Queen Takes Knight, but No Cheque

In the last seven days Labour have claimed two significant victories over the government with head of RBS Stephen Hester agreeing to waiver his almost £1million bonus and former head of RBS Fred Goodwin having his knighthood removed.

The hypocrisy of the Labour Party criticising the awarding of a bonus under a contract that they signed and celebrating the breaking of that contract did not escape the notice of many, the party of the people is well and truly dead, and the same goes for Fred Goodwin, it was Labour who recommended him the honour and Labour who led the populist-driven campaign to get it revoked. This isn’t so much a success for Labour as it is a failure of the government to stand up to popular pressure and by its convictions.

Whilst most people wouldn’t disagree with the idea that bonuses should be linked to performance rather than just a blanket entitlement, Stephen Hester’s contract stated he was allowed a bonus of £1.5million regardless. The bank’s directors decided this was inappropriate and chose to cut it by 40%, which is commendable, but no more because “they feel he has strengthened the bank, and they argue that Mr Hester is paid less than his peers". Mr Hester’s contract allowed him to receive that money; he shouldn’t have to give it up because the tide of public opinion – and the bandwagon-joining Labour Party – has decided he should be the poster boy for excessive executive pay. The government should have stood up to populism and argued that this bonus was his entitlement under his current contract but that they opposed the permissive bonus culture and used this case to push forward reforms to executive pay and public sector bonuses. Their handling, or mishandling, of the situation will be to Labour’s benefit.

The case with Fred Goodwin is remarkably similar. Few would choose to defend his actions in 2007 and early 2008 which contributed to the financial crisis but he was given a knighthood in 2004 for contributions to the financial services which, at that point, he presumably deserved. Honours have been retained by people who have committed much worse - and indeed more explicitly criminal - acts than Fred the Shred; Baron (Jeffrey) Archer of Weston-super-Mare springs immediately to mind. And however disliked Goodwin may be he hardly reaches up to the ranks of Robert Mugabe or Benito Mussolini, both of whom were stripped of their honours!

Whilst the rewards Goodwin and Hester received may be against the wishes of many, and indeed to possible direction of future government policy, by letting Labour appear to gain the upper hand the government has lost a vital opportunity to justify the need for reform and handed a points victory to Labour, whether they deserve it or not.