David Miller, 16 December 2006 

Fat cat, Dennis Stevenson

Naturally enough the defenders of corporate privilege such as the CBI say such rises are healthy. David Lonsdale, deputy director of the CBI, reportedly said ‘No doubt some will seize on these figures in order to peddle an anti-business message, but executive pay has to be driven by the realities of the market place’. [3]

The realities of the market place are such that we must expect greater and greater inequality and learn to like it. Since 2003 the inequalities have only increased. According to Income Data Services in November 2006, ‘average remuneration packages for chief executives of the UK's biggest 100 companies rose 43 per cent from just under £2m to £2.8m last year.’ This ‘means that the executives now earn approaching 100 times the pay of their average employees and follows previous inflation-busting pay rises which have doubled the remuneration of the top directors since 2000’. Scotland is no exception to the boom in fat cat pay awards, Sir Fred Goodwin, at Royal Bank of Scotland, saw a pay rise of some 35 per cent last year, receiving a basic salary of £1.09m, a performance bonus of £1.76m plus a £1.53m increase in the value of his pension fund. [4]

In 2006 there were fewer Scots in the top 1,000, (61 as compared to 69 in the previous year) but the overall wealth of the top 100 Scots, ‘has risen sharply by about £1.2 billion to nearly £14.5 billion.’ Glancing down the list of the top 100 in Scotland one is struck by the absence of many of the directors of Scotland's biggest corporations. The richest people in Scotland are apparently largely from traditional industries or from the mushrooming service sector. Thus there are milk and cheese producers (Alan Wiseman and Hugh Irvine), bus company owners (Brian Souter and Ann Gloag) car repair and sportswear companies (Tom Hunter and Tom Farmer). All of these (with the partial exception of Souter and Gloag) are predominantly national capitalists with business largely based in Scotland or Britain. Where are the directors of the Royal Bank of Scotland, HBoS and Standard Life? Maybe they are not in the rich list partly because their personal fortunes, though huge, do not measure up. Equally, it is difficult to measure their wealth since many of them choose to hide what they are paid through arcane tax and revenue avoidance measures, most - perhaps all - of which are perfectly legal. Sir Angus Grossart is one – left out of the Scotsman list because ‘careful accounting’ masks a full picture of his wealth. [5]

Also not listed are those who are hugely influential in Scotland but who are based outside Scotland. Two examples from the two largest corporations in Scotland suffice. Peter Sutherland is a non executive director of the Royal Bank and Dennis Stevenson is chair of the board at Halifax Bank of Scotland. Both are serious players in the transnational business elite. Both are hardly noticed as having anything to do with Scotland. Yet they and the rest of those running Scotland's financial establishment have the whip hand in decisions affecting Scotland.

Their financial affairs are murky but they are seriously wealthy, 'earning' in excess of £1million a year. But the most important thing about this faction of the new rich is their integration into the transnational corporate elite. Peter Sutherland, is a former Attorney General of Ireland, and was the first director of the World Trade Organisation in 1997. A consummate corporate networker Sutherland is on more boards and lobby groups than most people could name. Stevenson is also an arch new Labour connected fixer, friend to Peter Mandelson, think tanker, Special adviser to Blair, serial corporate board member. Their role in the Scottish economy is to promote its further integration into the world market. Stevenson himself argues that the Scottish financial sector is 'in no sense a branch factory - quite the opposite'. [6] This fraction of the rich are outward looking and equally at home in Edinburgh as they are in London, New York or Paris. They have an emerging different set of interests to the Scottish bound business rich whose dairies, car repair outlets and shops cannot be so easily moved to Shanghai or outsourced to India, like the activities of the financial sector. This is the new 'Rich-rich' divide noted by former US Labor Secretary Robert Reich between those who still work within a 'national' economy (like Britain or Scotland) and those at the top of the global corporations who share an 'increasingly similar cosmopolitan culture'. Their income and wealth ‘far surpass those of national’ elites. [7]

What do the rich do with their money?

The 21st century rich are rediscovering the pleasures of times past. In their leisure time they consume conspicuously; in looking after themselves they make sure to buy themselves out of the public sector by availing themselves of private health provision, sending their kids to private schools and generally avoiding their fellow citizens when at all possible. For example financier Angus Grossart spends his spare time renovating his weekend retreat a 16th Century castle near St Andrews, [8] while Irvine Laidlaw indulges his ‘taste for vintage racing cars and yachts’. [9] The sales of luxury cars are booming. Luxury car dealer HR Owen - according to director, Rodney Turner. ‘finds that as soon as bonuses are announced in the City, they get calls asking for cars worth up to £200,000’. Director Rodney Turner ‘said many clients spoke of their as "toys".’ [10]

But the new rich-rich divide is as nothing compared to the increasing divide between those at the top of the society whom Reich describes as 'symbolic analysts' and those at the bottom. Reich notes the accelerating collapse of the middle tier of the work force - those involved in producing goods in factories and offices - and the massive expansion of the bottom tier in the service sector. As he notes, the increasing wealth of the new rich in society - the symbolic analysts (he puts it at about 20% in the US) is 'helping to fuel the growth' of the lowest tier, the personal service workers. Reich notes that the richest 10% in the US (about the same in the UK and Scotland) now have so much discretionary cash that 'they can afford lots of pampering. They're hiring coaches, masseurs, drivers, gardeners, cooks ad therapists of all kinds'.

Those who think that the rich are lazy are quite wrong; they spend lots of their time and some of their money in ensuring that they are able to keep as much f their money as possible. Tax avoidance, offshore accounts and other ruses are heavily used. The Sunday Herald and Who Owns Scotland estimate that the ‘UK Treasury is losing hundreds of millions of pounds a year in Scotland alone because millions of acres of land are held in offshore trusts or nominee companies that hide the true identity of the owners.’ [11]

The rich must also cultivate the not so rich - the politicians - who act as their agents, smoothing the path of many a piece of unpopular legislations. So Lord Laidlaw ‘almost single-handedly bankrolls’ the Scottish Conservative Party. [12] Others who like to remain more in the background make sure that resources are channelled to neo-liberal political actors via direct funding or - better - via indirect funding by the corporation they run. This money goes to think tanks and other neo-liberal lobby groups. One of the lowest profile members of the Scottish corporate rich is Lord Dennis Stevenson, the Chair of the board of HBoS who ‘earned’ £538,000 in 2004 and £563,000 in 2005 not including bonuses or his myriad other jobs. Stevenson, a self confessed ‘intellectual snob,’ [13] made sure that Pearson stopped all funding of political parties when he joined its board in 1996. [14] Stevenson prefers to channel money and other benefits of his influence to market friendly think tanks – and thus has been associated with the Social Market Foundation and Demos. HBoS has a long history of supporting similar organisations in Scotland as have the other Scottish corporate giants. Together with the Royal Bank of Scotland, Lloyds TSB Scotland and Standard Life, they have funded the David Hume Institute, while Stagecoach and the Barclay Brothers bankroll the ultra right Policy Institute. The notionally ‘centre left’, but in reality pro market, Scottish Council Foundation is meanwhile funded by BP, BT, Diageo and Pfizer, amongst others and is chaired by a corporate networker and lobbyist (Shonaig Macpherson) who also manages to find time to sit on the Management Group of the Scottish Executive.

This indirect money funds the ideological allies and flunkies of the corporate rich to make the case for more privatisation and less democracy – so long as it is bound up in soothing phrases such as ‘modernisation’ and ‘good policy’. The project run by Wendy Alexander with the Fraser of Allander Institute (funded by Tom Hunter and the ‘private sector’) is an obvious example. [15] It involved bringing leading neo-liberal economists to Scotland to lecture the Scots on how to enact more privatisation. The resulting book project sets out the neoliberal agenda clearly as it 'emphasizes the role of greater openness, incentives and capabilities in stimulating future growth. But it also stresses the importance of winning the battle for people's hearts and minds in support of good policy, because if the politics do not make sense, the policy will rarely change.' [16] In other words, the art of politics is to manage public perceptions so that the voters will put up with the dominance of the rich or be misled into thinking that ‘modernisation’ is good for all.

This is how the rich attempt to ensure that the democratic process does not produce any political forces that are capable of constraining their wealth. Among the key battles for hearts and minds is their attempt to pervert the education system at primary and secondary schools and in further and higher education. Thus the rich plough significant resources into propaganda designed to insist that there is no alternative to hyper competitive capitalism.

Sometimes this is described as giving to charity. But – in the manner their Victorian forbears would have recognised - they gain kudos for charitable giving, which at the same time is designed to shore up their wealth. Thus Scotland’s rich seem keen on ploughing money into pro-business propaganda campaigns. Known as ‘enterprise education’ this teaches children that getting rich is socially acceptable, that it is within the grasp of anyone regardless of their social class, and that all it requires is a positive attitude – which can handily be inculcated by enterprise education. Irvine Laidlaw’s charity venture the Laidlaw Youth Project – which shares the same address as the Scottish Conservative Party has been ‘engaged in ongoing dialogue’ with the Scottish Executive on funding pro-market education initiatives and ‘has funded places for Scottish headteachers to attend a two-day leadership conference in London’. [17] Tom Hunter, Scotland’s richest man has also been heavily involved in promoting business propaganda in schools: ‘Working with the Scottish executive, the [Hunter] foundation has ploughed millions into the Schools Enterprise Programme since 2001 — delivering enterprise education to all pupils aged five upwards — making it available in every primary school in Scotland. They are working on introducing it across all secondary schools.’ [18]

For those who think that an independent (non socialist) Scotland would necessarily make things any better there is sorry news. The conflict between the national and international fractions of the capitalist class would remain and it is perfectly plain that the rich who run devolved Scotland would be the same as the rich who would run independent Scotland. They are not held in place by the mechanism of the devolved Executive. On the contrary they run the country with the connivance of the Executive and they would continue to do so with the connivance of an independent parliament. Unless and until the problem of the democratic system is sorted out and it is able to respond to the wishes of the people. Whether independent or devolved, Scotland needs a democratic politics which can take on the rich and end the obscenity of ever increasing social division.