Mark Field is MP for the Cities of London and Westminster. Follow him on Twitter.
As MP for the City, I have never slavishly defended the level of rewards in financial services which are often disproportionate and, in the current climate of austerity, seen to many as ludicrously out of balance (click here). Nevertheless, the unedifying spectacle of politicians jumping on the banker-bashing bandwagon this weekend, suggests that most cannot resist pandering to the very worst instincts when it comes to debating the bonus awarded to Stephen Hester of RBS.
For sure, such opportunistic grandstanding may reflect the current mood of the general public (at least insofar as collective opinion can be gauged) but I firmly believe the role of politicians must be to lead public opinion rather than to play to the lynch mob mentality that has been whipped up by the media.
Stephen Hester was brought in as a trouble shooter to run RBS after it crashed. Given the mess left behind by Sir Fred Goodwin, and his handsome rewards for failure, it was understandable that Mr Hester might expect a remuneration package that would reflect the mighty challenge of dealing with an organisation that had previously posted Britain’s largest ever corporate loss. As a result, the overall financial package was geared to attract someone of his calibre – indeed he had previously been Chief Executive of British Land on a financial package that dwarfed the sums currently the subject of such fierce controversy.
In total, £45 billion of taxpayers’ money was sunk into RBS at the time of its rescue in autumn 2008. The share value of the bank is now worth around one third of that sum. We need to protect our investment with the best talent to ensure that RBS is put on a sustainable path towards privatisation.
It is often asserted that because the taxpayers own 83% of RBS that it is effectively in the public sector. Nothing could be further from the truth – the government’s share in this bank is held on trust and we have aspired, until now at least, to give RBS the freedom to operate in the highly competitive global banking sector.
Whilst it is true that the share price has fallen by 35% over the past twelve months, this reflects general sentiment towards banking shares as well as the painful process of restructuring that Stephen Hester has led. Whilst this has resulted in significant redundancies, it has also been designed to make RBS far less risky (and as a result less potentially profitable) and put it firmly on the road to recovery.
While I suspect no UK government will be able fully to divest itself of our stake in RBS for at least another decade, it is only through such restructuring that we might not only recover our investment but possibly even enhance its value over the coming years. The lynch mob vilification of Stephen Hester (which has included details of his private life being plastered all over the newspapers in recent days) will only help dissuade potentially talented people from taking on this key task in the years ahead. Indeed I should be surprised if Mr Hester subjects himself to another year of the unwarranted and unpleasant scrutiny that he has had to put up with in recent days.
In short, we have a stark choice here. Either the government leads the way in making the case for protecting our £45 billion investment in this bank, which we so sorely hope to get back in due course. Or alternatively the only other logical option is that we write-off the entire sum pumped into RBS and from now on run it as a public utility headed by a civil servant on an established grade salary. It seems to me that those who have jumped on the band wagon in recent days may yet win a pyrrhic victory if we are forced down this latter path.