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Economy
On the eve of the G8 meeting chaired by Silvio Berlusconi in Italy, Gordon Brown warned against international complacency as last month’s mood of cautious optimism faded completely. The Prime Minister fears the world will sink into a second recession. His views are shared by Nicolas Sarkozy and the two leaders displayed an unusual show of unity at a press conference in France ahead of the meeting. The prime minister’s five point plan to the G8 summit to boost growth was well received with the Guardian reporting he was once again back in his element in a manner not seen since the G20 summit held in London in April.
Confidence has also been dented by comment from the head of the International Monetary Fund, Dominique Straus-Khan. He told the World Trade Organisation that revival could only come once the banks cleaned up their balance sheets. Nor has it been helped by the national Institute of Economic and Social Research’s forecast that GDP will drop by 0.4% in the three months to June. Manufacturing output fell unexpectedly in May by 0.5% as did the housing market, according to figures released by the Halifax. According to government statistics unemployment has also hit a 14 year high at 7.6%. The jobless figure climbed to 2.38m, although the number of people claiming benefits was smaller than expected.
Not surprising, perhaps, that stress levels and alcohol consumption are rising too during the recession, according to the Chartered Institute of Personnel and Development (CIPD). It has teamed up with the Department of Health to produce a guide for HR professionals on running alcohol awareness campaigns with their employees.
Pay, reward and regulation
In the face of the prevailing economic gloom public indignation has once again been fuelled by news of excessive pay deals and fraud. RBS (never far from the headlines) attracted the opprobrium of the Treasury in the person of Lord Myners in the UK, as well as caustic comment from financial pundits in the US. Both condemn the £9.6m remuneration package awarded to new chief executive Stephen Hester who replaced Fred Goodwin. The package is made up of £1.2m in pay, up to £2m in non-cash bonuses and up to £6.4m in incentives.
In February Mr Hester told the Treasury Committee: “I do think banking pay in some areas of the industry is way too high and needs to come down and I intend us to lead that process.” He clearly has a short memory. A view shared by Roger Lawson of the RBS Shareholders Action Group who said: “It is absolutely outrageous that the government does not use its power to bring the remuneration of bankers in these companies down to a reasonable level. Do they need to pay him this much to make him work harder?” A comment which echoes Jeroen van der Veer, the Shell boss, who stepped down as chief executive last month saying: “You have to realise if I had been paid 50% more I would not have done it better. If I had been paid 50% less then I would not have done it worse.”
RBS is not alone in provoking public outrage against the banks. Goldman Sachs has announced a record profit of $3.44 billion with bonuses to match, which prompted the Guardian to pose the question: “Is Goldman Sachs a blood sucking vampire squid?”. Controversy continues to surround the merger of Lloyds and HBOS, a deal brokered by Gordon Brown which wiped billions of the Lloyds’ share price and caused the resignation of its chairman, Sir Victor Blank.
Disquiet also surrounds reports that the Serious Fraud Office will decide whether a criminal investigation should be launched into the collapse of MG Rover, as the government delayed publication of the inquiry report.
Meanwhile Alastair Darling provoked controversy with the unions by refusing to rule out a public sector pay freeze, as did BA who asked its 40,000 staff to work without pay for up to a month in what the chief executive called its “fight for survival”.
The BBC has not escaped public censure either, as the corporation’s finances were closely scrutinised after the release of the expenses paid to its senior executives. It was revealed that its top executives had spent more than £363,000 over five years (including a £1,277 trip on a private jet). Mark Byford, the deputy director, and Alan Yentob, the arts and creative director, have the two biggest pensions in the public sector: Mr Byfoot’s pension pot is worth £8m while Mr Yentob’s stands at £6.3m.
This is even more galling considering that the BBC will have to cut millions of pounds from programme budgets to fill an estimated £2 billion black hole in its pension fund.
Criticism about the waste of public money at the BBC continues with the news that 420 staff covered the British Open while 324 (including Andrew Marr) were sent to T in the Park, the Scottish Rock Festival. Publication of the BBC’s annual report also revealed that more than 400 employees received more than £100,000 p.a. with Sir Michael Lyons, Chairman of the BBC Trust, earning £213,000 last year, 30% up on the previous year.
In the face of such a fierce political backlash it is not surprising the Chancellor’s proposals for tougher regulation of the banks were received with a degree of scepticism. Alastair Darling claimed that the long-awaited Treasury White Paper would give the FSA the powers to deal with risk taking in bank and penalise misconduct while encouraging competition.
Opposition shadow chancellors were not impressed. George Osborne described the reforms as “a totally inadequate response to the financial crisis” and announced a conservative government would return supervision of the financial institutions to the Bank of England. Vince Cable for the Liberal Democrats said: “This is not so much a White Paper as a blank paper. Mr Darling should have used this opportunity to assert his authority over the banks – instead he is maintaining his passive role. No doubt there will be champagne corks popping all over the City this afternoon…”. Sadly he is probably right, as it seems increasingly difficult to impose the worthy reforms of the Turner Review.
NHS training
Amidst rising public concern about the severity and numbers infected by swine flu a leaked memo has revealed doubts about the NHS’s ability to deal with a national pandemic. Earlier this month the Times published a less sensational but no less worrying account of training deficiencies in the NHS. It followed a parliamentary inquiry into the advances in genetic medicine. The Lords Science and Technology Committee called for a new White Paper and warned that the NHS needed to improve genetic testing and the training of doctors and nurses if the full benefits in patient care were ever to be achieved.
Education and graduate unemployment
The latest unemployment figures reveal that the under 25 age group are the worst hit, with unemployment leaping to a 16-year high of 726,000 young people. The outlook for those graduating this year seems particularly grim, so much so that it is reported there has been a big increase in graduates returning to university despite widespread fears about student debt.
