5 March 2009

Labour is wrong to go after Fred Goodwin

This week the government stepped tentatively away from earlier indications that it might retrospectively change the law to deny Sir Fred Goodwin his vast pension pot of almost £17m.

Lawyers have already stated that the government would almost certainly fail to recoup any of Sir Fred's £16.9 million pension pot and have suggested that even an unlikely eventual success would take years and require a considerable amount in legal fees.

There is no doubt that this money is an obscene amount to be paid to a businessman who oversaw unprecedented failure and incompetence. But the government is wrong to make an example of Sir Fred Goodwin for short term populist political gain.

Ministers were certainly wrong to approve this deal – but the simple fact of the matter is that they did. Lord Myners, the City Minister who sanctioned the deal, is now under pressure from MPs and trade unions to resign. The minister admits he was involved in negotiations over Sir Fred's early retirement – which effectively doubled the size of the pot – but claims he was unaware he could have blocked the package on offer according to The Telegraph.

We step on to dangerous legal and political ground when the Prime Minister says he is willing to use all legal means at his disposal to overturn what is a perfectly legitimate employment contract. The reality is that consent has been given - the fact that the government might now, with the clarity of hindsight, wish that they had not consented to the deal is neither here nor there.

Additionally, at the time that the deal for this pension package was struck the Royal Bank of Scotland was a private company receiving no government funds. I simply can not support action that justified a government assuming the right to demand from private enterprise the return of money paid to former employees.

If we want to launch a wider debate about how such salary and pension packages are fundamentally unjustifiable then that should be welcomed. I find the huge sums of money paid to many, irrespective of profession, to be largely obscene and indefensible. But I am not convinced that this is the debate the government is launching with these actions.

Perhaps Sir Fed should voluntarily return some of his pension fund as a relatively small gesture to the thousands of workers on more modest salaries who will lose their jobs and their livelihoods as a direct result of bankers’ incompetence.

But aside from a plea to Sir Fred’s better angels all the government can and should do is ensure that difficult lessons are learnt from this debacle; reactionary rhetoric won’t erase the mistake.

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