Scottish Banks, EU membership and the euro – A weekend with Douglas Fraser


  By G.A.Ponsonby
The excuse was that it was five years since the catastrophic event almost ruined the world economy.  The banking crisis that hit the world economy in 2008.
Whatever the reason, it was a strange choice of subject for BBC Scotland’s Business and Economy Editor Douglas Fraser.

  By G.A.Ponsonby
The excuse was that it was five years since the catastrophic event almost ruined the world economy.  The banking crisis that hit the world economy in 2008.
Whatever the reason, it was a strange choice of subject for BBC Scotland’s Business and Economy Editor Douglas Fraser.

It was the Scottish Green Party Conference and surely renewables deserved some coverage, it could have overlapped into Labour’s pledge to freeze household energy bills and Douglas could have expanded on his superficial commentary on the subject published on his BBC blog a week ago.

But it was banks that occupied his radio show on Sunday, and the bailout.

The programme was, as ever these days with BBC Scotland, less a mature analytical look back at the causes of the crisis and more a series of opinionated sound-bites from a small group of selected commentators, one of whom was former Chancellor Alistair Darling now leader of the anti-independence campaign group Better Together.

The broadcast heard praise for Darling who as the Chancellor when the crisis broke, apparently moved swiftly to ‘save’ the UK financial sector.  There was also praise for Mr Darling’s Labour party and a mention for former PM Gordon Brown.

The banks highlighted in the programme were HBOS and the Royal Bank.  “I’ve come to the mound in Edinburgh … the centre of Scottish banking” said Fraser by way of introduction.

The programme heard from Darling, who told how he had “bet the entire UK Treasury” on saving the banks.  We also heard clips from Gordon Brown and the “unprecedented” action his government had taken.  Clips from Reporting Scotland heard presenter Sally Magnusson also talk of the “Scottish banks”.

There was a message in this broadcast.

The programme presented Darling, Brown and the then Labour government as heroes who had saved the banking system.  Fraser’s look back contained little by way of critical analysis of the Labour government, a government which had presided over the deregulation of banks – one of the major factors in the crisis.

Were the right decisions made? asked Fraser at one point.  In the only mildly critical question put to Darling, the BBC man asked if Labour should have fully nationalised RBS and HBOS.

History will look kindly on Labour, we were told.

And that was pretty much the message.  Labour headed by Gordon Brown and Alistair Darling bailed out the Scottish banks … and in doing so, saved the UK financial system.

It stopped short – just – of being a puff piece for Alistair Darling and Gordon Brown and by extension pro-union arguments that use the so called ‘Scottish Banks’ as ‘proof’ that an independent Scotland would have been brought to its knees by the bank crisis from 2008.

But why look back at the banking crisis now?  And why, if you are going to seriously look at the crisis and the then Labour government’s handling of it, ignore the criticisms levelled against Darling and his own culpability.

In May last year the then Governor of the Bank of England, Sir Mervyn King, claimed that a lack of action by Brown’s government in the early days of the crisis could have cost up to one million jobs.

According to Mr King, the former Labour PM Gordon Brown and his advisors failed to heed his early warnings which he claimed, could have prevented the recession that hit the UK in 2009.

Brown and Darling dithered until October of 2008, but by then said Mr King it was “too late to prevent the financial crisis from spilling over into the world economy”.

King said: “In August 2007 came the moment when financial markets began to realise that the emperor had no clothes.

“From the start of the crisis, central banks provided emergency loans but these amounted to little more than holding a sheet in front of the emperor to conceal the nakedness of the banks.  They didn’t solve the underlying problem – banks needed not loans but injections of shareholders’ capital in order to be able to absorb losses from the risky investments they had made.

“From the beginning of 2008, we at the Bank of England began to argue that UK banks needed extra capital – a lot of extra capital, possibly £100 billion or more. It wasn’t a popular message.”

Sir Mervyn said the “bold action” to largely nationalise RBS and Lloyds Banking Group took another nine months.

“That bold action in October 2008 could have happened sooner,” he said. “Bailing out the banks came too late to prevent the financial crisis from spilling over into the world economy.  The realisation of the true state of the banking system led to a collapse of confidence around the world and a deep global recession.  Over 25 million jobs disappeared worldwide.  And unemployment in Britain rose by over a million.”

Also, what of the takeover that effectively contaminated RBS – ABN Amro?  In March 2012 Newsnet Scotland revealed the connections between Alistair Darling and the man who had been competing with Fred Goodwin for the Dutch Bank, one Naguib Kheraj.

Goodwin ‘won’ and Darling signed off the toxic ABN Amro deal.  His Labour Government, prompted by one Jack McConnell, decided to knight Fred Goodwin who Darling then sought advice from on banking.

Months on from the failed Barclays’ bid, high flyer Kheraj was recruited on an undisclosed retainer as a special adviser to the Financial Services Authority (FSA).

The FSA is of course appointed by the UK Treasury which is ultimately controlled by the Chancellor of the Exchequer.  At the time of Mr Kheraj’s appointment to his advisory role in April 2008, the Chancellor was none other than Alistair Darling.

Kheraj was also appointed by HMRC’s Dave Hartnett as an adviser to HMRC itself.

All very interesting stuff and of course pertinent to any programme seeking to look back at the crisis and also comment on the appropriateness of actions taken by the Labour Government following the collapse.

Fraser of course couldn’t fit everything into a half hour review programme, but was it entirely necessary to include a review almost devoid of criticism of Labour and one which focussed almost exclusively on so-called Scottish banks?

A day earlier, Douglas Fraser had interviewed the French Ambassador to the UK and had asked him two very noticeable questions.  The first asked whether the French Government would make its position known on the matter of the EU membership of a newly independent Scotland.

He then pressed Bernard Émié on whether a newly independent Scotland would have to adopt the euro.

So the Scottish Banks, EU membership and being forced to adopt the euro were all areas Douglas Fraser thought should be highlighted over the weekend.  A peculiar combination indeed.

Of course in a little under two weeks’ time a by-election will be taking place in Dunfermline.  Labour is expected to win but a local difficulty in the shape of planned school closures by the local Labour run council is threatening to destabilise Labour’s campaign.

In an effort at deflecting attention, the Labour campaigners are trying to turn it into a contest on independence, as they do with just about everything these days.  Ed Balls’ attack on the SNP plan to keep the pound reflects Labour’s worries over local issues.

If Labour can get the EU and the euro onto the campaign agenda then things might be easier.  If they can remind voters of how Labour under Darling and Brown helped save the banks, using the might of the UK taxpayers, then even better.

Douglas Fraser’s interest in these three areas is just coincidence I’m sure.  But after Derek Batemen’s claims that the Labour party has a direct line to the head of news and current affairs at BBC Scotland then one can’t be too sure.

One last thing. 

In questioning the French Ambassador on whether an independent Scotland would be forced to adopt the euro, Monsieur Émié said something interesting.  He said that it would not be automatic and would be part of negotiations – he also said that these negotiations are “taking place”.

A slip of the tongue perhaps, but something that Douglas inexplicably appeared to miss and didn’t pursue.  BBC Scotland also missed this important piece of information from the French Ambassador.

We didn’t.


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