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SimonHaskel.jpgSimon Haskel on the importance of social values to a healthy economy

In spite of running budget deficits, cutting interest rates and expanding the money supply, the recovery from the financial crisis has been much slower than we would have liked or expected. So I wonder, are we looking in all the right places? Or are we looking too narrowly? Is the reason for our disappointing prospects not only economic but also social?

The government’s reaction to the Panama papers is that this type of activity is damaging the economy - and I agree. But so must the misbehavior by some of our leading companies: huge socially divisive salaries, banks misleading consumers. Trusted car brands have falsified test results. A big chain of chemists has been shown to be ripping off the NHS. Microsoft and Google are in trouble with the EU Commission. I could go on. 

Another social concern about our economy is that it is unfair. We are all for innovation and technological change, but we have not convinced everybody that these benefits will be evenly shared.  All it will do is add to inequality.

So what is to be done? Fortunately, there are some good examples and mounting evidence of what works. Firstly, get away from the pressure to deliver short term outcomes which has led to a decline in long term investment. This means a purpose beyond shareholder returns needs to be the end result. The advantages of reducing the complexity of financial intermediation and simplifying the investment chain are well rehearsed. So are the benefits of longer term horizons to asset owners and fund managers. 

We also know that a strong focus on customer satisfaction, employee engagement, collaboration with the suppliers, and working with society have been part of the reason why some companies are successful and others are not. To my knowledge, these ideas have been around for 20 years. 

Studies show that only 37% of the population trust business. So more than ever, our economy depends on consumers because it is a good way of helping people in work deal with the uncertainties of the changing world of work, due to artificial intelligence and robots. And that’s one way of dealing with the concerns of the public at the direction in which business is going. 

It is time for economic policy not only to deal with economics, but also to bring together investors, executives and boards together with the government to make this social approach equally important. Economics alone won’t do the job. We have to persuade companies to raise their social game too. 

Encouraging these values will also help business to deal with other social pressures. Climate change, sustainability, reacting to the national populism which is becoming a feature of our politic and the need to be a good corporate citizen. As I have said, little of this is new: it is just becoming a lot more relevant and its time has come. So if the government wants to reposition itself as a force for good, here is a chance to do so.

Lord Simon Haskel is a backbench Labour Peer. He tweets @simon_haskel

Published 28th April 2016

Time and emotion

Simon Haskel on the importance of social values to a healthy economy

McFall_sml.jpgJohn McFall on 53 billion reasons why shareholders must play a bigger role in changing banking culture

Fresh data has been published by New City Agenda identifying the costs of the top ten misconduct scandals in the UK’s retail bank and building societies. Since 2000, this culture in banking has cost almost £53bn in fines and redress. Over £37bn was due to the mis-selling of Payment Protection Insurance to consumers, making the cost of this scandal more than four times the price of staging the 2012 Olympics. Almost £5bn meanwhile, was due to the mis-selling of Interest Rate Hedging Products to small businesses.

The key causes of these scandals have included poor quality products, inappropriate staff remuneration schemes and an aggressive sales-based culture. It has all had a devastating impact on the profitability of the UK’s retail banks and cost shareholders billions of pounds. Between 2010 and 2014, Lloyds Banking group has paid out over £14bn in misconduct costs and just £0.5bn in dividends to shareholders. At the same time, it has paid £2.1bn in bonuses. During the same period, RBS has paid out £6.4bn in retail banking misconduct costs and has not paid a penny of dividends to shareholders, but has paid £3.8bn in bonuses. If Barclays had not had to pay-out £7.3bn in misconduct costs then it could have almost trebled its dividend to shareholders.

The persistent misconduct and an aggressive sales based culture has made every UK citizen poorer through our pension funds and ownership of the bailed out banks. Shareholders should be leading the campaign to change bank culture and raise professional standards. They should demand public and transparent assessments of the progress each individual bank is making. And where senior executives preside over misconduct, shareholders must ensure they are held accountable; and demand significant clawback of bonuses.

New City Agenda will continue to focus on the issue of banking culture. Next Thursday (5th May), Anthony Jenkins, up until last year the CEO of Barclays, will share his experience of implementing a comprehensive programme of cultural change. Jenkins has previously highlighted that, in the years leading up to the financial crisis, banks were too aggressive, too self-serving and too focussed on the short-term. All of this has led to trust in the industry sinking to an all-time low. Now, he rightly wants to examine the challenges they will face in changing banking culture and what further reforms must be undertaken by banks, investors, regulators and policymakers

Lord John McFall of Alcuith is a backbench Labour Peer, a former member of the Joint Parliamentary Commission on Banking Standards and a founding member of New City Agenda

Published 28th April 2016

Banking up

John McFall on 53 billion reasons why shareholders must play a bigger role in changing banking culture

Don_Touhig4x3.jpgDon Touhig on developments and progress on the Armed Forces Bill

When I wrote about Armed Forces Bill before its Lords Second Reading back in February, I said that I had a sense of déjà vu – something that has only got stronger as we have continued the Bill’s progress.

During that time, we’ve had interesting debates covering everything from the composition of the Court Martial, territoriality of offences and sentencing, enlistment of minors, reporting about employment discrimination affecting reservists, compensation for mental illness caused by service, and the publication of statistics about sexual assault and rape.

Labour has pressed several amendments – one relating to the aforementioned statistics, another on the Commanding Officer’s discretion not to investigate complaints of sexual assault, and a third on parity of esteem on compensation for victims of mental health.

The Bill is important and has had cross-party support throughout the Commons and Lords, which we welcome and are glad to have been part of it. With Lords Report later today and Third Reading on 5th May, I look forward to working with the government to strengthen the Bill further.

Some may ask why we have made it a priority to see the publication of statistics on sexual assault and rape in the forces. I’ll tell you why: because there is an ‘overtly sexualised’ culture in the military. Not my words but those of Brigadier John Donnelly, the director of the Army’s personnel services when giving evidence at the inquest into the death of Private Cheryl James at Deepcut.

Brigadier Donnelly went on to say that Army chiefs were given a ‘wake-up’ call by a 2014 survey. This found that 90% of respondents thought this of the culture, while 39% said they had directly experienced sexual harassment or conduct close to it. While the results led to a top-down response, the Brigadier was clear that it wouldn’t happen overnight. So for me the best way to begin to change such a culture is to keep the spotlight on it. Transparency is our best weapon in getting the message across that sexual misconduct in our Armed Forces will not be tolerated.

Britain is blessed in having the finest, most professional and dedicated Armed Forces in the world. The men and women who serve should not have their reputation stained and their good named tainted by such actions. Labour has been encouraged that the government is listening and I am more than hopeful that the Minister will accept the merits of our argument that details of sexual assault and rape should be published.

We have also suggested a way to review the powers of commanding officers not to proceed with a complaint about sexual misconduct. And the government will also hopefully move towards our position on mental health compensation.

For me the whole experience of this Bill has seen Parliament working at its best, with all sides recognising that problems exist and being prepared to find common ground to solve them.

Lord Don Touhig is Shadow Defence Minister in the House of Lords

Published 27th April 2016

A force for good – revisited

Don Touhig on developments and progress on the Armed Forces Bill

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