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Thursday, 26 February 2009

The Goodwin pension saga explained

Gordon Brown says he did not know details of Sir Fred Goodwin's pension. George Osborne says the Prime Minister's claim is "pathetic".

Alastair Darling says Goodwin should give up his pension. Sir Philip Hampton, who draws two salaries at Sainsbury’s and RBS, and no doubt has generous pensions accumulated from his time at Lazards, British Steel, BG, BT and Lloyds TSB, wants Sir Fred to think about giving up his £ 693,000-a-year pension from RBS.

Sir Fred said he would think about it, probably hoping he could keep thinking about it until everybody else has forgotten about it. Darling has admitted that the government could have stopped Sir Fred getting his pension, and could have prevented him from drawing it at age 50 rather than 60, but had failed to do so. Osborne said Darling's position was "pathetic" as well.

According to Darling "Lord Myners spoke to Sir Fred and put it to him quite simply - do you not think it is right to forego this. You cannot justify these excesses." Maybe not, thought Fred, but he doesn't have to justify them, so Darling added "We are exploring with RBS, and with lawyers what can be done".

Sir Fred has since realised that he won't get away with the money just by kicking the ball into the long grass, so he has said he isn't giving anything back. Referring to the fact that he has foregone 12 months pay and some share options which at the time were worth very little and probably even less now, Sir Fred says he has already "made a gesture", and if he is asked to do more he will probably make another gesture.

It is, however, customary these days that when asking for £ 325 billion of government guarantees on top of £55 billion of equity contribution, in the process of offering his resignation, a managing director should expect to forego any future salary, so Sir Fred's gesture was unneccessary. That RBS should have allowed him to "make a gesture" was surely a question of good manners on their part. Indeed in earlier times a knight such as Sir Fred might have been expected to fall on his sword, although back in the times when knights wore swords they had never heard of billions or trillions, let alone lost that much.

Sir Fred has written a letter telling the Treasury that ministers agreed to the pension deal. In response, city minister Lord Myners has said he was not aware at that time that the deal could later be altered. "That doesn't make sense," you might think. And you would be right. It doesn't make sense because a deal is a deal so it can't be altered.

So why say it? Probably to confuse the media, because it looks like Myners was trying to waft smoke over the fact that he had discussed and agreed the pension with Goodwin. He was also covering for his boss, who almost certainly knew about the deal, because when Sir Fred stood down from RBS, Darling announced that he (Sir Fred) had waived his contractual entitlement and had decided "to do the right thing".

If it was the "right thing" then why does Darling think it is not the "right thing" now, or was he wrong before? Anyway, Osborne should come out and say that Myner's position is also "pathetic", just like Darling's.

Labour MP John McFall has weighed in to say "This is an example of hubris on Sir Fred's part", hubris being a Greek term used in modern English to indicate overweening arrogance, often resulting in fatal retribution, although McFall has not explained whether he will deliver the retribution himself. Cue Osborne to tell McFall he is "pathetic" too.

And McFall's boss Brown has waffled about taking all necessary steps to recover money from those who did not deserve it, simultaneously riding roughshod over contract law, glossing over his own negligence in allowing Goodwin's pension to be enhanced and omitting to mention the name of a man he recommended for a knighthood in the Queen's 2004 Birthday Honours list.

Lord Myners, who, we should remember, chaired the Treasury's review into the good governance of pensions, has now denied that he approved Sir Fred's pension and has said such a "huge reward" cannot be justified given the bank's losses. In a letter to Sir Fred, released by the government, Lord Myners said the discussions he had with the former banker about the financial arrangements of his departure from RBS "did not amount to approval" of his pension payment. He added: "I do not agree with your rationale for declining my request that you voluntarily reduce your pension."

Lord Myners, who should understand Sir Fred's concern at losing his job from his time as chairman of the Low Pay Commission, may not agree with the rationale and may think his discussions did not amount to an approval, but the pension has been approved after consultation with him, so anything he says now should be taken with a pinch of salt.

The government say they may pursue the matter in the courts but Osborne says he doesn't "think the government's got much of a leg to stand on in the courts if they're going to take legal action." It sounds like he thinks that is "pathetic" too. He hasn't said that Sir Fred is pathetic yet.

Brown has subsequently insisted that the government would act to protect the public interest over the payment of Sir Fred Goodwin's pension."When the the government has a share in this company and has now discovered that discretionary payments may have been made its up to us to protect the public interest," he said, adding: "We're still asking Sir Fred to waive the pension that he has been given".

Sir Fred will no doubt be happy to make a gesture by waving his pension in all our faces.

However we should not forget that, even if on a lesser scale than Goodwin, Brown and Darling are in many ways equally culpable - and are also guaranteed generous final salary pensions.

And in the interest of balance, we note that Osborne equally failed to point out the error of the bank’s ways, but also hopes to be entitled at some point to 50% of his ministerial salary for life as future ex-Chancellor.

Confused? You will be. Particularly when you hear about the latest RBS bailout package.


an ex-apprentice said...

I like it. Dry and rare, like a fine sherry.

But I think I'm as confused as I can take just now, thanks very much.

Demetrius said...

Alas we real pensioners in the real world are not confused. Those of us fool enough to save are losers. Those of us who are older have seen our pensions eroded by real inflation levels well above official ones. Those in sheltered housing or retirement developments are being screwed for all they have by property management service companies now in the hands of property speculators and investment companies. Those who rely on Social Services care are in for some nasty shocks as the cuts hit local government. In the meantime those who are of working age are looking at bleak futures and bleaker retirements in the future.