Last week Mark Kleinman (Sky News’ City Editor) broke a story about secret talks between the high street banks and the government aimed at securing support for the Big Society in return for a moratorium on bank-bashing. Whilst this was picked up in the press, it didn’t really feature as headline news. Has banking really slipped so far off our radar since the midst of the financial crisis in 2008-09 when ever day the lead news items seemed to cover some financial impropriety or incompetence? It seems so. And yet, with the Irish bailout fresh in our minds and the prospect of further bailouts across Europe fast becoming inevitable, we are still paying heavily for the banks’ gambling with taxpayers as their backstop.
This news highlights very well the inherent problems we face in making the government’s commitment to transparency and ‘open government’ meaningful. Whilst it’s great to see government data being made publicly available, it’s not in itself a solution to anything.
Just compare the fanfare that accompanied the publication of 150,000-odd items of government spending a couple of weeks ago, with the news of secret meetings between bankers and the government where future policy decisions are being agreed. Whilst there might be valuable information in amongst the vast list of items of spending which are in the public interest, that amount of data is only likely to be trawled by data specialists and those who are paid to interrogate it. For most of us it’s utterly meaningless and uncovering anything useful is the archetypal ‘finding a needle in a haystack’.
And even if we do uncover something – for example that the Cabinet Office spent £26,000 on a consultant to help them have ‘difficult conversations’ – we have absolutely no context to assess whether that was good value for money or not. Right now, I can see plenty of need for ‘difficult conversation skills’ but I still don’t know if it was good use of public money.
Contrast that with information about a meeting between government and the banks. The news reports suggest that the banks have agreed to put around £1bn into the Big Society bank to support community action and social enterprise. But the price for that investment is that the government ‘lay off them’ in the future, promise not to introduce any more taxes on the banks and not to interfere with their size, business model or structure.
If that’s true, the government are pre-empting the conclusions of the Independent Banking Commission which is currently investigating the banks’ structure and business models. And, perhaps more significantly, they appear to be making decisions that are far more significant economically than spending £25,000 to a training consultant. We’re talking billions of pounds here.
So what has the reaction been to this story breaking from the government committed to transparency? Kaye Wiggins’ in Third Sector reports a spokesperson from the Cabinet Office as saying ‘we are in discussions with the banking sector on a number of topics, but it would be inappropriate to provide a running commentary of our conversations’.
Basically, we can have all the information we want on data that has no context to enable us to make meaningful assessment of its value. But if we want intelligence on who’s influencing government and how they are taking decisions in our name, then that’s ‘inappropriate’ to be put into the public domain. I know which I would rather have in order to hold the state to account – which is meant to be the purpose of transparency!
And the second thing that disturbs me about these clandestine meetings is that the government, in return for a short term windfall for their Big Society bank are at risk of giving up a huge amount. Let’s go through the numbers that have been reported (of course we’ll need to await any official announcement, but nonetheless…).
The banks are going to contribute something like £1bn-£1.5bn to the Big Society bank over a two year period. This figure includes the dormant accounts that they hold – that is money which has become ‘orphaned’ from its original owners but does not belong to the banks and has always been earmarked for this purpose. The dormant accounts are reportedly worth around £200m – which is down significantly from an estimate of £5bn in a 2007 Treasury Select Committee Report (given in evidence by the originator of the Unclaimed Assets Register).
The remainder (£800m-£1.3bn) will be split between the five big high street banks – Barclays, HSBC, Lloyds, RBS and Santander – something like £200m each.
Let’s compare that with some other figures:
The proposed new bank levy will raise around £2bn.
The one off bankers’ bonuses tax raised £2.5bn.
The combined profits posted by Lloyds, HSBC, Barclays and RBS in the first half of 2010 was £13.6bn.
The amount of public money spent on bank bailout (not including our European obligations) was £850bn.
Compared with some of those figures, £200m per bank is peanuts. And rather than await the outcome of their own investigation into whether the banks are too big, too risky and need to be fundamentally restructured, the government seem intent on selling us short in return for a quick buck.
Come to think of it, short term profiteering with no regard for the long term costs sounds a lot like the sort of thing we’ve seen going on in the banking sector which got us into this mess in the first place….maybe they’re proving their credentials for a future career in the City?