Where are all the children?

It occurred to me today, as I pressed through the crowds at Clapham Junction and London Bridge (it is amazing how crowded London is in the summer), that I was feeling a little like that scene in Chitty Chitty Bang Bang in Vulgaria, when Dick van Dyke realises there are no children.

Where are they all?  In the suburbs?  In the countryside?  Locked into airless, artificially lighted New Labour-style nurseries, enjoying their interactive education smart screens?  I don't know.

There are one or two.  This isn't yet the era of the Childcatcher.  But for some reason, most of us seem to prefer to keep our children locked away somewhere, out of sight.

I don't think it's healthy.  I've just been to Genoa for a week, with two children (mine), and was overwhelmed at the welcome they received wherever they went - from shop-keepers and fellow travellers alike.  Even those poor souls fated to share the sleeping compartment with us seemed delighted to see them.

The contrast with the UK, or London at least, is extraordinary.  People are so often grumpy, at best, when they are forced to share space with children.  Sometimes they are downright hostile.  I know in Germany they even have a word for it: kinderunfrieundlich (have a spelled that right?).  It isn't the sign of a healthy society, and I can't believe our habit of hiding our children away - force-feeding them videos of Toy Story 3 - helps very much.

Why Stephen Williams is wrong

Stephen Williams is the Lib Dem vice-chair of the Treasury select committee, and he has just weighed into the argument about RBS profits and the shortage of lending to small business.  "There is no excuse for RBS not to loan to good British companies that are struggling to get credit," he said. "We cannot simply allow banks to go back to business as usual while viable British firms are suffering.”

He might be right in this second sentence, but he is wrong in the first.  In fact, the party is heading up a blind alley with this constant hand-wringing about the failure of the UK banking oligopoly to lend to small business.

The truth of the matter - and it really is time the political world understood this - is not that our handful of banks won't lend to small business.  It is that they can't.  They are no longer structured to do so.  Their structures and attention remains focused on the speculative economy.  They have no systems capable of lending locally; they have no local infrastructure that can give them the information they need - just tickbox computerised forms that will refuse most of the deserving small enterprise projects.

We are not being failed by our banks because of their laziness.  We are being failed by them because of the structure of their sector.

Even before the 2008 crisis, just over 40 per cent of local bank lending was to property, fuelling the property bubble.  It is now urgent for our recovery that the UK banking systems is broken up, to provide us with the infrastructure we need. 

Will that happen?  The appointment of Sir John Vickers to head the inquiry, after a period in charge of the pusillanimous Office of Fair Trading, does not bode well - but constant exhortation, begging the banks to lend more, as if they could if they wanted, simply obscures the point.  It allows politicians to continue in their fantasy that the structure of UK banking could survive if only th bankers were nicer.  It won't work.

Why do we subsidise this waste of talent?

HSBC chief executive Mike Geoghegan has made raised the predictable complaint about Vince Cable that his call for ‘restraint’ – rather mild when there are over a thousand City bankers earning more than £1m a year – might drive bankers abroad.

“We pay for talent and we have to pay the market rates,” he said.

But what is talent here? This is the question the political world needs to ask. Is this a good use of talent, to set it loose in the corrosive, speculative world, and deprive the real world of its imagination and knowhow?

There might be an argument that it is, because otherwise it will go elsewhere – if somehow the financial world was, slowly and rather badly, of benefit to the nation. What the coalition needs to decide is whether this is true.

Because, I’m not sure it is. In practice, the more we funnel our national talent towards the financial sector, the more we corrode our economy.

We create property bubbles (78 per cent of local lending in the UK went to property over the past four years). We corrode the abilities of small enterprise to compete. We finance the takeover of effective British companies by ineffective American ones. We funnel effort and finance into the pointless froth of the merger market. We corrode people’s pensions (£7 bn creamed off by the industry in hidden charges last year). We undermine the independence of local economies. We replace small employers with big multinationals which offshore their employment. We hollow out the UK economy and make it less able to compete in the future.

Is that a good use of talent?

Taking part in a BBC McDebate

I was on the new BBC Sunday Live programme this morning, talking – if you can call it that – about Tony Hayward’s £1m pay-off. I had forgotten just how frustrating those kind of programmes are.

It is a fantasy, of the BBC and others, that getting lots of people to phone in with comments and having a studio panel with others, who are not particularly well-informed, is somehow a contribution to democracy.

In practice, the technology barely worked. The phone-in consisted of one Scottish lady saying “Nooooo!” very slowly. And in any case, there is almost no scope for saying anything very different or exciting in this kind of McDebate.

But it did make me think a little. Apart from the problem of the size of Hayward’s severance package, which is just another symptom of the way we are creating a cadre of ubermensch in the corporate world, the issue here is really about efficiency.

How much money do we need to incentivise the right people to take the job in the first place? A hundred times average salary, a thousand times? Either way, if we pay more, we are not using our corporate assets – and most of us own BP in one way or another – very efficiently.

Especially as we then incentivise them all over again to achieve a series of narrow targets. The problem isn’t so much paying the ubermensch for failure, it is incentivising them in this narrow way in the first place.

Real success is not about share price, or sales, or anything else that can be summed up in a couple of numbers. When you give executives incentives to meet them, you pervert the performance of the company, with disastrous results. The banking crisis was accelerated by perverse, short-term incentives.

So I don’t have a problem with paying Tony Hayward for doing his job, whether he fails or not. I do have a problem with incentivising him over and over again, and far beyond what will actually affect his behaviour, to achieve narrow, damaging and perverse targets.