Sunday, 8 March 2009

A lesson to be learned?

A few years ago the Telecoms Industry suffered enormous losses; several trillion pounds were lost, a sum of a similar order to that lost by our banks (and they are increasingly our banks – yours and mine) and yet the industry was not bailed out by the Government. Not only have the banks been salvaged like broken-backed wrecks from the rocks of poor judgement but some of the people whose decisions were in part to blame were then invited by the Government to help rebuild the ship of finance and refloat it.

As in the case of Telecoms, drastically failing businesses which changed their boards seemed to succeed. Those that didn't change their boards continued to fail.

Public sector pay rises are planned for the next three years. Those in the private sector have not only had their pay rises frozen but some also face pay cuts. Hewlett Packard, which announced global job cuts of 24600 last September, has recently advised its employees that they can expect pay cuts of between 5% and 10%. The larger pay cuts will be made in the salaries of the higher-paid employees. Are the banks doing this?

Another thorny problem is that relating to Public Sector pensions. The country faces massive debt because of the pensions which must be paid in the future. Not only can Public Sector employees retire at the age of sixty (and in some cases earlier) and receive a full pension but their average pensions are six times higher than those of private industry employees. Their pensions are paid from taxes.

There seems to be a lack of understanding in the Government or perhaps a loss of sense of reality. Industry is not protected and has been forced to cut jobs and take wage cuts. Why haven't the banks and the Civil Service followed the same procedures?

Another multi-billion pound injection of public cash has been pumped into Lloyds. The Treasury takes a 65% stake in Lloyds as it lends £25 billion. The bank has clearly failed so why are Sir Victor Blank, the chairman of Lloyds, and Eric Daniels, his chief executive, still in position? The buck has clearly stopped a long way short of the main protagonists.

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