The Chancellor…everything up his sleeve
There have been some severely misleading statements in the media about Royal Bank of Scotland (RBS) over the last few days – on both sides of the Pond. Some of this is down to the usual hack idleness and gullibility; but rather more of it was a campaign of carefully assembled spin and distraction. Most of these have emanated from George Osborne.
The ‘Cabinet discussion about Nationalisation’ chatter
This was simply far too convenient to be a coincidence. With a decidedly dodgey set of results due in three days time, the N word was leaked. But note also in the leaks: “George Osborne is thought to be against the idea”. The Chancellor was the source of the leak: it was his less than subtle way of suggesting he’s The One True Tory left…and capable of getting tough with banks when needs be.
Partly too, this is a struggle for supremacy between LibDem Business SecretaryVince Cable, and Tory Chancellor George Osborne. By setting these imaginary hares running, Osborne has quite specifically distanced himself from a daft idea like nationalising the rest of the bank: but knowing that people are acquainted with Cable’s desire to do just that, most observers assume it’s Vince’s idea.
Further, Osborne’s loan guarantee scheme has been a flop. Bankers still aren’t lending to small and medium-sized business: given the way the economy is flatlining, Osborne needs a success. He needs to get banks lending again: hence all the guff about “exasperation” with bank lending policies: what better way to scare banks into lending than threaten to start nationalising them?
All well and good, but Draper Osborne is a long way from stupid, and one of the better chess-players at Westminster. Barclays is pinned down by a major scandal, and the wobbly nature of Lloyds/HBOS is gaining broader dissemination. Tough times are ahead on toxic debt, and by far the most exposed British Bank is the one the Treasury owns four fifths of: RBS.
OK, it wasn’t 80% acquired on the Chancellor’s watch. But that’s not the way it works in politics – and since the Conservatives came to power, things have got worse there, not better.
Distraction to support the ‘RBS in recovery’ myth.
RBS CEO Stephen Hester indicates that the taxpayer-backed lender is still “being hit by toxic assets” (as if they’d flown in through the window rather than having been acquired by the bank itself) yet has “achieved an important milestone” by repaying all the Government loans given to it during the credit crisis.
But all that bears little relation to reality. The trend data on losses are catastrophic: £399m in 2010, £766m in 2011, and now £1.5bn in the first half of 2012 alone. Some recovery. And the bank still owes the British taxpayer £46.6bn in relation to the price of buying its shares. The software ‘glitch’ is also being put forward by slippery Hester as causing the ‘setting aside of £125m’, and thus a major calamity over which RBS had no control. Bollocks: that sum is for customer costs and claims. What we need to grasp is that this cost is minute – under 0.02% of the glitch windfall, which was in the region of £80bn – effectively, a below-the-radar bailout. Regulars at this site will know that I had profound doubts about the reality of ‘the glitch’ from the start.
The sudden introduction of a ‘full nationalisation’ issue just four days before the results announcement was classic Blairite distraction. (And don’t kid yourselves: for all his empty promises of eschewing spin, Camerlot is more addicted to it than New Labour was). A bit of suitable bank-bashing, talk of a crackdown, good background to Osborne’s latest lending wheeze….and any rubbishing of LibDem nationalisation notions plays well with Malcolm Brady’s 1922 troops.
As for the nationalisation threat itself, it is too risible for words. Coalition leakers were claiming earlier in the week that the major motivation for considering full nationalisation was “exasperation at its inability to persuade RBS to lend more money to business”. Please, please can we all wake up? The Government already owns 82% of the bank, a stonking voting majority. WTF difference is buying the other 18% going to make?
And so by Thursday, we were all turning to the Treasury pinstripes for confirmation or denial. The final tick for me was that, by and large, there was much “playing down” of the story…as if those beastly journalists had been at it again, inventing all kinds of nonsense. Yet again, this is standard procedure.
“Osborne is a clever young man,” said a former Treasury grandee to me on the phone this morning, “but he is in love with intrigue for the sake of it.”
Correct. The extraordinary thing about these machinations (and my old Treasury chum is right, wee George revels in them) is that they are doing him no good at all: a poll earlier in the week among Tory activists showed that exactly 0% of those contacted saw him as a viable next Party leader. And ultimately, nothing will be able to distract from the one Big Issue Osborne cannot dodge: structurally, the economy is too lopsided and eurocentric to bounce back….and woefully unsufficient to keep an overcrowded island in work.
We have New Labour social engineers and the Scottish Gold trader to thank for this awful situation. But like I say, politics doesn’t work like that: this is here, Osborne is now, and pretty soon this Coalition is going to be history.