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Introduction
Property values rose by 0.9% in March, the first time since 2007. According to the Nationwide Building Society the average house price is £150,946, providing an optimistic note in the early spring sunshine. Businesses, however, continue to struggle as banks refuse credit, and the jobless total hit a 12-year peak. The Office for National Statistics indicates that the number of unemployed has risen above two million for the first time since 1997. In the three months to January there were 2.03 million out of work, an unemployment rate of 6.5%.
Banking – pay, performance and regulation The G20 Summit G20 demonstrations Young workers, apprentices and the minimum wag
Large organisations are looking for alternatives to redundancy: Jaguar Land Rover has reached a deal with its staff to implement a four-day-week and a year-long pay freeze; BT froze pay for its 100,000 workforce; Thomson Airways’ pilots have agreed to take a 5% cut to avoid compulsory redundancies. Undoubtedly it is the small business sector that has felt the bank squeeze most keenly as an estimated 85 small companies collapse daily.
Yet other signs show that the economic situation might at least be stabilising, with the worst of the recession behind us. The month ended with the apparently largely peaceful G20 summit hosted by Gordon Brown in London’s Docklands, which promised a new trillion dollar stimulus to the global economy.
The culpability of bankers continues to grab the headlines and fan the flames of public outrage. Much of it centres on the Royal Bank of Scotland (RBS) and its erstwhile chief executive Sir Fred Goodwin, and not just on his obscene pension. Tales of quite extraordinary extravagance at the bank’s Edinburgh headquarters emerged and were widely reported in the Times and the Sun. An anonymous whistleblower, a former employee, described a “culture of greed” in email correspondence with Vince Cable, deputy leader of the Liberal Democrats. According to the Guardian the Labour peer Lord Foulkes joined Dr Cable in writing to Lord Turner, the chairman of the Financial Services Authority (FSA) asking for a full enquiry into the abuses at RBS.
With exquisite timing the new board of RBS was then forced into a massive PR offensive in the week leading up to the shareholders’ annual meeting on 3 April. Sir Philip Hampton, the current chairman, called for an “end to public flogging” and in a statement ahead of the meeting, he said “…only a tiny minority of staff in RBS were in any way responsible for the major credit market losses we suffered in 2008” and “the majority of staff are not fat cats or city slickers. They work in branches, call centres and offices in every community in the country.”
There were even reports that Sir Fred was considering a request put to him by Sir Philip Hampton to reduce his £16.7m pension. The angry shareholders were not impressed. They formally voted against the bank’s pay and pensions policy, some even demanding that the entire former board of directors should be held collectively responsible and sent to jail. It seems unlikely that RBS will accept their demands on the basis that the damage has already been done. A small number of the G20 summit demonstrators took more direct action however smashing windows and breaking into the RBS building on Threadneedle Street which rather mysteriously was the only building in the area not to have been boarded up. The fallout does continue to damage reputations: first Lord Myners and now Sir Peter Sutherland, the Chairman of BP. As RBS announced they were consulting with the unions to cut up to 4,500 UK jobs, there was mounting criticism by investors of the role he played in his former job on the remuneration committee at RBS in approving Sir Fred Goodwin’s pension.
The long-awaited Turner Review of global banking regulation arrived just in time to form the basis for discussion at the G20. It was at the height of the financial crisis in October last year, that Gordon Brown first commissioned Lord Turner, FSA Chairman, to investigate the failures in regulatory control in world banking. The exhaustive 126-page report looks at what went wrong and how to put it right, as well as the wider issues of global markets and liquidity in international banking.
The report calls for greater controls on banks and a halt to the massive profits made over the last decade. It blames behavioural and cultural factors rather than high level bonuses, and concludes that excessive risk taking was systemic as well as due to reliance on over sophisticated mathematics. It observes somewhat astutely that “dominant executive personalities have a strong tendency to believe their own strategies”, as we observed in last month’s training news. The FSA has also produced an initial draft code on remuneration policy to be followed by a consultation exercise. The new code establishes key principles about risk management. Foremost among them is that “firms must ensure their remuneration policies are consistent with effective risk management”, and that “remuneration should reflect an individual’s record of compliance with risk management procedures, rules and appropriate culture as well as financial performance”. Well hurrah for the fact that at last we have a clear recognition of previous failings in risk management, but obviously the FSA and the UK cannot operate in a vacuum and must achieve international consensus.
The G20 summit hosted by Gordon Brown at the ExCel Centre in London’s Docklands promised to deliver just that. Before leaving for the Strasbourg NATO summit Barack Obama hailed the summit a historic success, saying the G20 leaders had agreed "unprecedented steps to restore growth and prevent a crisis like this from happening again". Gordon Brown claimed: “This is the day that the world came together to fight back against the global recession”, while even Nicolas Sarkozy (whose attempts to upstage the other leaders had been largely frustrated) was mollified, admitting: “Frankly to tell you the truth all of this goes beyond what we could have imagined.”
The communiqué promised a $5 trillion fiscal stimulus with $1.1 trillion of additional resources, plus a raft of regulatory controls, new reforms of the global banking systems, including hedge funds and other parts of the “shadow banking system”, tighter regulation for credit rating agencies, a list of tax havens to be published immediately and sanctions to be deployed against countries that do not comply with anti-secrecy regulations. Commenting in perhaps more measured tones, Brendan Barber, General Secretary of the TUC, said: “Of course there are still gaps in the communiqué, progressive voices have not carried the day on every issue and vital issues such as climate change have been put off to the Copenhagen conference. But agreements reached today, if carried through, should offer hope to the millions around the world whose lives have been so badly hit by the global slowdown.”
Although the summit appeared to pass off peacefully with the police able to contain violent demonstrations, complaints have since surfaced of over-zealous policing preventing peaceful protest. These culminated with the Home Secretary Jacqui Smith asking the Independent Police Complaints Commission (IPCC) to conduct an urgent enquiry into video footage of Ian Tomlinson, a man who died after being shoved to the ground. A New York fund manager recorded the footage which showed Mr Tomlinson, a street vendor, walking away from the police on his way home. He gave it to the family who he believed “were not getting any answers”. The Liberal Democrats are now demanding a criminal inquiry. The party’s justice spokesman, David Howarth, said the footage showed a “sickening and unprovoked attack” by the police.
Russell Brand also continued to court controversy with his somewhat bizarre behaviour outside the Bank of England during the G20 demonstration. He turned up apparently disguised wearing a beanie, sunglasses and a bandana, and attracting huge attention from the press pack that followed him. He appeared vague as to why he was there saying: “I hope today will send a message that things need to change. I’m glad to be a part of this and hope the leaders of the world are listening to us” before sinking into such incomprehensible utterances as “I wonder what alternatives there are and I think it makes people cogent of them. I think it is also very beautiful”.
His timing was as ill-considered as always: the demonstration coincided with Ofcom’s, the media regulator, highly critical report of the BBC. Ofcom fined the BBC £150,000 over the lewd phone calls Brand and Jonathan Ross made to the actor Andrew Sachs about his granddaughter Georgina Baillie on Radio 2 on 18 and 25 October last year. The fine is one of the largest the BBC has ever paid and condemned the broadcast as “gratuitously offensive”.
Interestingly, like the Turner Review, the report also concentrates on risk management and failures of regulation. Ofcom’s Stewart Purvis told the BBC the incident had come about because of “underlying flaws” in BBC systems. He commented: “When the BBC decided to outsource the programme to an independent production company, it didn’t put in place what we call compliance systems, in other words, ways of staying within the rules. The executive producer of the programme was a senior figure in the agency which represented Russell Brand, and a line producer was loaned by the BBC to the production company, of which Russell Brand is one of the owners.” He added there was no one at the BBC who was “absolutely in editorial control of the whole process”. Commenting on Brand’s interests Ofcom noted “…they had been given greater priority than the BBC’s responsibility to avoid unwarranted infringements of privacy, minimise the risk of harm and offence and to maintain generally accepted standards.”
At its Young Members Conference in Eastbourne on 27 March the TUC called on government to end low pay for young workers by paying the adult minimum wage at 18 years rather than at age 22 as it is now. It also wants to scrap the exemption from the minimum wage rate for apprentices.
The recession is certainly affecting young people disproportionately and a number of celebrities have been speaking out in their support. The redoubtable Alan Sugar continues his advertising campaign, urging employers to take on apprentices during the recession, as his hit series The Apprentice 2009 returned to our screens. He told People Management: “We will come out of this. These apprentices are your investment and your managers in five years’ time. If you have trained them properly they will be meaningful members of your staff.”
Despite Opposition claims that the government would miss its expansion targets, Sugar said he was confident that it would reach the 35,000 places this year. He did admit to a degree of caution as far as SMEs and specialist technical areas were concerned when apprentices could represent a “false economy”.
The Sunday Times reports that the famous vacuum cleaner inventor James Dyson is distinctly miffed at the Skills Secretary John Denham’s preference for Dragons’ Den television star Peter Jones’ scheme to set up an academy for enterprise over his bid for an engineering academy in Bath. The Telegraph, however, places a slightly different interpretation on the story, blaming his failure to secure the funding on the notorious impracticality of engineers.
Jamie Oliver has also been doing his bit for the cause of young people. During the G20 the celebrity chef employed a team of eight apprentices from his restaurant Fifteen to cook a “Best of British” menu for the visiting heads of state. Commenting on his website www.jamieoliver.com he said: “We did it, the dinner went really well! I was so proud of the apprentices as they really held it together…It was an amazing night and I managed to have a few laughs with the guests as well…One the highlights of the night was that I got to meet President Obama and his wife, which was such a thrill for me”. Somewhat invidiously an article on this in totalessex compares Oliver’s laudable performance at the G20 with that of another famous Essex man, Russell Brand.
Finally, Alan Titchmarsh has backed the government’s Green Apprentices scheme announced by Margaret Beckett on 24 March. Yorkshire’s Alan Titchmarsh apparently trained with Ilkley Council as a green apprentice. This gave him the chance to start his highly successful career in horticulture and TV gardening. The £1m scheme will be administered by 47 local councils who will invite horticulture students of all ages to take on traineeships to improve their skills.
