Comment: Public deserve referendum on RBS' future

Wednesday, 1 February 2012 10:06 AM

Removing a knighthood isn't enough. It's time to scrap RBS completely.

By Tim Patmore

Have you ever looked at a photo of your local town centre from 100 years ago? Aside from the change of styles and the lack of horse and cart, one other thing is noticeable – almost all of the companies would have changed as well.

Go back even 20 years and the same is true. Why? Because the average lifespan of a company is only 15-20 years. Giant companies like Kodak lasting over a century are as rare as compassionate bankers.

RBS as a company is another exception, in having lasted a staggering 285 years this year. And yet even from birth, RBS showed itself to be a bad apple, nearly succeeding in its first two years in bankrupting its rival countrymen at Bank of Scotland through dirty tricks (http://www.rampantscotland.com/SCM/story.htm ).

More recently, as an ex-employee of one of their subsidiaries, I noticed how RBS is never in the news for good reasons. Take the 2010 election debates, where Nick Clegg pointed out that the 11th-hour takeover of UK national treasure Cadbury's was only made possible by RBS stepping in with the funding. Or the recent scandal over banker's bonuses –Bob Blackman at Barclays got paid £8 million and barely got noticed, but Stephen Hester's £2.2 million caused widespread anger.

RBS shouldn't be scrapped on the basis of a few poor decisions, and they deserve some credit for briefly becoming the biggest bank in the world in 2008 (and also for inventing the overdraft).

But what should make an open-and-shut is the fact it has been nationalised.

Nationalisation is the kiss of death to most companies and, although it has recently returned to profitability by making a £2 billion profit in 2011, it is worth noting that this is less than a two per cent margin on their £1.6 trillion in assets.

It is also worth noting that most companies nationalised in the 1970s were transformed under the same premise; namely that they would eventually make the government an overall profit (which they never did). In the case of RBS, it will take at least 15-25 years to pay off all the debt it accumulated in the subprime mortgage crisis.

And, in spite of the image suggested by their £1 billion annual bonus bill, most of the talented staff have already left, with the employee morale suffering from over a decade of staff cuts (all the way back to the RBS takeover of Natwest).

So, rather than keep RBS for years (which is against EU competition laws anyway), I'd say it is time to scrap RBS and see an end to a disastrous company. Split it up, sell it off in bits and create a load of smaller banks to increase competition in the stagnant banking market place.

I recognise that the mistake with RBS in the past has been that the public were never consulted either way, whether on Fred Goodwin's pension or the bailouts. What should be done, then, is to hold a referendum on the future of RBS and the other nationalised banks.

Just as with the EU and the Scotland independence vote, an issue as big as the banks (who many blame for the 2008 crisis) needs to be thoroughly debated and a decision made. Should we have an economy focussed on narrow, short-term banking? Do large bonuses for just the top one per cent work? Most of all, should the government rescue banks from their own shortcomings?

In the case of RBS, the answer to all three is a definite 'no'.

Tim Patmore is assistant editor at The Groucho Tendency and a former employee of the RBS Group

The opinions in politics.co.uk's Comment and Analysis section are those of the author and are no reflection of the views of the website or its owners.

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