Margareta Pagano: GOD looks odds-on to take King's mantle

The former head of the civil service has the clout in Whitehall and Threadneedle Street to become the next Bank of England Governor
Click to follow
The Independent Online

The dashing former head of the civil service, Gus O'Donnell, must be delighted that his ex-colleague and running partner, Siobhan Benita did so well in her bid to be the Mayor of London.

He was one of Benita's main advisers, so can take some of the credit for the outsider's surprising success, coming in fifth and even taking votes from Labour's Ken Livingstone.

The Mayoral campaign will also have given him a taste for realpolitick; an experience which will serve him well in the race to become the next Governor of the Bank of England when Sir Mervyn King steps down next year. It's only been a few days since O'Donnell – known as GOD because of his initials and other reasons to be explained – confirmed his interest in the role but his decision to do so has prompted something of a media frenzy, and the odds on his success have shot up making him second favourite.

It's only been a few days since Lord O'Donnell confirmed his interest in the role but his decision to do so has prompted something of a media frenzy, and the odds on his success have shot up, making him second favourite.

Bets on Lord O'Donnell are now four to one; putting him neck-and-neck with Lord Turner, head of the Financial Services Authority, and just below the hot internal candidate, Paul Tucker, a deputy governor, who is surprisingly still at three to one. Privately, insiders at the FSA tell me that Lord Turner turned purple when he heard about Lord O'Donnell entering the race, saying to those close to him that he's the only real threat.

He's right. The ex-Cabinet Secretary has to be a serious runner for the job; a down-to-earth football-mad, tennis-playing South Londoner, yet academic and smart; (although he probably needs some PR advice: he should not be giving interviews like the one in the Sunday Times last week if he's not going to talk about anything, not even tennis.) It was a surprising gaffe as, although he's been a civil servant for most of his career, he's been a supremely artful one; how else could you work as press secretary to Nigel Lawson and John Major, and behind the scenes for Tony Blair and Gordon Brown? He outlasted them all and went on to mastermind the coalition.

No wonder they call him GOD; political for himself maybe, but not parti pris – somewhere between a one-nation Tory or a Blairite according to friends. He's broken out of the civil service straitjacket on three occasions by all accounts, once telling students that Mr Brown's economic five tests were political never economic (he was against the euro), defended the civil service against David Cameron's criticisms and warned about the Union break-up. He's a fine economist – Warwick, Oxford and a Glasgow lecturer – and at the Treasury directed macro-economy policy, public spending and EMU negotiations. But it's his time on the Monetary Policy Committee that gives him legs to be at the Old Lady; he was a non-voting member taking part in interest-rate decisions from 1998 to 2004. There is no public record of his views, but it's doubtful they would have differed much from those of the majority, such is his influence.

This brings us to Sir Mervyn's Today speech last week in which he conceded the Bank didn't shout loudly enough about the solvency problems building up in the banking system. He was right to remind us our flawed system was the fault. By being guaranteed by the taxpayer, they were "too big to fail". They still are and it's why the coalition should speed up the Vickers-based legislation to ring-fence investment banking and their retail arms. Whoever takes over must have this as their priority. It's a big job and there's a long way to go yet. The job isn't formally advertised until the autumn.

George Osborne will need a friend, someone who knows Whitehall as well as Threadneedle Street and who can smooth feathers: Lord O'Donnell fits the bill. My hunch is GOD is the clear favourite to take over from King. He wasn't called Augustine for nothing.

Time to move in at Trinity Mirror now that Sly's reign is over

As we first reported last July, investors have been deeply unhappy about Sly Bailey's stewardship of Trinity Mirror for some time. They were unhappy with the way the Daily Mirror group is bleeding money, the lack of dividend payments, Trinity's potential role in the phone-hacking scandal and Ms Bailey's handling of it and then, finally, the fat bonus she was going to pay herself. Under Ms Bailey, Trinity's market value has fallen from £1.1bn to £83m today, there have been no dividends since 2008 and the shares have fallen some 90 per cent to 31p on Friday.

Pension liabilities are £1.7bn and in the last year the pre-tax loss rose to £230m from £161m.

Even by newspaper industry standards, this is some record. Yet Ms Bailey was going to pay herself £1.7m for last year; a sum that includes a bonus. Yes, a bonus for increasing losses, shutting newspapers and shedding staff. If it sounds like a joke, it's because it is.

Indeed, you have to ask what took Trinity's big investors – Aviva is the most outspoken protester – so long to demand her head.

But you also have to blame the rest of her board, and the top executives because even Ms Bailey can't have managed this mess alone; there should be a complete clear-out when the new chairman, David Grigson, takes over.

Institutional investors are curious beasts, keeping their heads down even when the going has been tough as it has at Trinity.

This is tragic as jobs and pensions have been lost as a result; investors too should be made accountable. But they seem to have woken up; in the past few weeks we've seen protests over pay at Barclays, Man Group, Aviva and AstraZeneca.

It's too early to say whether we're seeing a couple of focused protests or the start of a concerted campaign to bring down executive pay. Either way, it might be time to make the sign of the cross and buy a few Trinity shares. It's ripe for a bid.

Comments