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By Martin Kelly
 
Coalition Minister Vince Cable has called for the Royal Bank of Scotland to be broken up and part of it turned into a “British Business Bank” to lend to what he called ‘sound businesses’.
 
The Lib Dem MP’s proposal was contained in a leaked letter obtained by the BBC which came just a day after the announcement of 300 job losses at the bank – most of them in Edinburgh.

The proposal will come as a further shock to employees at the bank still reeling after the sudden announcement that hundreds of jobs were to be transferred to India.  The initial Government buy out, which saw the public acquire 82% of the organisation, came with a pledge that jobs would not be exported.

Mr Cable, who is the Secretary of State for Business Innovation and Skills, outlined his proposal in a letter to Prime Minister David Cameron and Deputy Prime Minister Nick Clegg.

In the letter the senior Lib Dem MP said that the coalition had inherited from Labour “a banking industry structurally ill placed to serve the needs of productive businesses” and insisted that RBS was effectively finished in its current form and should be broken up.

He said: “My suggestion is that we recognise that RBS will not return to the market in its current shape and use its time as ward of state to carve out of it a British Business Bank with a clean balance sheet and a mandate to expand lending rapidly to sound business.”

Conceding that it would take time to establish he added: “But this will take time and in the meantime we have to get the state banks lending to business, especially SMEs.”

In the letter, which was leaked to the BBC, Mr Cable also criticised the UK’s “industrial policy” of the past claiming it had acquired a bad reputation.

“There were however more successful, albeit different, experiences in France, Germany, Korea, Japan and Singapore” he said.

He insisted that the Coalition Government had to think ahead and plan long term, instead of simply focussing entirely on dealing with the UK’s deficit and added:

“I sense however that there is still something important missing – a compelling vision of where the country is heading beyond sorting out the fiscal mess; and a clear and confident message about how we will earn our living in future.”

Mr Cable echoed the recent statement from the SNP over procurement rules and highlighted the system left behind by the last Labour Government which he said had played a part in the loss of major contracts.

Criticising Labour for a lack of strategic pro-growth thinking, he wrote:

“Recent bad news from Bombardier, BAES and Rio Tinto Alcan will not be the last, with potentially difficult announcements from General Motors and the knock-on from the possible loss of the Typhoon contract.

“None of these can be blamed on the Coalition but the policies we inherited have played a role; notably, our procurement rules in the case of Bombardier, but also our planning rules in the case of Pinewood Studios being denied planning permission.”

The Lib Dem MP criticised the Tory/Lib Dem Coalition for not showing enough leadership and support for new technologies, he highlighted the digital industries as a success area. 

He also expressed concerns for the UK’s Aerospace capabilities and Automotive industry due to industry cut-backs and overcapacity and warned that government support may be necessary if the sector was to survive in the UK.

Mr Cable was also keen to stress the importance of Scotland with regards to energy. 

He urged that close attention had to be paid to what he termed “the Scottish dimension” and the threat posed by Alex Salmond if London was seen not to care.   This was thought to be a veiled reference to the scrapping by London of the Longannet Carbon Storage project.

Responding to criticisms of the UK tax policy by the oil and gas sector Mr Cable said:

“In recent years the oil and gas exploration industry feels it has been taken for granted, despite generating vast investment and supporting impressive supply chains with unexploited potential.”

Much of what the UK Minister said will chime with the Scottish Government who have insisted that the renewables sector will be Scotland’s new economic and industrial powerhouse.

Mr Cable’s leaked letter coincided with his public statements over the possibility of introducing a so called ‘mansion tax’ that would see owners of very expensive properties paying a levy.

Mr Cable’s public opinions will be seen as typical horse trading between two coalition parties keen to stress their separate identities to back-benchers and supporters alike just before the Chancellor’s forthcoming budget.

However some will also view it as a challenge to Chancellor George Osborne and a warning by the senior Lib Dem that an economic change of direction is needed.


Comments  

 
#
Welsh Sion
2012-03-06 22:57

Don’t think I’m supporting his actions, but please do note that Vince Cable’s title is actually Dr not Mr.

He has a PhD in Economics from Glasgow University and has lectured there.
 
 
#
clootie
2012-03-07 07:05

Welsh Sion

You are quite correct on the use of such titles. However a man either has principles or not. The game he plays of “hinting” at better ways but continues to support a party of quite a different shade is sad. He either supports the present governments stance or he does not.
I do not consider him trustworthy any more. He has gone down the same route as Jim Wallace / Malcolm Bruce etc They have one set of views for a Scottish audience and another for their Tory friends.

The current Tory policies are going through thanks to the LibDems. I do not feel grateful to a set of unelected peers imposing change (good OR bad the principal remains unchanged).

I will respect his title but I’m afraid it ends there. He could have earned respect had he maintained his earlier position – amazing what the illusion of transient power can do to some.
 
 
#
pmcrek
2012-03-08 02:47

Yeah, its funny how he doesn’t advocate outsourcing the Government.
 

 
#
Islegard
2012-03-06 23:12

Shouldn’t HBOS be a more likely candidate to be broken up? Break it back to it’s constituent parts. The Bank of Scotland set up by an Act of the Scottish Parliament 1695. Then our Bank of Scotland can become our indepenent national bank again as it was in 1695 it shall be in 2014. A central bank post 2014?

How were Westminster able to contrevene the Act of Union and take over our bank in the first place?
 
 
#
truth
2012-03-07 13:37

So far as I am aware the BoS was a commercial bank and not a central bank.

In fact, back when it started central banks were only really invented to fund wars.

Since Scotland hasn’t been much of an billigerent until it formed the UK, I’d say Westminster did contravene anything.

Having said that I like your suggestions.
 

 
#
Legerwood
2012-03-06 23:18

Some of what Dr Cable said in his letter made sense but not the call to break up RBS. It has already had to divest itself of parts of its operation but it is still a large bank.

As a poster said above the Lloyds/TsB/Halifax/BOS would be a more obvious candidate to be broken up.
 
 
#
Islegard
2012-03-06 23:20

Thanks Leg.
 

 
#
ituna semea
2012-03-06 23:58

RBS will lose more money in the unfolding Greek economic collapse. Edinburgh now has even more claim to be called the Athens of the North.
 
 
#
Sleekit
2012-03-07 00:12

Yes…

That sunny climate and chiselled adonis waiters waiting to pounce on unsuspecting tourists…

If only we could somehow claim all that financial mismanagement by the FSA, Gordon Brown and the Labour Party were actually us then we really could be just like Greece. Carefree sunny climes without even having the worry of choosing our own leaders (as they would be appointed technocrats).

Oh wait…

I’ve got it!

RBS and HBOS both have the word Scotland in their names.

Its a long shot, but people just might buy that the bank bailout was Scotlands fault…

What do you think Ituna?

Can we really be like Greece… Pleaseee
 
 
#
oldnat
2012-03-07 00:12

Since the French and German banks are much more exposed to Greek default than RBS, perhaps your description might be better applied to Berlin or Paris.

However, since you, in your ignorance, seem to want to see a particular UK bank as the main victim, we can safely put that down to your narrow nationalism.
 
 
#
DonaldMhor
2012-03-07 09:22

Quoting oldnat:

Since the French and German banks are much more exposed to Greek default than RBS, perhaps your description might be better applied to Berlin or Paris.

However, since you, in your ignorance, seem to want to see a particular UK bank as the main victim, we can safely put that down to your narrow nationalism.







Oh it’s a UK bank now is it. Perhaps we should put that down to your narrow unionism?

 
 
#
Exile
2012-03-07 09:53

Oldnat’s “narrow unionism”? Eh, no, I don’t think so. The clue’s in the moniker.
 

 
#
Legerwood
2012-03-07 00:52

On the subject of banks: I see the former Prime Minister of Iceland, who is on trial in iceland at the moment, does not have anything nice to say about the role of Mr Darling, the UK or Dutch banks in Iceland’s problems.

telegraph.co.uk/…/…
 
 
#
Islegard
2012-03-07 02:12

Well Leg I’ve never been able to find anything nice to say about Darling or the UK either.

Funnily enough even after economic collapse Iceland are still placed higher in the economic league than the UK.
 
 
#
amfraeembro
2012-03-07 09:42

Why can’t we put some of our former PM’s on trial – I can think of at least two who are infinitely greater criminals.
 

 
#
Aplinal
2012-03-07 08:08

There may well be a reasonable argument for the splitting up of RBS, but the exact same principle applies to all the other international banks as well. (Wasn’t this LibDem policy prior to the election?)

The ‘fault-lines’ in the financial sector are not so much the fact that the banks were badly managed, but that the so-called ‘casino’ banking sector was not separated from the mainstream, retail sector. As a former Retail banker, albeit now 15 years ago, I can say without fear or favour, that we were moderately paid, and did not benefit from the bonus culture that drives the excesses of the “City”.

Let’s not throw the baby out with the bath water.
 
 
#
UpSpake
2012-03-07 08:08

Iselgard. Have you actually read the 1695 Act setting up the monopoly which was the Bank of Scotland. It’s shareholding was to be split ensuring that 2/3 of the bank forever remained Scots or as the Act clearly states,’for all time Scots’.
Clear to me. An Act of the Scots Parliament clearly overturned or was the sale to the Halifax illegal ?.
 
 
#
DonaldMhor
2012-03-07 09:31

RBS will be the main target despite the fact that Northern Rock was the first bank to be assisted, and still remains in the taxpayers portfolio. HBOS is now mostrly referred to as BOS, until it returns to profit.

But RBS has always been a thorn in the side of the Unionist establishment, despite the vast amounts of revenue it earned for the Treasury in London, the fact it was seen as Scottish always caused irritation with them.

Now is their big chance to continue with the earth scorching policy and break it up to sell to their city friends, and get rid of the name. The same policy that is seeing the stripping of MOD assets from Scotland.

Scotland must be maintained as a branch economy at all costs, as it has been all these years. Nothing that gives us any advantage must be allowed to flourish. And that dear readers is why we must have total independence from London.
 
 
#
tartanfever
2012-03-07 09:38

All bank should be broken up and separated into three sections

Personal
Business
Investment.

Personal banking funds cannot be used for investing.

The banks have to hold good leverage on personal and business accounts.

Banks and customers can do what they like with investment, it’s a gamble. If you lose your money – tough. If your a dodgy banker and you break the bank – tough, that part of the bank closes down and people lose their jobs. If you want to work or play in this sector then thats the health warning it carries.

It is absolutely that simple, the bankers will say you can’t do that, so will the government and probably the FSA – but don’t listen to them, it’s all vested interests and greed at play here. This is what needs to happen.

Oh and throw in a couple of good corporate culpability laws.

On and lastly, if any banker says that bonuses must remain high because we ‘won’t attract the best talent’ – sack them immediately.
 
 
#
balbeggie
2012-03-07 10:17

O/T Latest G.E.R.S. figures published.

www.scotland.gov.uk/…/9525

We seem to be doing better than the UK as a whole.
 
 
#
cirsium
2012-03-07 10:30

It is interesting that Dr Cable talks about investing in sound business. Given RBS’ catastrophic involvement in the sub-prime mortgage mess in the US and in the wild west which was Dublin’s financial sector before 2008, is Dr Cable becoming concerned by RBS’ activity in Asia? I certainly remember reading that the international division of the post-2008 RBS was continuing to sell exotic financial instruments in Asian market.
a bit OT but an interesting article – the RBS decision is puzzling a few people community.nasdaq.com/…/…
 
 
#
Marga B
2012-03-07 10:39

Cirsium – see this paragraph:

“If the retail and commercial banking divisions are about to disappear, then the new jobs in India suggest that RBS is planning a major push for growth in private banking for India’s wealthiest citizens. Depending on how large that business in, RBS India could be sending some very nice profits back to Scotland in 2012.”

To Scotland?
 
 
#
tartanfever
2012-03-07 13:12

So, since 2008 RBS has shed in the region of 30,000 jobs, many of which are in this country.

They now want to set up in India. Why ?

Well there is a growing economy there and a market potential, but if it sees the move away from a UK market then I wonder how profitable it will be for the UK workforce in the long run?

Of course, the main objective for RBS is to get back into profit and to repay the taxpayers bailout, but we should consider long term implications.

I would also have thought that an Indian workforce would be far cheaper to pay for than a UK workforce.
 
 
#
rapid
2012-03-07 13:27

Quoting tartanfever:

So, since 2008 RBS has shed in the region of 30,000 jobs, many of which are in this country.

They now want to set up in India. Why ?



you’ve got the wrong end of the stick. RBS have been moving back office operations (particularly) IT to India over the last 5 years. An Indian IT worker costs about 1/4 of the cost of employing an IT worker in Edinburgh and there is a much bigger pool of IT talent in India than Scotland & London. So this is a cost saving move rather than a profit acquiring move.

it’s quite sad, because typically (not all cases), the output quality reduces when the job is outsourced abroad. it used to be illegal to outsource 1 for 1 jobs abroad…

 
 
#
tartanfever
2012-03-07 14:05

Aren’t cost saving moves and profit acquiring moves just the same thing ?

Pay less for workers, get more out of them. And when in a few years this bank returns to profit – will we see any of the jobs lost in the UK return to these shores ? Doubtful. Remember, workers pay tax and NI, they spend money in our stores which all goes to creating wealth for a nation, it’s not just about the banks balance sheet.

Thanks RBS, plenty of work for cheap Indian employment but your loyalty to this country and it’s tax payers is where exactly after we bailed you out ?
 

 
#
rapid
2012-03-07 11:14

knowing RBS, they will have had a project on the runway for some time already and will already have plans for how the bank would be split. If there’s one thing about RBS, they are very efficient at this kind of thing.

say what you will about the bank, but bear in mind that the RBS/NatWest integration made history as one of the best executed corporate mergers of all time. Their people are very sharp and were only let down by buying a dutch bank without proper due diligence by an managing director with a huge ego.

If Barclays had “won” ABN AMBRO, then we’d have a very different situation right now.
 
 
#
truth
2012-03-07 13:45

For a detailed account on the demise of ABN Amro I recommend “The Perfect Prey: The fall of ABN Amro”, by Jeroen Smit.

It gives an incredibly detailed account of what happened, including a lot on RBS and Mr Goodwin.

The actual battle between RBS and Barclays was incredibly under reported in the media, as was the ABN chief’s preference for the Barclays bid.
 

 
#
Wee-Scamp
2012-03-07 19:58

Outsourcing to places like India in the prevailing economic conditions with the lack of jobs in the UK is politically and economically idiotic especially when it comes so soon after the announcement on bonuses.

It’s almost as if Hester and his board are sticking two fingers up at the rest of us. Salmond should be using this as a classic example of why the union is so out of step with thinking in Scotland.
 
 
#
gfaetheblock
2012-03-07 20:25

Outsourcing should ultimately save money, so it might not make political sense, but it could well make economic sense. RBS is needs to be commercially viable to stand alone or will remain part nationalised.

Do you see Hester as representing the Union? Can you explain? Surely a man running a company that supports thousands of jobs in Scotland is important to Scotland, in or out of the Union.
 
 
#
tartanfever
2012-03-07 21:06

Outsourcing makes no sense to the people of Scotland who have lost their jobs with RBS and have also paid the price through helping the bailout along with all the other taxpayers of the country.

Thats loyalty for you.

While I agree that RBS have to sort out the balance sheet and repay the tax payer and government – if the long term strategy is too move their infrastructure to new emerging markets and capitalise on a cheap workforce, then i think many in this country would be rightly unhappy with this.
 

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