Jeremy Warner's Outlook: An act of petulance from RBS's Fred the Shred

Rural railways; Sickly dollar
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The Independent Online

It is nearly always a mistake for a high profile chief executive to sue a national newspaper. A stand-off develops and whether right is on the chief executive's side or not, it rarely pays for large organisations to make an enemy of the media. Royal Bank of Scotland's decision to issue a writ for libel against The Sunday Times is therefore of more than passing, media village, interest. It is hard to recall the last time a FTSE 100 company sued for libel. Regrettably, newspapers quite often print non or half truths about companies, but usually the alleged libel is either ignored, or settled in a way that allows both sides to walk away before it ever gets as far as a writ.

The other danger of suing is that you never can tell, until you reach the courtroom, what other dirty linen is going to end up getting washed in public. These cases are impossible to control, and although Sir Fred Goodwin, chief executive of RBS, claims the offending articles "exposed him to ridicule", he should just wait until a good libel lawyer gets to work on him in the witness box to see what ridicule is really all about.

To me, the allegations don't seem outrageous enough to justify a writ. Sir Fred is not accused of fraud, sexual impropriety or dishonesty, all of which would indeed be good grounds to sue for libel. Rather, he complains of embarrassment and serious damage to personal and professional reputation. The Sunday Times, he says, set out to harass him and make him seem ridiculous.

There were essentially three allegations. One was that he had a private cabin built on the construction site of RBS's new Edinburgh headquarters, so that he could personally oversee the work in conditions of comfort. Another was that RBS had built a bridge for the purpose of servicing a private road between the headquarters and Edinburgh airport so that Sir Fred could avoid the traffic. And finally there was the allegation that he had tried to use his position to gain early membership of the Bruntsfield Links Golfing Society.

It's all trivia really, but I guess if you are one of Britain's top bankers, jealous of your reputation for integrity and professionalism, then something had to be done to shut them up. None of these allegations are true, insists Sir Fred. There is no cabin, the bridge is to link the site of the headquarters to the nearest dual carriageway and he has never applied for membership of the Bruntsfield golf club. Ah, but the society's secretary, David Sandford, says he did, or rather that Sir Fred's secretary phoned to inquire about membership and said Sir Fred would be very disappointed when told he would have to join the waiting list. Mr Sandford's claim appears to be inconsistent with the writ's contention that Sir Fred had never had any communication with the club.

This is rather the problem with writs for libel and is another reason companies are so reluctant to issue them. Before the ink is even dry, the writ has already become a hostage to fortune.

The more serious point about this case is that it highlights an apparent breakdown in communications between RBS and the media. I don't personally hold this view, but RBS is quite widely perceived as an arrogant, uncooperative, secretive and aloof organisation. This may have something to do with the fact that it is based in Edinburgh, rather than London, and as a consequence is perhaps not quite as media savvy as its southern counterparts. Yet doubts are beginning to emerge about its strategy too.

Having made a huge success of its acquisition of National Westminster Bank, Sir Fred is now busy reinvesting the proceeds in US expansion. His ambition is to be one of the biggest interstate banks in America, a goal he aims to achieve through the acquisition of a string of smallish regional banks. Sir Fred seems to be paying through the nose in pursuit of what many think of as a high-risk strategy.

The construction of a spanking new £350m headquarters on the outskirts of Edinburgh has added to the suspicion of hubris. Sir Fred's best approach would be to ignore the attempts at ridicule, for they are calculated to draw a rise, and in any case they will melt away like summer snow if eventually he proves his critics wrong with his US strategy.

Rural railways

This was the week when Dr Beeching, the man who decimated Britain's rail network, reared his head again after the Government announced that it wanted to cut subsidies for the rural rail network by one-third. But he was just as quickly put back in his box when the Secretary of State for Transport Alistair Darling insisted the reduction in state support would be achieved without the kind of route closures that so ravaged the network in the 1960s.

Instead, Mr Darling wants to reclassify some 56 routes as "community rail lines". This will allow local councils and businesses a greater say in how they are run in the hope this will stimulate more traffic. But it will also mean that the maintenance of the lines will no longer need to be gold-plated. Because they are relatively lightly used, upkeep will not be to the same standard as it is on inter-city or commuter lines. It could also mean greater flexibility in timetabling and cheaper rolling stock.

Rail enthusiasts will have given Mr Darling two cheers. But so will Network Rail, the not-for-profit company which is now responsible for the tracks following the demise of Railtrack. Its own operating costs are edging down - thanks in part to the decision to take all maintenance work in house. But its borrowings, and hence its interest payments are going through the roof. Figures announced yesterday show that in the first half of the year, the interest bill doubled to more than £300m. It will rise again sharply in the second six months as Network Rail's borrowings mushroom to something close to £16bn. Anything which helps chip away at the financial pain of this debt mountain must therefore be helpful.

As ever with the railways, though, financing remains something of a runaway train. The £100m in subsidies Mr Darling hopes to save through his rural initiative are but a drop in the ocean compared with the £3bn it is costing to run Network Rail. The good news is that the company's performance has improved, with delays well down on a year ago. But anyone looking for Network Rail to make a genuine profit might as well bed down for a long wait. That particular train looks to have been cancelled indefinitely.

Sickly dollar

If you have ever thought about a shopping expedition to the US, there has rarely been a better time to do it. As the $2 pound beckons again, forget the dream of a second home in Tuscany or the South of France. Buy instead in California or the Rockies. It will be cheaper, and they even speak our language. The more serious point is how the freefalling dollar is going to affect us back here in the UK.

The primary impact is to make our exports to the US and the Far East, where currencies are closely aligned to the fortunes of the dollar, less competitive and non-European imports cheaper. Companies with a high level of exports to the US - Jaguar and others - are already struggling. There will also be an intensification of deflationary pressures coming from the Far East.

But the bigger and longer term worry is what effect the declining dollar has on the US economy. The danger is that US interest rates will need to rise sharply to counter the inflationary effect of the sickly dollar and to finance a budget deficit which hitherto has relied on cheap inflows of foreign capital to sustain it. That in turn might poleaxe demand in the US, eventually plunging the world economy into recession. Is that the most likely outcome? I don't think so, but hold onto your hats. There are turbulent times ahead.