Leaders: RBS bonus retreat a potential watershed for banking sector

IN OPTING to forgo a £960,000 bonus payment, RBS chief executive Stephen Hester has acted wisely if tardily – and put his own senior staff in the firing line.

Can it be right that he foregoes his bonus while senior executives under him continue to receive theirs? And for the banking sector as a whole, is this a watershed moment when public outrage has finally broken the “bonus as normal” culture?

In austerity Britain, bank bonuses are an explosive public issue unlikely to go away. In normal circumstances, the remuneration of company executives is not, and should not be, the business of government. This is a matter that should be left to companies, their directors and their shareholders. We also note that Mr Hester’s proposed bonus was not spuriously arrived at, but was within the terms of an agreement reached with the government of the day some three years ago. On this narrow definition, Mr Hester had reason to feel entitled to a payment the terms of which had long been agreed.

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But the position of RBS is not at all that of other quoted banks. And these are by no stretch normal circumstances. The bank is owned 83 per cent by the UK taxpayer, in whose name the government mounted an extraordinary rescue operation in 2008. The bank is still heavily dependent on that support. As for circumstances, these are quite different from those envisaged when that agreement was made. While Mr Hester has made good progress in deleveraging the bank, wider context matters.

Recovery in the bank’s operations has not turned out as many had envisaged. Shares in RBS fell by almost 40 per cent last year due to a combination of adverse circumstances, including a substantial charge over the group’s involvement in Payment Protection Insurance. There is no question of a resumption of dividend payments. And a return of the state shareholding to private ownership looks as far away as ever.

Context has indeed changed in other respects. Many of the bank’s public shareholders are poorer than they were three years ago. Austerity is squeezing household budgets. Here leadership requires restraint by example. But the state, as 83 per cent shareholder, exercised no force majeure or applied sanctions on the board. Rather, it was a move within the RBS board itself – the decision of chairman Sir Philip Hampton at the weekend not to take up his entitlement – that left Mr Hester isolated and exposed. A Labour threat to force a Commons debate and vote added further pressure. But Hampton pulled the rug.

As for RBS executives, any move to award the head of its investment banking division a bonus as if nothing has happened would reignite the row. So this does look to be a watershed moment for RBS if not yet for other banks. But here the slump in corporate activity is already taking a heavy toll on staff numbers across investment banking. Thousands are losing their jobs – a force majeure no bank can now avoid.

University figures mask underlying problem

ON THE face of it, the latest figures on university admissions which show a 1.1 per cent fall in the number of Scots applying for universities north of the Border, compared to a decline of nearly 10 per cent for prospective students in England hoping to study south of the Border, vindicates the Scottish Government’s refusal to introduce tuition fees here.

It was no surprise then that this was exactly the point made by Michael Russell, the education secretary, when commenting on the release of the statistics. It was equally unsurprising he won support from the National Union of Students, which campaigned successfully against the imposition of fees.

However, a closer examination of the figures suggest both Mr Russell and the NUS should spend a little less time in self-congratulatory back-slapping and consider the long-term consequences for Scotland, particularly of the large rise in the numbers of EU students who are studying here for free, under the same terms as Scots. It has always been a concern that European students would be treated better than students from the rest of the UK, something the Scottish Government claims it regrets and blames on the adoption of fees by the Westminster coalition.

But there is a further reason for concern as the EU undergraduates are a drain on the Scottish public purse, with Mr Russell still nowhere near being able to introduce “management fees” similar to those levied in Ireland on EU students. Unless this can be resolved, and there is little sign the EU can be persuaded to allow what would be “back door” fees, the future financial security of Scotland’s universities must remain uncertain.

Persuasive case for broadcasting devo-max

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JEREMY Peat, the BBC’s former national governor for Scotland, has called for viewers north of the Border to be offered an alternative to “England-only” stories shown in UK-wide bulletins. It is certainly frustrating to see items on Westminster health and education policy covered in considerable detail without even acknowledgement of the fact that the content does not apply to Scotland. He also calls for more BBC devolution to Scotland. His remarks will be widely welcomed, albeit with reservations.

It would certainly enhance viewer experience if items, together with video footage, were not so regularly repeated between the UK-wide and Scottish news bulletins. And on too many occasions the same commentary and video footage is carried over into Newsnight Scotland. Such duplication cannot always be avoided. But it need not be quite as pervasive as it is.

It would also have been heartening to hear Mr Peat speak out against the imminent loss of two BBC Radio Scotland news programmes – Scotland at Ten and the Saturday morning news review. Both are high quality discussion and analysis programmes devoted to Scottish matters. Radio still has a vital place in broadcasting. With a critical referendum on the future of Scotland now on the horizon, this is surely not the time to be losing this output.

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