The Times: Top Tory MP blasts banks and CBI over ‘crony capitalism’

By Deputy Political Editor, Sam Coates: An influential Conservative backbencher today calls Goldman Sachs employees “greedy” and the CBI “lamentable” in a pamphlet urging colleagues to find a Tory response to Ed Miliband’s warnings of “predator capitalism”.

Jesse Norman, MP for Hereford & South Herefordshire, uses the paper to set out why Conservatives must “take action against crony capitalism — and the culture that created it” — in an excoriating criticism of the City likely to discomfort some of his colleagues.

Business in Britain has lost touch with the wider public interest, he argues, and needs to reconnect with core conservative values rather than pursue short term profiteering. Banks should lead the way by suspending or drastically reducing the amounts they pay in bonuses.

The pamphlet is unusual because it gives a detailed critique of individual business decisions, something that most politicians usually shy away from, while many Tory MPs would regard those being criticised as their natural supporters.

Despite discomforting some in the party, however, his thesis is likely to be broadly welcomed by the Tory leadership as a way of articulating a Conservative version of both Labour and Liberal Democrat criticisms of the City.

Mr Norman, who worked with George Osborne in opposition, is a former banker for Barclays who has run a vigorous campaign against PFI public sector deals.

He rounds on Goldman Sachs as a “cliched symbol of financial excess” who have abandoned their historical low risk conservatism and no longer have the right to claim, as they do in their 2010 annual report, that “integrity and honesty are at the heart of everything we do”.

He criticises those partners at Goldmans who, in 1999, agreed to float the company.

“Generations of Goldman partners had considered and shied away from flotation, arguing that the firm’s culture derived from its partnership ethos and would be undermined by publicity and media interest, that a focus on quarterly earnings would distort the firm’s priorities, and that it was not for any single group of partners to cash in for personal gain the value built up over decades by their predecessors.

“The then-new partners were arguably not less or more greedy than their predecessors. But they were more numerous. Many stood to make tens or even hundreds of millions of dollars from the flotation, and there were so many of them in number that the closeness and mutual accountability of the earlier partnership no longer held sway.”

He also goes further than Mr Osborne and rejects the merger of Lloyds and HBOS in 2008 at the height of the credit crunch, in a deal aided by the Labour Government of the time.

Until this point, he says, Lloyds was “by some way the best-managed UK big bank” but “this patient value creation was blown away by the merger”.

He concludes: “What has been the result? Lloyds’ shareholders have been wiped out, losing an estimated 85 per cent of the value of their shares; the worst effects will have been felt by small shareholders, who did not enjoy the offsetting value from the sale of their HBOS shares. Bank customers continue to feel the chilling effects of reduced competition on the high street.

“The financial advisers to Lloyds, whose due diligence on HBOS had been so catastrophically bad, likely collected fees in the hundreds of millions of pounds from the deal. Some 24,000 employees have been laid off since the merger. Incredibly, Sir Victor Blank, the architect of the transaction, was invited by the BBC to guest-edit the prestigiousToday programme on Radio 4 over Christmas 2011.”

His third significant target is the CBI, which represents business industry but is unable to acknowledge its flaws and problems.

“The CBI describes itself, in a telling phrase, as ‘the premier lobbying organisation for UK business’. It claims to speak for about 240,000 businesses, covering a third of the UK private sector workforce. It has 230 employees, a £24 million turnover and pays its new Director-General twice as much as the Prime Minister.

“But what has it actually achieved? There are signs of possible change with its new Director-General. But the CBI’s recent record on key issues such as bank reform, the Private Finance Initiative and executive pay, has been lamentable.

“On all three it has consistently taken the side of big business against the interests of its smaller members and the taxpayer, and has done so in defiance of the facts,” he says.

| The Times (£)