Really, well done Ed Miliband and everyone else who stuck the knife in. That’s another £580m that Stephen Hester and the rest of the management at RBS will have to recover, on top of an already depressed share price. As Rowena Mason writes in her article:

It makes the prospect of recouping the £45 billion used to prop up the banks in 2008 even more distant.

Well done, excellent work Ed Miliband. Perhaps the taxpayers can sue you to the tune of £900m for having wiped that amount of value off the UKFI’s stake in the banking sector? Please, just keep your trap shut. Each time you open it you wipe millions off the value of our banks, and the FTSE100 as a whole. Even better, just get out of politics, shut down the Labour party, and take up counting paperclips for Lambeth Council.

Gosh, it’s about a month since I resumed this blog, despite telling myself that I should keep it updated regularly this year. What’s prompted me out of my torpor has been the furore over the award to RBS’s CEO Stephen Hester of £963,000 in share options, deferred for two years. What follows is a bit of a rant, so hang on!

It’s this last bit that seems to have escaped pretty much everybody’s attention, except for economics reporters in the media, and the usual apologists in the City. So why on earth am I defending this bonus, which Hester has now declined? Me, of all people, who’s an ardent left-winger? It’s all about increasing the share value of RBS in order that it be sold at a profit. People, wake up! That’s the sole purpose that Hester was hired for. Like it or not, money is a great motivator, and yes, it even works at the bottom end of the money pile. It’s not as if Hester was being awarded a cash sum of money that he could fritter away to his heart’s content. I’ll repeat it again: it was a share option, deferred for two years. That means he does not receive the shares until 2014.

It’s evidently fashionable to “bash bankers,” and I have little sympathy for the breed. Indeed, I’m as tamping mad as the next person for the short-termism bonus culture which largely got us into this financial mess in the first place. But lest we forget that it was the Labour government who loosened regulation, and indeed Conservative MP John Redwood (PDF) urged even less regulation of the financial services sector, despite later trying to “clarify” what he said. This, however, is a distraction.

It’s not widely known that Stephen Hester is actually paid less than the market rate for the type of job he does. It’s also conveniently forgotten that he was appointed by the previous Labour government to sort RBS out. Labour – via UK Financial Investments – would’ve had a hand in hammering out Hester’s contract of employment, including what bonuses he would be entitled to. So it makes my blood boil that the very same Labour party have now been crowing loudly about this deferred share option, even though they would’ve approved it in the first place! A source who has worked inside RBS at a high level has told me that things are “difficult” inside RBS, thus the current management team have a mountain to climb in order for UK Financial Investments to sell it at a profit, unlike the loss they made selling Northern Rock to Virgin Money.

So, this is the situation we’ve got ourselves into. Because society has successfully exacted revenge on Stephen Hester by putting pressure on him to reject his legitimate bonus, it’ll now make it less likely for us to recoup our investment in RBS. Thanks a bunch, you ignorant public. What’s to stop Hester throwing the towel in and walking off to a similar position at another bank for less stress, more money, and less public opprobrium? Nothing. And do you honestly think that Mabel from the corner shop, or the guy who flips burgers at McDonald’s is able to step in should Hester resign? (This needs no answer.) The harsh reality (and I’m deeply uncomfortable about this) is that the number of people with the necessary skills to run a bank like RBS and improve its share price are terribly thin on the ground. Yes, I know that it’s all their fault we’re in this mess to begin with, but we have no other choice but to turn to those sort of people to return these financial institutions to private ownership, and at no loss to the taxpayer.

If Stephen Hester does manage to return RBS into private ownership and at profit to the taxpayer, as far as I’m concerned you could give him the moon on a stick. If he succeeds in driving up the share price prior to its flotation or sale, with a share option, he gains, but so do we, massively. It’s quite simply a win-win situation. Sadly, the population (and most of the media) have forgotten this, or are too stupid to understand.

The funniest suggestion I’ve heard regarding this saga is that because Stephen Hester is effectively a civil servant (due to the taxpayer owning 83% of RBS), he should be paid a civil servant’s salary. That’s easily the funniest thing I’ve heard so far in 2012, and just goes to show the level of people’s (and politicians’) ignorance with this matter. There’s a vast gulf between what a CEO of a bank like RBS is expected to do and some Whitehall or Powys County Council mandarin who mainly counts paperclips. Since when has a civil servant increased the share price of a private company? I’d imagine they’d know how to decrease it quite effectively. (The gross inefficiencies of the public sector will be written about sometime later.)

Back to my title: revenge may come at a price. This is the danger. My source who spent some time at RBS reckons that now this bonus option (plus all future ones) have been turned down by Stephen Hester, and the fact that he knows he’s publicly hated, it’ll make the recovery of RBS – and Lloyds Banking Group and Bradford & Bingley plc – even longer to achieve. Indeed, my source reckons it’ll add two more years to the economic downturn and consequent austerity measures. A pyrrhic victory for populism. Nice one, plebs.

Very little has changed in the meantime, except that the country’s on its knees, thanks to the Labour Government’s mismanagement and “light touch” regulation of the financial services industry. Not that the Conservative Party would’ve been any better – indeed, they were pushing for even less regulation. That’s conveniently forgotten about these days. Few would’ve thought that over the past three years or so that things would end up this bad.

I’ve always wondered if David Cameron or Nick Clegg anticipated that we’d see such a large decrease in living standards (or that incomes remain static or even fall, as household costs rise). While the economy was discussed during the leaders debate, as far as I can recall nobody admitted that the economy would end up in such a mess, and that the vast majority of the population would end up shouldering tax hikes and enjoying a severe reduction in public services, while CEOs and directors creamed even more money out of publicly-listed companies, and ditto senior bank staff looting from the state-owned banks we had the misfortune to bail out.

In better economic times, we’d have looked back at the premiership of Gordon Brown with humour; sadly, we don’t have that luxury. It was a time of abject horror, and this has become even more apparent in the 18 months since, not less so. His one saving grace was that he kept the UK out of the Eurozone; however, this is more likely to be due to accident rather than by design. A case of incompetence having a fortuitous outcome for once.

Spotted in the window of Derek’s Plaice fishmongers in Welshpool.

Oh dear, I think he’s probably regretting that he went over there because of the savaging he had. You see, people, this is democracy — holding a country’s leaders accountable by one’s political representatives. It’s such a shame that there’s so little accountability at Westminster. There’s little point in writing anything constructive about this YouTube link, except that I strongly suggest people watch it. Please. And forward it. I have rarely heard such a masterly put-down in many, many years.

To compound the misery, Nigel Farage also stuck the boot in, though in not such an eloquent manner:

A transcript has been done of Daniel Hannan‘s wonderful three minutes of glory, and I don’t think he’d mind at all for it to be reproduced here:

Daniel Hannan MEP: The devalued Prime Minister of a devalued Government
Prime Minister, I see you’ve already mastered the essential craft of the European politician: namely the ability to say one thing in this chamber and a very different thing to your home electorate. You’ve spoken here about Free Trade – and amen to that. Who would have guessed, listening to you just now, that you were the author of the phrase ‘British jobs for British workers’ and that you have subsidised, where you have not nationalised outright, swathes of our economy, including the car industry and many of the banks? Perhaps you would have more moral authority in this house if your actions matched your words? Perhaps you would have more legitimacy in the councils of the world if the United Kingdom were not going into this recession in the worst condition of any G20 country?

The truth, Prime Minister, is that you have run out of our money. The country as a whole is now in negative equity. Every British child is born owing around £20,000. Servicing the interest on that debt is going to cost more than educating the child. Now, once again today you try to spread the blame around; you spoke about an international recession, international crisis. Well, it is true that we are all sailing together into the squalls. But not every vessel in the convoy is in the same dilapidated condition. Other ships used the good years to caulk their hulls and clear their rigging; in other words – to pay off debt. But you used the good years to raise borrowing yet further. As a consequence, under your captaincy, our hull is pressed deep into the water line under the accumulated weight of your debt.

We are now running a deficit that touches 10% of GDP, an almost unbelievable figure. More than Pakistan, more than Hungary; countries where the IMF have already been called in.

Now, it’s not that you’re not apologising; like everyone else I have long accepted that you’re pathologically incapable of accepting responsibility for these things. It’s that you’re carrying on, wilfully worsening our situation, wantonly spending what little we have left. Last year – in the last twelve months – a hundred thousand private sector jobs have been lost and yet you created thirty thousand public sector jobs. Prime Minister, you cannot carry on for ever squeezing the productive bit of the economy in order to fund an unprecedented engorgement of the unproductive bit. You cannot spend your way out of recession or borrow your way out of debt. And when you repeat, in that wooden and perfunctory way, that our situation is better than others, that we’re ‘well-placed to weather the storm’, I have to tell you that you sound like a Brezhnev-era apparatchik giving the party line. You know, and we know, and you know that we know that it’s nonsense! Everyone knows that Britain is worse off than any other country as we go into these hard times. The IMF has said so; the European Commission has said so; the markets have said so – which is why our currency has devalued by thirty percent. And soon the voters too will get their chance to say so. They can see what the markets have already seen: that you are the devalued Prime Minister of a devalued government.