Tuesday, 7 November 2017

A Brown Curate's Egg

Gordon Brown has re-emerged from the shadows. His memoirs are published today. No, I haven't blagged a preview copy - I've been reading the trailers in the newspapers. And, of course, I have my own views on the man who I lectured a Labour canvasser about in 2001. I guess it was the general election that Labour won handsomely: I remember because we had just moved house and I was decorating the hall. I'd got his attention by saying that, having 2 youngsters I was concerned about health and education. No sooner had he mentally noted me down as "for" when I launched into a vituperative tirade about how Brown had started well as chancellor but time would tell otherwise. Brown's £5bn a year pension tax grab featured prominently but wasn't my only stringent criticism. I was peeved about paying a huge wodge of stamp duty to buy a lower priced house than our previous one and, rather selfishly, about Brown's stealth taxes on my company car and health insurance. None of which I would have minded paying if it was spent wisely, but I felt state education and the NHS weren't performing and were unlikely to improve. "Mark my words" I remember saying "you all think he's a hero now but Brown will come to be seen as a total unmitigated disaster". (Ok, not quite right, that prediction, I'll give you). The poor chap eventually managed to get away from me and I turned to my younger son, who had been listening in and said "I don't know why I did that, look my paint brush has gone dry". "No, dad" he said "but it had to be done". (A very wise 15 year old, I thought).

Brown was, of course, a son of the manse - his father was a minister in the Church of Scotland. Though I'm effectively demoting his dad in saying this, after my 2001 tirade I came to the view that Brown was a curate's egg, good in parts. And, to misquote the American poet Longfellow, when he was bad, he was horrid.

The bad included letting public spending get out totally of control and helping to create the crisis in company pension schemes with that infamous £5 billion a year tax grab (though, to be fair, a Tory chancellor had started this stupid wheeze, Brown just pumped up the volume). He was also complicit in the "education, education, education" Blair government that did so little for education, other than come up with the dumb target of 50% of young people going to university, which has left us with the overhanging issues of university funding, student "debt" and a surplus of unemployable graduates in some disciplines, using that word very loosely. And it was Brown as chancellor who gave the gambling industry free rein, leading to wall to wall betting ads on Sky Sports, gambling companies sponsoring half the Premier League teams and, according to the Gambling Commission, half a million youngsters aged 11-15 gambling regularly, as do two-thirds of students. (Two thirds!! It wouldn't have been 1 in 50 in my day).

Horrid? More like appallingly awful.

However he did, as he put it "save the world" when he unfortunately miss-spoke in a debate in the House on the financial crisis. Though to be fair to him, he did, with Alistair Darling, skilfully ensure that the worst of the chaos that could easily have resulted was avoided. Very good. The reforms he made on assuming the role of Chancellor of the Exchequer - independence for the Bank of England and taking bank regulation from the Bank and putting it with the newly formed Financial Services Authority - were also good and bad respectively, the FSA proving not up to the job of regulating the banks and so contributing to the crisis he had to deal with. But Brown, along with Ed Balls, deserves enormous credit for thwarting Blair and keeping us out of the euro, otherwise the impact of the financial crisis would gave been far more serious*. And extricating ourselves from the EU would have been even more difficult, so your view on Brown's success in bamboozling Blair with his five economic tests probably depends on whether you think we should remain or leave.

Anyway, with that background, it's worth listening to what Brown has to say on the financial crisis. And guess what? It's a curate's egg.

Brown says "If bankers who act fraudulently are not put in jail with their bonuses returned, assets confiscated and banned from future practice, we will only give a green light to similar risk laden behaviour in new forms", a statement that led to headlines like "Bankers should have been jailed". This is the Gordon Brown who'd had 10 years to get the regulatory system right before the crash and at least 2 years after the crash to start to take action.

Brown says the actions of Northern Rock's bosses in covering up their financial situation were 'but a short step from criminality'. Hmm, not criminal then, so hard to jail them surely? And the Rock's business model, borrowing money on short term markets while lending it out on long term mortgages was very well known. Absolutely a failure of risk management and regulation in my book, so that one's actually down to you, Gordon.

Brown also hits out at Barclays bank for doing an 'unconscionable' deal with the Gulf states to avoid taking the Treasury's shilling, so avoiding Treasury control. Brown blanks out the fact that Treasury officials lied to the Lloyds team, who were also wary of state control. (Lloyds asked Treasury officials whether the other major banks were being bailed out and explicitly asked about Barclays, who they hadn't seen during the negotiations. They were told the Barclays team were meeting on a different floor of the building). Barclays maintained its independence and arguably fared the best of the British banks. OK, HSBC makes more profit than Barclays (£5.49bn against £3.93bn last year), but Barclays profitability (profit as a % of turnover) is a lot higher and HSBC didn't require a bail out (just as well as it is essentially trans-national, British taxpayers bailing it out wold have been problematical I reckon).

And of course Lloyds only needed bailing out because Brown had offered them the poisoned chalice of HBOS, which they had previously coveted but hadn't been allowed to acquire on competition grounds. Under pressure to get things fixed Brown changed the rules and gullible, greedy Lloyds didn't do proper due diligence. Otherwise Lloyds wouldn't have needed a bail out at all.

 To be fair the Gulf deal does look dodgy. But the government (i.e. you and me) didn't have to put up any of our money to bolster its balance sheet, some Arabs did. Brown argues that, because Barclays avoided government control, it carried on as before. Well actually it didn't because Barclays also reshaped its business away from what Vince Cable calls "casino banking", wilfully ignoring the fact that Northern Rock and HBOS got into trouble overstretching themselves on good old property. Barclays would probably would have done better if they had kept more of their investment banking business.

Meanwhile, RBS languishes in state control, unlikely ever to be able to repay the taxpayer bailout. Partly, I would argue, because the government made it get rid of its most profitable activities. Yes, it was to take out risk but it doesn't look with hindsight to have made any sense. So the bank most under the control of the state has done the worst - quelle surprise!

Brown takes aim at the egregious Fred the Shred - Fred Goodwin - and the ridiculous corporate excesses of RBS under his control. It was well known that RBS was a byword for hubristic levels of corporate extravagance don't I remember Brown saying anything about the overblown HQ in Scotland when it was opened. I wouldn't be surprised if he had applauded the job creation in his homeland.

Meanwhile the only bank executives charged with fraud are 4 former senior executives at Barclays. Ooh, it doesn't do to upset people like GB and the Treasury, does it?

So, as I say, curate's egg. I guess I should read Brown's autobiography in full to see whether it's as self-serving as the previews make it sound. But I'm not the only one - the Spectator said "Gordon Brown's memoirs show he is good at blowing his own trumpet - but nothing else"**.

Brown's memoirs is called My Life, Our Times and is published by The Bodley Head.
*For example, see Five tests that saved Britain from the fate of economic oblivion, Telegraph 27 Feb 2012
** The Spectator, 4 November 2017

1 comment:

  1. An odd chap Brown, totally unsuited to being a Prime Minister but he was just about the only senior Labour figure to see the utter madness of Brexit. Relaxing gambling restrictions was a very bad move. So yes a good in parts chap but there are so many politicians that are good in no parts these days!