Dr Eamonn Butler argues that it is absurd for ministers to condemn Fred ‘The Shred’ Goodwin’s pension deal on leaving the position of CEO of RBS given the pensions mess that they created.
Yes, Sir Fred Goodwin’s pension is a scandal. How can someone who brought his company to near collapse walk away, aged just 50, with £703,000 a year? But would I tear up the contract? No, I wouldn’t. A deal is a deal. If the minister, Lord Myners, was foolish enough to sign it – without even giving himself a cooling-off period, which of course the banks have to give their customers – then I’m afraid that he and taxpayers are stuck with it.
What revolts me more is Harriet Harman’s declaration that, whatever the legal position, Goodwin’s pension can’t survive the “court of public opinion”. I don’t see Harman and friends deferring to the court of public opinion. If they did, they’d all have resigned long ago, probably when Blair took us into Iraq.
People should not be robbed of their lives, liberty, property, or even their pensions by a “court of public opinion”. That’s something for a court of law. An eagerness to replace the rule of law by this rule of public prejudice is one of the most gut-wrenchingly illiberal features of this government.
Sir Fred Goodwin made some big mistakes. Buying the Dutch bank ABM Amro was one. This pig-in-a-poke was stuffed full of US sub-prime junk that cost the Royal Bank of Scotland £16.2bn. But, until then, everyone hailed Goodwin as a financial genius. He made the RBS a major economic force, employing 180,000 people worldwide. It was the backbone of the economy, particularly Scotland’s economy. In 2007 it paid £1.7bn in tax. A high-spending chancellor must have been grateful.
If Goodwin had stood on the brakes back in 2007, I’m sure he’d have been out on his ear with a pension of tuppence. But back then, the government was pouring rocket fuel into the economy, and the sky seemed the limit. Of course it all exploded. But that’s down to Gordon Brown’s imprudence, not Goodwin’s.
There certainly is something wrong about Goodwin’s pension, and the other astronomical sums that corpora-crats pay themselves. It’s the fact that company law gives shareholders – the real owners of Britain’s businesses – far too little say. So Goodwin is rewarded, while people who loyally invested in his business see their shares fall by nine-tenths. But that’s something the lawmakers must sort out.
While they’re at it, politicians should sort out their own pensions scandals. They’ve promised hugely generous pensions – usually two-thirds of final salary, index-linked, of course – to more than five million police, judges, mandarins, BBC staff and other state employees. These civil-service pensions cost taxpayers more than £20bn a year. That’s a total liability of £1,261bn, which works out to a £47,998 debt on every household in the country.
Why is council tax so high? Partly because we’re paying for all those retired council officers. Why is Britain’s policing so feeble? Well, much of the police budget goes to pay the pensions of 140,000 retired officers rather than the wages of the 165,000 serving ones. Some forces actually pay out more in pensions than they do in wages.
A top civil servant like the head of the Department of Work and Pensions – the person in charge of paying married couples their state pension of just £145.05 a week – can expect to retire with an inflation-proof pension of 18 times as much, £138,000 a year.
Nice work, if you can get it. But most of us can’t. In 1997, Britain’s private company pensions were a huge success, worth more than the rest of Europe’s put together. Gordon Brown thought they could well afford his technical “dividend credits” manoeuvre that netted him £5.3bn and rising. But over the last dozen years, that’s amounted to £175bn taken out of the pockets of pension savers – a tax of £16,600 on every saver.
Today, just half of the 100,000 pension schemes of 1997 still exist, and few of those are taking on new members. Less than half of private-sector workers are now paying into a pension. With the economy suffering, this “public affluence, private squalor” is causing real resentment. No, if you want to make money these days, the only thing to be is an MP. You can fiddle your expenses, employ your family and buy a second home at taxpayers’ expense without even facing suspension, never mind jail. And the final-salary pension scheme is, naturally, fabulous. Even beats being a banker, doesn’t it?