, in urging Lloyds Bank to take over HBOS, with its panoply of toxic assets, just when it was staring defeat in the face at Glenrothes?   Was Alistair Darling entirely altruistic when, at the same time, he “made it very clear” to Lloyds that the headquarters of HBOS should remain in Edinburgh (for whose South West constituency he just happens to be MP) after the takeover?

And what of Adair Turner’s revelation that the Government applied pressure to the FSA to regulate companies like HBOS with a “light touch” and to avoid being “heavy and intrusive”?  Was that an example of stern Labour financial probity?

The more one looks at Labour’s stewardship of the economy over the last twelve years, the more examples one finds of the way they have used the system for their own unalloyed political ends.   Morality has had precious little to do with it.

The trouble with humbug, as Gordon found out with “British jobs”, is that it tends to stick in your teeth.   He should have learned to avoid it by now.

Gordon Brown, it would appear, has rejected the advice of Alistair Darling and other cabinet colleagues and refused to take the opportunity, on his visit to the United States, to apologise for the deficiencies of the financial regulatory system put in place under his Chancellorship.  

According to the Telegraph: 

he defiantly believes that the problems were unique and were not the fault of the system he put in place and presided over while at the Treasury for a decade.

The difficulty for Mr Brown is that increasingly few people share his view.  Last week, Adair Turner, the chairman of the FSA, told the Treasury select committee that the Authority had been subject to political pressure to apply a non-intrusive “light touch” in regulating the financial sector. 

Today, John Kingman, head of UK Financial Investments, the company that represents the taxpayer’s interests in the quasi-nationalised banks, also appeared before the Treasury Select committee and was equally critical.  To quote the Telegraph:

He told the [committee]: “There are issues around how the Treasury and the regulator identified problems.”

When asked whether he was reluctant to admit that the system that Labour put in place in 1997 had been a massive failure, he replied: “I don’t think I am massively reluctant.”

It is becoming increasingly obvious that Labour were guilty of encouraging a lax style of regulation on the part of those whose responsibility it was to be alert to the very problems that have manifested themselves in the British financial sector.  Certainly, the sub-prime problem began in America, but the British institutions were insufficiently rigorously regulated so as to minimise the impact of the economic tsunami when it hit the UK.

 Brown positively encouraged the boom and was, equally, content to tolerate (to quote Adair Turner) “a style of regulation and a philosophy in regulation which was, in retrospect, mistaken.” 

And of course Brown won’t apologise.  It’s not in his nature.  He wants to be seen with Obama bestriding the world that he, personally, has saved.   

The word “sorry” doesn’t figure in his vocabulary.

In an intelligent article in this morning’s Telegraph, Jeff Randall points out that Fred Goodwin has been set up as an Aunt Sally (albeit a very highly remunerated one) in an attempt by the Government to shift attention from the dog’s breakfast it is making of the British economy:

If the inappropriately named Goodwin did not exist, the Government’s Department of Propaganda would need to invent him. By casting Sir Fred as the pantomime villain – the credit crunch’s Dick Dastardly – the unholy trinity of Gordon Brown, Alistair Darling and Lord Mandelson has been able to deflect attention from Labour’s calamitous stewardship.

The Prime Minister in particular has been brazen in threatening Sir Fred with court action to retrieve a pension package that was signed off by the City minister, Lord Myners. This is grandstanding of the cheapest kind. Sir Fred’s deal is obscene, but that does not make it illegal. Mr Brown understands this, but is desperate for the searchlight of public opprobrium to be shifted away from the unfolding debacle in Downing Street. Ironic, isn’t it, that having destroyed Britain’s private pension system with a tax raid which, grossed up over 12 years, has snatched about £100 billion from personal savings schemes, the Prime Minister is now keen to preach on pensions and justice.

It’s good to see the professional political commentariat at last latching on  to what the blogosphere has been pointing out since the Goodwin pension story broke: that the affair has all the hallmarks of a diversionary campaign engineered in Downing Street.

Randall, however, has homed in on the real issue:

Last week’s £325 billion insurance scheme for RBS’s toxic assets is hopelessly flawed, according to Professor Willem Buiter, a former member of the Monetary Policy Committee. He estimates that it will cost the taxpayer £100 billion. That is three times the annual defence budget. Let’s hope that our children and theirs have a strong work ethic, because they will be paying for the profligacy of this Government long after it is booted out.

Goodwin’s pension settlement is undoubtedly repugnant, but far worse is the Government’s persistence in treating the British people as malleable, bovine idiots.

And an important question, which assuredly will be answered in due time, is: who are the “authoritative sources” who leaked details of Goodwin’s pension to the BBC’s Robert Peston, who broke the story last Wednesday, the day before Darling’s statement to the House on the RBS bail-out?

The saga of Fred’s wedge has heated up nicely during the day.

Lord Myners, the minister who is under fire for apparently sanctioning the payment of Fred Goodwin’s pension, is said by Downing Street to have been “misled” by “senior figures” at Royal Bank of Scotland into believing that the settlement was an unavoidable contractual obligation.

Gordon Brown says that he “shares the public anger” at the size of the pension and is “considering every legal means at our disposal” to get some of it back.  I have to say I’d be intrigued to know what “legal means” the PM has in mind, but no doubt all will be revealed in the fullness of time.  And even if there is no means of getting the money back, at least it’s good to know that the Prime Minister is really, really cross about it.

Even John Prescott (remember him?) has waded in.  Appearing on this morning’s Today programme, the former Deputy Prime Minister said that the Government should take steps to stop payment of Goodwin’s pension:

“The feeling is so enormous: the taxpayer has rescued them. There is billions of pounds involved.

“He’s not entitled to this kind of pension – who knew about it or not, you can investigate that later. I believe [we should] take it off him and let him sue in the courts.”

All this sound and fury from Labour looks fairly obviously coordinated.  The Government realise that there is enormous public disquiet – no, anger – at the appalling mishandling of the banking crisis and the monumental public liability it has created.  Fred Goodwin and his pension are, so far as many are concerned, the last straw, a tangible distillation of everything that has been done so badly and gone so wrong. 

So the Government are using Goodwin as chaff, in an attempt to divert public opprobrium away from themselves.  Turn Fred the Shred into a hate figure, they calculate, and perhaps people will forget that it was the Government who really cocked up by agreeing to pay him in the first place.  (And how exactly did it come to pass that details of the pay-off leaked out into the public domain on the very eve of Darling’s statement to the House on RBS?)

The tactic is unlikely to work.  George Osborne correctly identified the issue in the House yesterday:

Whichever way one looks at it that obscene pension is unacceptable and the Government are on the hook. Either they did know and failed to act or they did not know and failed to ask the right questions. It is a totally irresponsible use of taxpayers’ money.

Put simply, the Government is totally stuffed on the Goodwin pension issue.  They have fouled up and at least one head may roll.  Myners would at present appear to be the most obvious candidate for sacrificial lamb,  but some may ask whether Alistair Darling, whose Treasury was responsible for conducting the manifestly deficient due diligence, should himself be facing the chop. 

Indeed, given how dreadful Darling looked yesterday, he might welcome the happy release.

A faltering performance by the hapless Alistair Darling yesterday, when he told the House about the Government’s plans to pump a further £25 billion into Royal Bank of Scotland and insure up to £325 billion of its toxic assets.  MPs were unimpressed, and made their displeasure plain.

The greatest anger was reserved for the £693,000 per annum pension which Sir Fred Goodwin, the bank’s chief executive, is currently enjoying at the tender age of 50.  Although, in the scheme of things, Sir Fred’s £17 million pension pot may seem small beer when incomprehensibly enormous figures are routinely tripping off ministers’ tongues, Members clearly viewed the issue as emblematic of the whole gross, egregious foul-up.

Darling was challenged by George Osborne as to whether, as Stephen Hester, RBS’s new chief executive, had asserted on yesterday’s Today programme, Goodwin’s pension had been agreed with the Government:

Finally, on excessive bonuses and rewards for failure, once again the Chancellor has promised there will be none. Yet this morning he said in his radio interview that he learned only a very short time ago that Sir Fred Goodwin was paid off with a £650,000 a year pension funded by the taxpayer. However, the new chief executive, who was on the same radio programme, said that the deal was negotiated with the Government. Who exactly in the Government knew about that deal? Will the Chancellor answer the claims that Fred Goodwin’s departure was delayed so that he could secure that pension? Whichever way one looks at it, that obscene pension is unacceptable and the Government are on the hook. Either they did know and failed to act or they did not know and failed to ask the right questions.

Darling’s response was stumbling:

The hon. Gentleman mentioned the remuneration of Fred Goodwin. It is beyond doubt that most people find it hard to understand, given what has happened to RBS, that such an enormous pension can be paid from the age of 50. Let me explain the position. First, the agreement was not negotiated by the Government; nor was it approved by the Government. Nor would it have been-[Interruption.]

Mr. Speaker: Order. Let the Chancellor of the Exchequer answer.

Mr. Darling: The agreement on remuneration-the pension arrangements-of employees of a bank is a matter between the employee and the board of directors. Last autumn, we were told that there was a contractual agreement between the bank’s board and Sir Fred. We previously understood that his pension arrangements were an unavoidable commitment, but we did not know-we became aware of it only very recently-that the decision of the previous board of RBS to allow Sir Fred to take early retirement had the effect of increasing his pension entitlement, and that that might have been a discretionary choice. We did not know that and, on finding out-[HON. MEMBERS: "When?"] Last week, actually. It became clear that the matter may have been a discretionary choice. When we found out, I asked United Kingdom Financial Investments, which holds the shares, to discuss with the new board of the bank whether there was any scope for clawing back some or all the pension entitlement, and whether the board made the decision in full knowledge of the facts. That investigation is going on at the moment.

Darling’s palpable discomfiture almost made me feel sorry for him.  He is clearly deeply unhappy in his job, and unsurprisingly.

This morning, the issue of Goodwin’s pension is exercising the media mightily.  Gordon Brown is apparently threatening to sue, although the basis of his action is unclear.  On Newsnight last night, John McDonnell was calling for primary legislation to sort the issue out.

Fred’s wedge has all the hallmarks of a story that will run and run, causing still more damage to this unhappy, discredited Government.

The issue of the Lloyds – HBOS merger rumbles on, with revelations by Adair Turner, chairman of the FSA, that:

• HBOS could have been rescued with financial help from the Government and without merging with Lloyds; and
• both the FSA and the Treasury had known, from “stress testing” analysis carried out last October, that HBOS was heading for losses of the magnitude disclosed last week.

The disclosures will certainly put more pressure on Gordon Brown, who intervened in the merger to an extraordinary degree. 

And not only on Mr Brown.  Readers will recall that the HBOS rescue took place against the backdrop of the Glenrothes by-election, called after the death of the Labour MP, John MacDougall, on 13 August, 2008.  The election was held on 6 November, when Labour retained the seat with a remarkable and unexpected majority of 6,737.   Alistair Darling also put in his fourpence worth during the campaign, pleading for as many Scottish jobs as possible to be saved after the merger, and “making very clear” that HBOS’s HQ should remain in Edinburgh.

Mr Darling is MP for Edinburgh South West.