• Stephen Hester says the privatisation is getting closer
• £607m paid out in bonuses, £215m to investment bankers
• £450m extra charge from PPI scandal
• Plans to spin off part of US arm Citizens
Royal Bank of Scotland declared on Thursday it was on track for a partial privatisation next year but sparked a fresh row over bonuses at the scandal-hit institution.
The bank posted an annual loss of more than £5bn and Stephen Hester, its chief executive, admitted 2012 had been a “chastening” year after its £390m Libor rigging fine. Its total losses since the 2008 bailout have now topped £34bn. However, the bank is still paying out £607m in bonuses in the coming weeks.
The shares were among the biggest fallers on the stock market, losing more than 6% to 323p – which amounts to a near £15bn loss on the taxpayer’s 82% stake.
Hester, however, said “the light at the end of the tunnel” toward privatisation was “coming much closer” while Sir Philip Hampton, RBS’s chairman, hoped the bank would start to pay a “token” dividendto shareholders – the first since the banking crisis – “as soon as possible”. He said: “Our objective is to give the government options to sell its stake as soon as possible and it would be very good if we could make that ‘as soon as possible’ 2014.”
A government spokesman insisted that “there is no timetable for a disposal” although ideas for a free distribution of shares to 46m voters had been floated as recently as a fortnight ago.
George Osborne claimed credit for the decision by RBS to “accelerate” its focus on UK retail and corporate banking. It announced further streamlining of the investment bank and a plan to spin off part of its US operation, known as Citizens, in two years. Hester described UK Financial Investments, which looks after the stakes in the bailed-out banks, as becoming “more activist in trying to present its views”.
Asked what form any share sale would take, Hampton said he expected taxpayers to be able to “participate in the availability of shares” although he warned about the number of football stadiums that would be needed for shareholder meetings.
Hester said the privatisation of RBS would be a “seminal” moment, appearing to indicate that he intended to stay on to see the task through.
Despite the loss, RBS has paid out £607m in bonuses, £215m of which went to its investment bankers whose division was behind the Libor scandal. The bank, which said bonuses would have been £500m higher without the Libor fine, risked inflaming the row over City pay further by indicating that its annual report in March could disclose how many of its staff take home more than £1m.
Labour Treasury spokesman Chris Leslie said: “We need radical change in the culture of our banks and that must include reining in bloated bonuses, which are a device for keeping traders focused on the weeks ahead, rather than years ahead.”
Ian Gordon, analyst at Investec, said that RBS was “starting 2013 in a weaker financial position than the market had anticipated”. The bank insisted it would meet international targets for capital before the deadline in 2019.
Hester stressed that the bank’s assets had been reduced by £906bn since their peak in 2008 but acknowledged the cost of the payment protection insurance scandal, for which the bank took a further £450m charge to take the total cost to £2.2bn, and the interest rate swap mis-selling scandal had required a further £650m charge. The computer meltdown in June cost £175m.
He said: “2012 saw landmark achievements for RBS. It was also a chastening year. Along with the rest of the banking industry we faced significant reputational challenges as we worked with regulators to put right past mistakes.”
Osborne, who this week rejected calls for RBS to be fully nationalised, said: “I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it.”
The chancellor added: “The government’s strategy is for RBS be a stronger and safer bank, which in time can be returned to full private ownership.” But he did not give any clues as to his preferred route for when a share sell-off can begin.
Hester acknowledged the influence of the government and also the regulators which have been conducting a review of bank capital. There had been an “important accommodation” over the bank’s capital, Hester said.
“The two revisions to our strategy that go with that are a further shrinkage of our markets business, with the capital there coming down significantly further over the next couple of years” and the intention to start selling Citizens.
On bonuses, Hester said that while the figure looked a “big number”, it was below the £1.8bn being paid out at Barclays and sums handed out by rivals UBS and Deutsche Bank.
RBS was forced to sell off its insurance business Direct Line by Brussels in return for the taxpayer bailout in 2008 and spun off a third of the operation last year, for which it has already been forced to take a goodwill writedown of £394m.
• This story was amended on Thursday 28 February to correct the figures for the amount being paid in bonuses
Ministry of Justice and Capita-owned interpreting firm condemned by MPs as courts count the cost of no-shows
The privatisation of court interpreting services has been “shambolic”, MPs warn saying it has caused more trials to collapse and suspects to be remanded unnecessarily in custody.
In a damning report on the decision to hand a near-monopoly of courtroom interpreting in England and Wales to the company Applied Language Solutions (ALS), the justice select committee criticises the Ministry of Justice for failing to understand the complexity of the
Barnet council is doing its best to protect vital services at a time of dramatically reduced budgets
Barnet council’s change programme is described by John Harris – “privatisation writ large” – in terms reminiscent of 1980s politics (Outsource to easyCouncil? Not in our name, 12 November). He says that our policy “denotes 70% of the council’s functions – first supposed ‘back office’ services, and then such core functions as environmental health, planning, transport, even crematoriums – being handed to the private sector”.
Harris’s apparent belief in public sector good, private sector bad, is completely at odds with how councils of all parties are dealing with the challenges of a greater demand for services from those who most need them, at a time when our budgets are dramatically reduced. Private sector and public sector are unhelpfully simplistic terms. We need to talk about how we can best use taxpayers’ money to support a successful society.
Over the last year we have turned one of our services into a local authority-owned trading company; our legal service is now jointly provided with Labour-controlled Harrow; our music service is to become a registered charity; and our recycling services are being brought in-house. And we will shortly publish details of how to move many of our back office services – phones, IT, payroll and HR among others – to a private supplier. This can give us a better quality service while taking tens of millions of pounds out of our costs. The simple fact is that we will do what is best for Barnet. Harris describes our decision to keep waste services in-house as “surprising”. I would argue it is not so if you understand that we approach each problem with an open mind.
He says that “on the really big stuff, the ruling Tory group … are holding their nerve”. But the really big stuff isn’t
Public accounts committee warns that a ‘growing number’ of NHS trusts are facing financial difficulty
MPs have chided the Department of Health for not having a “failure regime” for bankrupt hospitals after it emerged that two could be privatised and another will lose its accident and emergency department as a result of the first declaration that an NHS trust is insolvent.
The cross-party public accounts committee warned there was “a growing number of NHS trusts and NHS foundation trusts in financial difficulty, but it is not clear what will trigger them being placed in special administration, or exactly how the process will work, including the role of ministers”.
Accusing the health department of “inventing rules on the hoof”, the committee said 21 of the most troubled hospital trusts had received £1bn over the past five years to maintain services and pay wages.
Plans for South London NHS trust, declared bankrupt in July, were outlined on Monday by the special administrator, Matthew Kershaw. He said that without action the trust, already losing £1m a week, would accumulate a deficit of more than £240m by the end of 2015.
South London, with an annual spend of £440m, runs three hospitals – Queen Mary’s in Sidcup, Princess Royal in Bromley and Queen Elizabeth in Woolwich – serving a population of 1 million and employing 6,000 people. The draft report recommends that Queen Elizabeth is merged with Lewisham Healthcare trust and that the accident and emergency department at Lewisham hospital be closed.
The review, drafted by Kershaw and which private consultants were paid £2m to work on, could see Princess Royal, built in 2003 using the private finance initiative with 525 beds, offered to a private company – although Kershaw said his “preferred option” was that it be taken over by King’s College hospital.
Kershaw, a civil servant in the department of health, said: “King’s are very keen to do so but we can get other benefits from the independent sector … and absolutely there’s a choice in the report.”
Queen Mary’s would be taken over by Oxleas mental health foundation trust and land sold off to pay off debts. This would then become a “health campus” with the hospital service reduced to cope with only simple day cases – no longer offering hip or knee replacement surgery. The hospital service could then be put out to tender.
It is understood Circle, which became the first private company to run an NHS hospital earlier this year, Serco and Virgin have expressed interest in running parts of the South London, as have NHS organisations such as Guy’s and St Thomas’s.
Kershaw said: “The current design of services and the economy of the local health system are not safely tenable in the long term”.
He said there were “no promises” on job losses. The deficit in South London will be £65m this year, with a third of this made up from PFI payments which the taxpayer will have to carry on paying. Another £34m, the report says, could be saved from medical and nursing pay. “The trust has the lowest income per consultant in its peer group, a very high ratio of junior doctors to consultant staff and high use of locum and agency staff,” the report warns.
Andrew Gwynne, a shadow health minister, said Labour had “repeatedly warned David Cameron it was dangerous to reorganise the NHS when its first focus should have been on facing the financial challenge — this distraction is now throwing the NHS off course.
“With hospital trusts facing a financial challenge David Cameron’s government should be focusing on sorting the situation out. Instead, as this report reveals, they lack a plan to deal with trusts in serious financial difficulties and cannot guarantee that the quality of patient care will not be affected.”
The government denied it was “making the rules up” as it went along. Lord Howe, the health minister, said: “in fact, we are working closely with Monitor, the NHS Trust Development Authority (NTDA) and health professionals to set out proposals on how Foundation Trusts and other healthcare providers can remain financially stable and will report back on this later in the year.”
The focus is on creating an education market – where private providers can operate and public universities can go bust
Almost a month after the UK Border Agency announced that it was revoking London Metropolitan University’s right to award visas to international students, the high court has intervened to give a temporary reprieve to some of its students. However, the move by the UKBA still ultimately threatens thousands of students with deportation, along with the future viability of London Met as a public entity.
The past few weeks have demonstrated both that a serious and concerted campaign is capable of delivering results, and that the government has always been more interested in pursuing its ideological agenda in higher education than in protecting students – effectively using London Met as test case in its market experiment.
While London Met and the National Union of Students were launching legal battles to keep students at the institution, private colleges have been circling around, running open days in the hope of taking displaced students, and the universities minister, David Willetts, last week announced a package of £2m in hardship funds for “legitimate students” affected by the situation.
Far from being a cause for celebration, these moves by the government represent the latest in a cynically presented official narrative around the London Met case: that the government, and the set of private providers now swarming around London Met, are working to alleviate the situation for students left stranded by the incompetence of the university’s management. The truth is that the government is exploiting the situation at London Met in order to further its own objectives.
London Met is already at the heart of the coalition’s experiment, in which massive cuts to public teaching grants are forcing institutions to seek private income streams. Having implemented a 70% cut to its courses in 2011, including the loss of whole departments such as history and philosophy, the university’s management announced last month that it would seek a large-scale privatisation deal – essentially a corporate buyout of much of its central services.
The essential theme of the higher education white paper, much of which is now being brought into effect without a vote in parliament, was the creation of a market – with private providers allowed to operate, and public universities allowed to go to the wall if they cannot make ends meet. The social consequences of this project will be dire: it is precisely the universities that working-class students rely on that will be forced to merge, or even to close entirely.
Like almost all higher education institutions, London Met has come increasingly to rely on international students, whose fees are uncapped. Without this income the university will struggle to survive, and, predictably, the government’s new approach to the crisis does nothing to address the insolvency that London Met faces as a result of the UKBA’s decision. Instead, Willetts is focused on moving London Met’s international students on to other institutions, while “protecting Britain’s reputation” in the global higher education market.
The government’s emphasis on making Britain an appealing destination for international students goes beyond the poor taste of viewing people, and their contributions to academia and society, as cash cows and cogs in a market mechanism. It is also dishonest and cynical: the situation at London Met is in large part a product of an increasingly draconian set of visa and immigration restrictions now being used by the Home Office to “send a message” about “bogus students.”
Over the past few years international students have faced repeated attacks on their ability to study and work in the UK – as well as paying increasingly astronomical fees, they are required to register at police stations, carry biometric ID and to have their attendance monitored constantly by their institution and the UKBA. In April, the government abolished the post-study work visa – effectively forcing many international students to leave the country.
London Met is not alone in struggling to meet visa monitoring requirements: in a number of prestigious Russell Group universities, staff will privately admit that cuts to registry departments have made them effectively negligent. The effects of a curtailment order in this context are expressly political – the coalition is refusing to intervene to save the institution from bankruptcy because, unlike the universities that its own sons and daughters attend, London Met has become a target for the government’s market experiment in higher education.
Ultimately, this chaotic, money-driven experience is not confined to international students. With the rapid extension of the market across the system, this is the government’s vision for everyone in higher education. Events at London Met are once again proving to be a crucial and symbolic battleground for the future of education as a whole. Everyone who believes in preserving education as a public service must be willing to take action – in the courts and on the streets.
Schemes have only enriched security companies including G4S, says officer as ministers prepare another £3bn worth of contracts
Nearly £1bn has been spent on the electronic tagging of criminals over the past 13 years with little effect on cutting offending rates, offering little value for money and serving only to enrich two or three private security companies, one of which is G4S, a senior police officer has claimed.
Chris Miller, a former expert on tagging at the Association of Chief Police Officers, who stood down as Hertfordshire’s assistant chief constable last year, said that much of the potential of electronic monitoring to keep communities safe in Britain has not been realised.
“The current contracting arrangements for electronic monitoring have all but squeezed innovation out of the picture and stifled progress,” he writes in a foreword to a report by the Policy Exchange thinktank published on Monday.
“Electronic tag technology used in most cases today is hardly any different from what it was in 1989, when it was first used in the UK. The future arrangements must not be allowed to continue to hold us back,” writes Miller. He says the problem has centred on a “sclerotic, centrally controlled, top-down system that has enriched two or three large suppliers, that lacks the innovation and flexibility of international comparators and that fails to demonstrate either that it is value for money or that it does anything to reduce offending”.
The Ministry of Justice has spent £963m on tagging contracts over the past 13 years. Two companies, Serco and G4S, have taken the bulk of the work, putting ankle and wrist tags on more than 100,000 offenders every year, mainly to monitor their compliance with night-time curfew orders which do little to cut reoffending during the day.
Ministry officials are about to invite bids for contracts for the next nine years, thought to be worth up to £3bn. The Policy Exchange report, Future of Corrections, says one in four police forces regards electronic tagging as ineffective.
“In the US there are a number of localised suppliers, meaning that the police and probation service are given the most up to date GPS technology to track the movements of a criminal 24/7,” said Rory Geoghegan, the report’s author.
He said in the US ankle bracelets had become smaller, smarter and more durable and were GPS-enabled so that police can pinpoint offenders’ locations at all times, but the lack of competition in Britain meant the taxpayer was losing out.
“We desperately need to create a real market so that the police can get the technology they need to cut burglary, cut robbery and other crimes that have a massive impact on victims and community,” he said.
Miller said that, as Hertfordshire’s head of crime, he had tried satellite tracking technology for prolific offenders, polygraph testing of internet child pornography users, and alcohol diversion programmes for those caught drunk in public places. But each initiative had been greeted in Whitehall with reactions ranging from incredulity to downright obstruction.
The Policy Exchange pamphlet argues that the police and crime commissioners due to be elected in November should be given the power to decide how much money, if any, is spent on tagging and who should provide the services.