Any other business | 8 January 2011

A knighthood for the last banker who put his shareholders’ interests first

The New Year honours list is always a vivid indicator of the times just gone by. No brand better encapsulated the feelgood consumer frenzy of the last decade than Lush, the purveyor of organic soaps and Fairtrade lotions alongside campaigns to save sharks and rainforests, whose name has (perhaps coincidentally, but it can’t have done sales any harm) become slang for something luxurious and desirable. Lush’s founding couple, Mark and Mo Constantine, collect an OBE apiece. As for the dark side of the last decade, the financial services sector, which accounts for almost 10 per cent of the British economy, is recognised by one modest medal — an OBE for Adrian Coles, director-general of the much diminished Building Societies Association, so many of whose former members took the demutualisation route to perdition. That award is matched by another OBE for a man who must nowadays count as one of Britain’s busiest magicians, Andrew Duffell, chief dealer of HM Treasury’s Debt Management office.

There was one banker on the list too, but since he retired from the City in 2003 he is evidently no longer regarded as a danger to the public. Sir Peter Ellwood, as he becomes, was chief executive of Lloyds during its sensible era, and bequeathed what Neil Collins once labelled here ‘the Ellwood Memorial Dividend’ — a handsome annual payout to shareholders that lasted until the catastrophic HBOS rescue merger in 2008 and now stands in investors’ memories as a sad reminder of what it was like to own a piece of a bank that got its priorities right.

It’s a bit of a mystery why Ellwood should be knighted for ‘services to business and the public sector’. After Lloyds he chaired the remains of ICI, until it was sold to the Dutch group Akzo Nobel, and the packaging group Rexam, but neither counts as specially notable; in the public sphere, he led Tony Blair’s Race Equality and Diversity Task Force, which is probably best forgotten. I suspect the real reason for his belated K is his service as chairman of the Royal Parks, and that he may well have been the mastermind behind the great clean-up of the St James’s Park pond which did so much to improve the quality of life for nesting coots — an achievement that deserves a lifetime supply of Lush body butter as well as a big gong.

Joining the doomed band

Commiserations to Anti Poolamets, the Estonian historian who fought a brave campaign to persuade his fellow countrymen not to surrender their currency, the kroon, in favour of the euro. Poolamets — who plastered Tallinn with posters saying ‘Welcome to the Titanic!’ — pointed out that with a debt-to-GDP ratio of only 7 per cent, one tenth of the eurozone average, Estonia’s reward for becoming the 17th member of the euro club will most likely take the form of an invitation ‘to pay the bills for banking machinations in other countries’. But the changeover went ahead on 1 January, and prime minister Andrus Ansip was photographed beside a euro cash machine with the same smug grin that the bandleader Wallace Hartley must have had in 1912 when his agent told him he’d got the gig on an unsink- able new transatlantic liner. Meanwhile, Latvia and Lithuania look forward to joining the on-board ensemble in three years’ time.

All this tells us two useful things. First, it really isn’t difficult for countries to change their currencies when circumstances demand. In Estonia for example, Russian, German and Finnish money all circulated after independence from Russia in 1918 until the kroon (originally pegged to the pound) came into being in 1928; it was supplanted by the rouble in 1944, returned in 1991, and has now yielded to the euro. Second, the euro itself is still evolving, and the well-oiled mechanism for bringing in new members can surely be reversed to ease out delinquents and help them re-establish their own currencies. So why not declare that henceforth the single currency will operate like the FTSE100 index, with a fixed number of participants and promotion or relegation at regular intervals – of, say, three years? That would give Greece, Portugal and Ireland until January 2014 to get into shape or risk losing their places to Latvia or Lithuania or indeed Hungary, Romania or Bulgaria, which also aspire to play in the band. And it would make the euro less likely to sink with all hands, by reinserting some discipline into a structure whose original rules have been so comprehensively abandoned.

No black swan

After the big snowfall, northern petrol stations were piled high with plastic containers of bluish liquid advertised as ‘ready-diluted screenwash’. Each probably held a few pennies’ worth of blue chemical and five litres of water. But I fell for the ‘two for £7.99’ offer, and my screenwashers promptly froze solid, as did the remaining solution in the container. So I felt sympathy for BAA managers when Heathrow had to shut — until it became apparent that they had not been gulled into buying a load of dud de-icer but had not bought enough of any kind of de-icer, nor the equipment to deploy it, and had clearly never attended the kind of risk management seminar that I wrote about last week.

The Heathrow freeze-up is a disgrace for which culpability looks far more straightforward than BP’s Gulf rig disaster; it was mitigated neither by BAA chief executive Colin Matthews’s offer to forego his bonus nor by chairman Sir Nigel Rudd’s attempt to label it a ‘black swan’ — a reference to Nassim Nicholas Taleb’s theory about the impact of highly improbable events. This was not such an event, but by all accounts a case of feeble planning and under-investment, for which blame must go back to BAA’s debt-laden Spanish owners, the Ferrovial construction group. And that makes me feel better about the headline I put on a piece by George Trefgarne when Heathrow was in chaos because of security measures back in 2006, shortly after Ferrovial completed its purchase. ‘Are these Spanish builders really fit to run Heathrow,’ it asked, or are they ‘too busy juggling their debt portfolio to attend to the current crisis in Britain’s airports?’ At the time it looked a bit rude, but now it looks remarkably prescient.