Royal Bank of Scandal Reaches New Low

The Tomlinson Report into the practices at the Royal Bank of Scotland, compiled under instruction from Vince Cable's Business Department, has been passed to the Financial Conduct Authority we read this morning. It will apparently demonstrate that the bank that we saved and which we own, had gone beyond being parasitical on the businesses of this country to actively working to destroy them and profit from their demise. It has long been clear that the financial sector in this country is sucking the lifeblood out of our economy, but the fraudulent nature of RBS's business activity takes us to a new level of revulsion.

Since the crisis of 2008 banks have found it more difficult to generate huge profits that were possible at that time. They have looked for ever more ingenious ways to exploit their customers which has given rise to a continuing tale of scandalous mis-selling, first selling insurance against potential redundancy to employees who did not need it, then selling financial products known as swaps to small businesses who had no need for them or understanding of them.

But the latest scandal to be revealed in the Tomlinson report is another step down the ladder into the slough of public opprobrium. It relates to one part of the bank known as the Global Restructuring Group (GRG). RBS's customers who got into difficulties paying back their loans were sent to this part of the bank apparently to receive help with turning their businesses around. Instead they were deliberately charged high fees so that they would become bankrupt, enabling the bank which had inside information to be the first on the scene to pick up their assets cheap. This is a shocking allegation that will now be investigated by the Financial Conduct Authority that has received a detailed report on the activity from the Business Innovation and Skills Department.

It has been clear for years that the banking sector in the UK is pernicious and not serving the real economy, but to find that it is actively working to destroy the small businesses that we need for our economy to thrive is another shock. It undermines yet again the suggestion that what we need is a change of culture in banking. What we actually need is significant structural reform and a much stronger role to be played by politicians in controlling what is possible in this most important sector in a capitalist economy.

Here is a simple idea which I have suggested before but which seems particularly relevant today: the Royal Bank of Scotland should be broken up and turned into a system of local community banks on the model of the German banking system which has done so much to support their Mittelstand - the layer of small and medium-sized enterprises that is the engine of the German economy. Each local bank could include local business people and others with an understanding of local economic needs on its board. It could still lend at interest but do so in a way that served its local economy and built its resilience rather than actively destroying businesses.

That a bank would work to undermine its customers for its own advantage is shocking and probably fraudulent, but that this activity would be undertaken by a bank that owes its existence to public support and is 80% owned by the public is, quite frankly, unbelievable. Of all the politicians who have been in a position to act on the disasters of the British banking system, Vince Cable has been the most disappointing. He clearly has the knowledge about how to do the right thing so we can only assume that he does not have the power within the coalition. Let us hope that this latest and most shocking scandal gives him the authority to take the action our small businesses so desperately need.

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Will the UK Abandon its Climate Targets?

During the past year we have seen the painful exposure of the political strategy of a party that has thrived by promising all things to all people. Now that the Liberal Democrats have had their bluff about coalition government called, we see both their opportunism and their political incompetence exposed to full view. This is by turns hilairious and tragic for the party but leaked documents about cabinet splits over climate change policy suggest that it may soon prove tragic for the country and the world. These documents suggest that the Tory government, in its desperate drive for growth, is seeking ways to avoid the strict carbon dioxide emissions targets enshrined in law by the previous Labour government.

The Climate Change Act, which became law in November 2008, was a recognition that climate change is too important an issue to be left to the vagaries of the electoral cycle. It included two important provisions. First, 'a legally binding target of at least an 80 percent cut in greenhouse gas emissions by 2050, to be achieved through action in the UK and abroad. Also a reduction in emissions of at least 34 percent by 2020. Both these targets are against a 1990 baseline.' To remove the temptation to avoid these strict targets the bill also established a Committee on Climate Change, with a particular remit to ensure that the law was being respected.

It would appear that this committee is becoming nervous about a battle within the cabinet over the tension between the CO2 emissions reductions and the desire to reboot the destructive growth cycle. This follows the leak of a letter from Business Secretary (and ex-chief-economist at Shell) Vince Cable to Energy Secretary (ex-anti-nuclear, ex-merchant banker) Chris Huhne. Cable challenged the Committee's attempts to reduce CO2 emissions as a threat to economic growth.

The fact that the CCC is leaking to the press is a sign of how serious the situation is. This is hardly a radical green outfit: the list of its members indicates the usual selection of ex-business and conventional science establishmentites. But they find themselves at the sharp end of the tension between pro-growth economics and the climate reductions the human race needs. The battle-lines are drawn and the issue will be decided at the cabinet meeting on Monday.

The evidence of this fight at the very heart of government makes it clear that climate change emerges from a structural problem within the capitalist economic system, as green economists have long argued. Both sides in this current spat are right: we must have CO2 emissions, but we cannot have CO2 emissions. The only was to resolve this apparent impasse is to ditch the 19th-century economic paradigm we are still suffering for the ideas of green economics that Caroline Lucas has called 'the economic paradigm for the 21st century'.
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A Budget for Growth or a Balanced Budget?

The voices of capital have been flooding the airwaves for some time with their demands for the budget. We already know that this will be 'a budget for growth' aka a budget that refuses to accept the planet's limits and permits a tiny elite to profit at the expenses of other species human and otherwise. So what can we expect to see from this 'budget for growth'? As Simon Jenkins points out, it will be the bankers, corporate bosses and corporate investors who will decide. His mockery of the so-called Project Merlin, headed up by Barclays boss John Varley is right on target. From spivs to wizards in a few short months.

A 'budget for growth' can be interpreted as a 'budget for business'. Vince Cable weakness was made clear by the secret recordings of his boasting to constituents: vanity. His speech at the Mansion House on 3rd March demonstrates a similar tone, together with an unpleasant attempt to cosy up and laugh off his former critical line with both bankers and business.

Cable identifies his central task as finding a way 'to strengthen a framework in which the private sector can grow the economy out of its current problems', which neatly addresses the deficit problem while ignoring the more fundamental environmental problems. The 'animal spirits' of our entrepreneurs are to be unleashed, while capital is to be encouraged to be more mobile than ever, a clear demonstration of the highly pro-capitalist nature of liberal economic policy. This also applies to its policy towards exercising social control over business. Far from the tyrannical opponent of corrupt business we have been led to expect, Cable undertakes to 'fight damaging regulatory impositions from the EU like the Working Time Directive'.

Perhaps most damaging of all, the speech contained a clear suggestion that the countryside would be thrown open to heedless profit-driven development in a desperate attempt to restore economic growth without regard to the environmental cost. We can expect to see Osborne's Economic Enterprise Zones being given special dispensations, since the underlying logic is one of growth at any cost.

For the first budget from the greenest ever government one would expect a genuinely balanced budget, that is to say a budget that prioritised the need to balance our demands with the planet's limits. This is the real balancing that is required, alongside a rapid shift away from the emphasis on finance and towards encouraging real production in the sectors required for the transition to a low-carbon future.

A policy to bring about this balance would be one that matched the money banks take out of the economy through bonuses with money invested in the sustainable economy. New legislation to equate annual windfall taxes with the amount banks allocated to bonus and other incentive payments could free two birds from one cage: putting a downward pressure on excessive salaries while generating revenue for investments in the public good.
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Gilts and Boars

Now that our national strategy of using finance to energise the economy has been seen so spectacularly to fail, the favoured option of the pro-capitalist, pro-globalisation ideologues is to follow the export-led growth model. Hence our Business Secretary Vince Cable, together with the Prime Minister and several other cabinet members, has headed off to China to advertise what real products we have to sell. The wares as advertised are a motley collection with a resonance of the Sunday-morning car-boot sale. Much of what is on offer, from randy pigs to shit treatment, is distinctly unglamorous. We can only assume that there are major arms deals behind the scenes to justify the cost in sparse sterling and carbon emissions.

Vince Cable has drawn attention to three items which make it intensely challenging to take seriously the Coalition's claim to be the greenest ever government: Jaguar cars, tourism, and education. The environmental impact of encouraging China to consume more in these three areas is deeply disturbing. Latest World Bank Figures show that only 22 people in every 1,000 in China own a car, compared with 463 in the UK. To you this is a relief; to Jaguar it is the biggest market opportunity in the world. You can almost hear them salivating.

In my own sector, education, the encouragement of Chinese students to learn in the UK represents an alternative to supporting our own students in higher education. But the environmental consequences are equally stark. Each return flight a Chinese student takes creates around 5600 kg of CO2, some five times the annual limit under the Contraction and Convergence framework that the Liberal Democrats apparently support. Many of our students travel home and back more than once in a year.

The composition of the trade delegation is also unsurprising. According to the Washington Examiner, the businessmen on the trip include executives from Royal Dutch Shell PLC, Tesco, Barclays bank and Diageo. This is a recovery strategy designed by corporations to serve corporations. Little help here for the struggling small business in a provincial town.

China's dominance in material production is recent; its contribution to spiritual wisdom is ancient and still valuable. Here, in the words of Lao Tzu, Cameron might acquire some strategic guidance:

'When rulers take action to serve their own interests,
Their people become rebellious;'

Verse 75, Tao Te Ching


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Limiting Educational Aspiration

The blizzard of policy announcements since May has been quite bewildering. Journalists and academics are reeling at the pace of change, and much of what is being proposed seems both illogical and inconsistent. In my own area, that of higher education, the aim of the policy seems fairly clearly: to reduce the number of young people going to university. Raising fees from £3,000 to £7,000 or more is not a funding measure but a rationing measure.

The Telegraph headline may read 'too many middle-class students at university' but is not very informative until we have a clear idea of what 'middle class' means. As the cuts proceed it appears to be the very concept of 'middle class' that is being squeezed. Perhaps we could have a more informed debate if the sociologists who used to explain to use what class meant had not all been removed from their posts during the 1980s Thatcherite purges.

Clegg argues that tuition fees led to an unfair system of admissions; the Lib Dems graduate tax would ensure social mobility. The actual policy has focused on cutting costs, so the 'too many students' part stuck but the graduate tax was lost. Two posts in a row citing Clegg unfavourably might be considered unfair, but he has foolishly allowed himself to be the fall-guy for the coalition's policies. It's a small step from 'too many middle class students' to 'too many students', and naive Nick has done the Tories dirty work for them.

For those who missed the announcement because they were looking down a Chilean mine, and to those whose minds cannot accept it and are still asking 'eight-teen per cent?', let me repeat here that the policy proposed by the erudite Lord Browne is that the teaching grant should be cut by 80%. In future the government will only subsidise medicine, science, engineering and modern languages degrees. The sorts of courses we need our thrusting businesspeople to be equipped with, which is unsurprising given that Browne and Cable (who will implement this policy on behalf of the coalition) are both veterans of the corporate oil industry.

The savings that will result from this reduction in funding a civilised society is £3.5bn. In comparison with the size of the bailout this seems like a drop in the ocean. Corporate pressure has already diminished the standards of education in our universities; this will convert them into external training departments for the globalised business elite. As well-qualified young people who choose to enter employment rather than university displace their less well-qualified contemporaries unemployment rates are sure to rise, bolstered by the cohorts of university teachers whose skills will no longer be required. The savings will be cancelled out but this does not mean the policy is misguided, since its aim was always political rather than economic.

The Browne Review promised to ask searching questions about what our universities are for, but none of the most important questions were considered. How might our cleverest citizens prepare society for the transition to a low-carbon economy? How do we balance the interests of business and citizens in determining curricula? How might universities be models of transition institutions, rather than following an export-led growth model of education?

These questions were not asked because Lord Browne already knew the answer to his own question. Our professors are required to work in the service of business and to prepare a new generation of serfs to do likewise. Critical thinking is off the menu: the new paradigm will be developed elsewhere. Tweet

Lies, Damned Lies, and Economic Statistics

The Chancellors debate was even more disappointing that I had anticipated. Perhaps I should be thankful that we were in the middle of a digital switchover debacle so the wise words of Alistair and friends were lost in an analogue wilderness somewhere between the Wenvoe and Mendip transmitters.

There were several examples of mislabelling that George Orwell would have been proud of. First, the idea of a debate, which surely should involve some element of fundamental disagreement, honestly explored, and with progress towards a resolution? What we saw was rather a performance, each man presenting a show of confidence that his obvious nerves revealed as dishonest. Each offering defensive responses intended to maintain face. The underlying premise of the debate was that capitalism works, an assumption that flies in the face of the financial catastrophe of the past few years, not to mention the environmental crisis that has been accelerating throughout the past several decades. Without this question being put, the whole event was revealed as a charade.

Then there was the fact that it was called 'Ask the Chancellors'. This seems to chime with the widely held, although deeply misguided, notion that believers in the catechism of neoclassical economics have anything useful to tell us about sorting out the economic mess we're in. These are the guys who learned this orthodox faith at university: it is hardly likely that they are going to be the ones to trace the path towards a stable and sustainable future.

Meanwhile the masochist of the year competition continues. Our three would-be chancellors are now wishing to match their prowess against Madame La Guillotine herself: putative Iron Chancellors competing with the Iron Lady. This is an embarrassing public display of posturing that does nothing to address the question of how we protect the vulnerable in our society in a situation where the economic system we have signed up to has allowed the money they have earned and the value they have created to be stolen from them.

All three must have seen the figures that will confront the person who actually walks into 11 Downing Street on May 7th. The graph illustrates how The Economist sees the situation (it illustrates the ratio of debt to GDP for a number of countries). These data were derived from World Bank sources. They seem to bear little resemblance to what the UK is reporting to the EU and offer no justification for the singling out of Greece for a particular beating by the foreign exchange markets. Given that these figures do not include either our private debts or our off-balance-sheet debts, it is a miracle that the pound is still trading at all Tweet