The travel company, Thomas Cook, announced a dramatic surge in profits on Thursday to suggest that it is finally recovering from its near-death experience of a couple of years ago. That was when it was in such a mess it should really have been allowed to go bust.
The only reason it didn’t is because its bankers thought it was too important to be allowed to fail so they put their own heads on the line to create a rescue package to save it – one which had to deal with the major risk that they were simply pouring good money after bad. It is, however, in the nature of these things that there was almost no publicity given to the bankers behind the move.
Two years on the big banking story is the suite of allegations that Royal Bank of Scotland took advantage of financially weakened companies to force them into bankruptcy and grab their assets, when, with a bit more support, they could have survived. What is really interesting though is that these allegations centre round the RBS division run by Derek Sach. This is the very same man who put his head on the line to save Thomas Cook.
I have lunched with Derek Sach a few times so know him a little. I would judge that he is not the financial sector’s answer to Mother Teresa but neither is he the devil incarnate. And the allegations – even if they subsequently turn out to have some truth – need to be seen in the context of what he had to do.
He has been one of the leaders in the gigantic task of sorting out the bank’s bad loans and to salvage what he could. As taxpayers and majority owners of the bank, we should arguably celebrate in his success, not hang him out to dry. On his watch the toxic (or what they prefer to call non-core) loans within RBS have been cut from £258bn to around £40bn.
We should pause to think of the financial burden lifted from the bank and thus the taxpayer by this effort. That £218m would be enough to build HST2 from London to Inverness, not just Birmingham. It would get us 50 aircraft carriers, not two. It would pay the entire NHS cost for almost two years or defence spending or education for five years. In a sensible country that would earn him a knighthood.
Clearly he is not going to get that but at the very least we should keep a sense of proportion. His department might well have been a bit brutal at times – it is hard to see how it could be otherwise given the scale of the task in hand. Innocent people did possibly get hurt and some good companies which might have been saved possibly went to the wall. But this was the biggest economic and financial bust since the 1930s and even then it was not all one way as Thomas Cook and others prove. Given the size of the mess that had to be cleared up the surprise ought to be that there has been so little collateral damage.
I would hope Sach does not end up with his head stuck on a pole though once a media frenzy erupts that tends to be the way we do things in this country. But if he does become the scapegoat – the latest in a long stream at RBS one might add – we really should not be surprised if in future no talented private sector people are willing to come out of the shadows to take on the next big public sector clean-up job.
It is not intelligent to clamp down on foreign students
When a country is struggling to pay its way in the world an intelligent government puts weight behind the things we are good at so they can grow as much as possible. We have such an advantage in higher education and run second only to the United States in our ability to attract students from overseas to study here.
It is good business. Overseas students pay more than UK nationals so keep costs down for them and obviously have additionally to pay their living costs. The Institute for Public Policy Research estimated this week that this is worth £13bn a year to the economy and supports 70,000 jobs. It would take an awful lot of SMEs to generate a similar amount of exports.
David Willetts and the Department for Business Innovation and Skills recognise this and have said he wants to boost these student numbers by a further fifth over the next five years. Unfortunately this cuts no ice with his colleagues in the Tory hierarchy, who are is stepping up the anti-immigrant rhetoric.
The result, the IPPR reckons, is that overseas student numbers have fallen by a third under this government, not raised as the education minister would like. So not only is this iniquitous policy destroying our reputation as a civilised country and undercutting the long-term links with those countries fostered when the students return home with their degrees, it is also costing around £4bn a year in lost income.
The worst public firm board? You can bank on the answer
Tuesday evening I found myself at a dinner in the wonderful surroundings of the National Portrait Gallery for clients and friends of Tulchan, one of the leading City public relations firms. Conversation at my table took an interesting twist when the assembled past and present captains of industry, bankers and Government ministers started comparing notes about which was the worst public company board they ever sat on.
Interestingly the same name came up from several of them independently
as standing out above all the others for its sheer dysfunctionality. Are you surprised it was a bank?
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies