Just to recap then, the Royal Bank of Scotland went bust because of the gambling culture that had developed in the financial services industry. This came about because of deregulation in the late 1980s – at the time it was called The Big Bang. Little did we know at the time just how prescient that phrase was – 20 years later, after a massive speculative bubble developed in global markets, The Credit Crunch happened in 2007 when the Financial sector in the US and Europe went into meltdown and we are all paying for it now and into the future.
The Government stepped in and saved RBS from going bust to the tune of £26Billion – effectively we bought a huge amount of debt which had been run up by financiers gambling on things like loans to poor US families to buy houses they couldnt afford, loans which were bound to go bad.
RBS’s value is now half what it was when the Government bought its stake. RBS Boss Stephen Hester presided over this halving of value, but it’s not his fault – he is just trying to clear up the awful mess left by Sir Fred Goodwin.
Hester has now decided, under some pressure, to forego his £1M annual bonus. RBS chair Sir Philip Hampton has also indicated he will not take this year’s £1.4M bonus. They aren’t alone – the bonus culture is at the core of RBS – a state owned bank, as much as in any other city business.
The Government argued that it could not intervene because if the UK’s financial sector did not provide financial packages which were competitive with the rest of the world, there would be a mass exodus of talent. This argument is trotted out elsewhere too – Chancellor Osborne, in his autumn statement, argued that he had to provide a £250M subsidy to energy-hungry industries because otherwise they would leave the UK and go to….China?
As the FT put it
“We are not going to save the planet by shutting down our steel mills, aluminium smelters and paper manufacturers,” the chancellor said. “All we will be doing is exporting valuable jobs out of Britain,” he added, warning against burdening business with “endless social and environmental goals”.
The language echoed comments made by Mr Osborne last month, when he told the Conservative party conference that “we’re not going to save the planet by putting our country out of business”.
That has led directly to the current review of the Habitats Regulations, which is happening at breakneck speed (and presumably the quality of the review will reflect that celerity) in order to prevent any more developments being impeded by pesky newts, bats or dormice.
And just the other day my MP and Cabinet Office Minister Oliver Letwin was reported as having suggested that, since the NPPF fiasco had worked out so well , why not condense all of England’s wildlife, countryside, pollution and waste regulations and legislation down to 50 pages too? I can think of a few choice words of reply, which I will be imparting to Mr Letwin next time I see him at his constituency surgery. Perhaps you could help me with some suggestions!
So there you have it – the Government’s position in a nutshell: we must get rid of regulations (such as those that protect the environment and inter alia human health and wellbeing) because they are stopping economic growth; and we must pay the financiers as much as they demand in case they go elsewhere and do such a good job in one of our competitor countries.
After all, de-regulation of the financial sector worked so well didnt it?