STRICTLY UNDER EMBARGO UNTIL 0001, THURSDAY 22nd DECEMBER
 
Jeff Randall’s Christmas Dinner
 
Please note that any quotes used must credit Sky News and Jeff Randall in full
 
Sky News’ Jeff Randall sits down to a Christmas dinner with three of the biggest names in British business:
Sir Philip Hampton, Chairman, Royal Bank of Scotland
Alison Cooper, CEO, Imperial Tobacco
Justin King, CEO, Sainsbury’s
 
JEFF RANDALL: 2011 was a news year like no other, when the extremely unlikely became almost commonplace. It began with a debt crisis inside the eurozone and ended with the currency’s very existence in jeopardy. Along the way, President Mubarak was toppled in Egypt, Colonel Gaddafi assassinated in Libya and the News of the World closed in Britain. We saw student protests, riots on the streets and a Royal wedding. Apart from all that, it was pretty quiet.
 
A bailed out bank in the world of big bonuses, as Chairman of Royal Bank of Scotland, Sir Philip Hampton faces the challenge of reviving an institution which suffered a near death experience and is now kept alive on a support machine funded by tax payers. His every move is scrutinised by Ministers, the media and a very angry public. 
 
Burning issues in a man’s world, as only the fifth woman to head a FTSE 100 company, Alison Cooper has one of the toughest jobs in business. Imperial Tobacco’s Chief Executive faces relentless attacks from health campaigners, she recently defeated accusers over price fixing in this country but is now battling plans for tougher regulations in Austria.
 
And fighting for every penny, he’s the boss credited with restoring the fortunes of Sainsbury’s, after taking the top job in 2004. Justin King has retail in his veins having previously worked for Marks and Spencer and Asda but now, as households feel the squeeze and spending is cut back, he needs all that experience to keep the company moving forward. In this festive season, Justin has kindly invited us to his London headquarters for my Christmas Dinner. 
 
It’s been an amazing year, an unpredictable year, what for you, Justin, was the game changing event?
 
JUSTIN KING: Well Jeff it has to be the euro doesn’t it and the crisis in Europe around the euro. It’s captured the news wires for most of the year and connected all of us, not just commentators like you and business people like us, but every single person in the country, with the idea that there’s this thing called the euro which is affecting every one of our lives on a day to day basis.
 
Everybody tells me, Philip, it’s going to lead to a banking collapse if it all goes wrong. Will it?
 
PHILIP HAMPTON: Well it would have to be a second banking collapse wouldn’t it because we’ve already been through one. Yes, I mean if you think of some of the more extreme events that can occur which is major countries leaving the eurozone or a number of smaller countries leaving the eurozone, that’s something that would produce massive strains around the banking system immediately and certainly at the more extreme levels of that you would get a wave of recapitalisations of banks by governments throughout Europe.
 
So this is not politicians overstating a problem into a crisis, it really would be a disaster?
 
PH: Yes, which is why I think it won’t happen, I think the euro probably will hold together because the implications of it falling apart are so horrific for business and for people throughout Europe and indeed the world.
 
What do you think Alison, because you trade all over the world?
 
ALISON COOPER: Yes, I’m very much with Philip on this. I do think that we will find ways of keeping the euro together and …
 
Really, you don’t think we’ll fudge?
 
AC: I think we’re fudging already aren’t we in reality? So we’ve got sticking plaster and string and everything else but we’ve got to keep at it and we’ve got to hold the euro together so that we actually do give some stability for growth to get us out of this crisis.
 
Do you think, Alison, that Cameron was right to wield that veto? The public think he was right.
 
AC: If I look at what he was trying to do, I think the motivations were very good. I think the execution was probably the point of debate here and I think ultimately we have got to stay connected.
 
Philip, I’ve heard more than once that banks will fall apart, they’d go bust.
 
PH: Everybody is planning for it, everybody has got the contingency plans.
 
Do they?
 
PH: Oh absolutely.
 
At RBS you have a plan B which says on the top of it – euro break up?
 
PH: Yes, we’ve had contingency plans about this for several months, partly at our instigation, partly at the direction of the FSA so this has been talked about. I have to say, whenever it arises it will almost certainly be a shock because if you think about it, no country can say we are planning to leave the eurozone because the minute they say that, they’re out because their banking system collapses because everybody takes all of their money out of the banks. 
 
We’ve had lots of reports this year, all sorts of reports, the Vickers reports and of course the RBS report into what went wrong. There was a moment of almost surreal humour on the day it came out, I remember reading the headlines on the website and it said ‘RBS collapsed because of management failures’. Come on, did we need a report to tell us that, Philip?
 
PH: I missed the humorous bit.
 
Well it was just a statement of the obvious.
 
PH: Gallows humour. Yes, RBS really didn’t do much that other banks weren’t doing with one exception which is it made a really big, bad acquisition at an absolutely terrible time and it was probably that that tipped it over the edge. 
 
Post the Vickers report into banking, post the report into RBS, have we got it right because I keep hearing this clamour for more and more regulation but we had tons of regulation before all this didn’t we? We weren’t short of regulation.
 
PH: Well we had the non-regulation and then the international cap, the international banking system we now know – people didn’t think it at the time – was grotesquely under-capitalised.  We do need to make sure that we’ve got regulation that fixes banks, you can’t have a banking system that’s weak otherwise everything else starts to gum up.
 
Are you now comfortable with how we run our banks? Do you go to bed at night still thinking this could all go horribly wrong?
 
PH: I don't think the system has been fixed. I think it is very much on the mend. UK banks, there is a ghoulish expression used in the City that the British banks are the best looking horse in the glue factory or the best looking pig in the slaughterhouse, all those sorts of things …
 
See, gallows humour!
 
PH: … but the banking system as a whole is under strain.
 
Alison, another theme of the year, perhaps the last two or three years, is that banks don’t serve their customers well. You are a big international business, are you well looked after by your banks or is your cash flow so good you don’t need them, they need you?
 
AC: We do have very good cash flows but in terms of our banking relationships, they have been very good throughout all of this.
 
At the risk of sucking up to your former boss, are you well looked after by your bank?
 
JK: Yes, I think we pretty well are but of course big corporations like ours are big fee payers so it’s hardly surprising that we are well looked after by our banks. I think the challenge for banks is, whether it be consumers feeling the charges that they bear for their current accounts and their small overdrafts when they take them are unreasonable or unfair or small businesses feeling that they don’t get the support of a bank manager to, if you like, support the growth of their business. 
 
Philip, you have been in and out of banking, you have been on both sides of the fence, you are always alarmingly frank – are the big banks starving British business of investment funds?
 
PH: There is something of a problem there. I personally think it is exaggerated sometimes by the media and by politicians for other reasons, we certainly at the moment at RBS, we have a 42% market share now of new lending into the SME sector.
 
If it was a lot more you’d be accused of being manipulative.
 
PH: Or reckless in terms of lending too much. But we are taking up the slack that is left by other banks who are not really, in our view, doing as much as they should.
 
So do you feel under pressure from the government to lend in your view badly, i.e. to lend more but not wisely?
 
PH: Clearly we’re under pressure to make money available and it’s our job frankly to make money available, that’s what you do, that’s what banks should do, particularly when times are hard for their customers. That’s why they need to be strong, so they can deal with their customers if their customers get weak.
 
What about the other issue of this year, regulation? I mean Alison, you are in a highly, highly regulated business and many people would say absolutely rightly so. Are you over regulated?
 
AC: I look at regulation as a day job I live with, I am similar to other sectors around the table. Regulation has got a very, very key role to play when regulators get it right and absolutely, I’m in an industry where a degree of regulation is absolutely right and proper and good regulation, well thought through serves a very good purpose. My problem is with ill thought through regulation, hurried regulation, regulation where the evidence isn’t considered properly.
 
I suspect most of our viewers, many of our viewers would say, but hang on a minute, it’s cigarettes. We all know that smoking is not good for you, in the long run if you do it enough it kills you, you’ve got to have very strict regulation and many people would say you are not regulated enough.
 
AC: And we have significant degrees of regulation which is absolutely appropriate for the product but I think at an extreme though, if you take it too far, the unintended consequences are actually unhelpful for the health agenda. From a business perspective there are a lot of issues there around costs and …
 
Isn’t that just business whinging? We need regulation, you are a highly regulated business when you sell food, rightly so, you also sell cigarettes by the way.
 
JK: Let’s take an example which touches both of our businesses. In April next year a new tobacco display regulation is going to be put in place. Here is a very straightforward, it could be a very straightforward regulation and something that we would all accept, tobacco has to have controls on it. We’ve long since lost the thread back to the reason that it’s being done and you could describe that for almost every regulation that’s now happening. We are seeing four version of many, often changes made in effect retrospectively and I think one of the things that business really wants from regulation apart from the fact that I said that politicians should ensure that it is connected to its objective, is that we want it to be consistent, long term and predictable.
 
Philip, you don’t have a dog in this fight in the sense that you neither make cigarettes nor sell cigarettes, should smoking just be banned altogether?
 
Well we’re pretty close to it aren’t we, in terms of the public places. No, I don't think so, I personally don’t much like smoking, I’m an ex-smoker so it sort of defines me really as strongly opposed to it but I think it’s one of those freedoms that people need to make up their own minds.
 
Okay. Now, Justin, another report, we keep having lots and lots reports, Mary Portas, the high street, the death of the high street. This is something with which I have sympathy, my home town in Essex, Brentwood, you walk down that high street and it’s absolutely extraordinary. I counted more than 20 shops the other day empty, something is going on with British high streets. Does it matter and are you to blame? 
 
JK: Well we’re not, I’ll start with that. I think you might expect that someone like Mary would have come out with that conclusion and she hasn’t. What we’re seeing though is we’re seeing massive changes, have been for generations, in customer shopping habits. In the end we may have been past the peak of the amount of space that wished to be rented in the high streets as retail space. That doesn’t mean that we can’t have smaller, more consolidated high streets as still an incredibly attractive destination but we’ll have to be radical in our thinking. We’ll have to allow councils to think about the bad end of the high street being converted back maybe to domestic use. At the moment the bad end of the high street ends up being full of empty units and charity shops who are getting a rate subsidy and ultimately lots of charity shops potentially undermines vibrant new small businesses starting up so I don't think we should assume that they are necessarily they are a benign force.
 
END OF PART ONE
 
PART TWO
One issue that has actually struck home with me is public sector pensions because when you look at what a lot of these people are doing, they are pretty unpleasant jobs, they are not well paid, they thought they had a deal and suddenly the government has turned round and said the deal that you signed up to is off the table, you’re going to get something less than that. Was the government right to do that, Alison?
 
AC: I think the government has got to look at all aspects open to it at the moment in terms of managing the situation they’ve got and the deficit of this country so I think they do have to look at all those options.
 
Justin, public sector pensions, do they not have a case?
 
JK: Well again Jeff, I’m going to have a go at taking you to task on the way that the question’s asked. Why is this challenge facing us? At its core is an incredible piece of good news – we are all living longer healthier lives. 
 
That’s true.
 
JK: Life expectancy has gone up nearly five years in the last twenty years and you see I think there is a fairness issue in this.  The response is usually ‘well this isn’t fair’, I absolutely agree that it’s not fair for those of us who still have many working years ahead of us to expect our employers to stick with a deal which is 20, 30 years old, completely out of date with the reality of life expectancy today and ask our children and our younger employees to pick up the tab. That’s not fair. 22 year olds are finding it hard enough to get a job today as it is and if their deal is also that they will never enjoy a pension that the 40 and 50 year olds in their company will enjoy, and by the way they are going to subsidise the pension, I think that’s an issue of fairness.
 
Philip, I recently went to PCS union meeting with Mark Serwotka and what was going on was really rather simple, the people there said look, you the bankers nicked all the money and we the people on low pay are now having to pay through lower pensions and it’s simply not fair. Do you understand where they are coming from?
 
PH: I certainly understand the anger against bankers, I am pretty angry myself. I think the way the banks behaved, just from a sheer business point of view in addition to the society aspects, was absolutely shocking, there is nothing you can say to defend it but the issues are very, very loosely correlated if you like and I think Justin’s spelled it out very clearly. The facts have changed.
 
By tradition at this Christmas dinner we have to look forward to the next year and contemplate what’s going on. I’m going to ask you three questions about big issues and then I’d like one big forecast. So the questions are these: the eurozone by the time of this dinner next year, will it be intact, I mean even if one member falls out that is not intact; the coalition, the UK coalition government, will it be intact by this time next year; and will the Chancellor’s austerity plans be intact or will he have to have a pretty big Plan C come the budget? Justin, what do you think? Eurozone?
 
JK: Eurozone, no, I think at least one country will drop out.
 
Coalition government?
 
JK: I think that will still be intact.
 
And will George Osborne have introduced Plan C or D or something else?
 
JK: I think substantially he will still be on Plan A.
 
What do you think Philip?
 
PH: I think it’s likely that one country, a small country will drop out. It could be any of them because I think that some of these things will be driven by political events as much as by economic circumstances and social unrest and all of those sorts of things but I think there is a very good chance that one country will fall out.
 
That’s interesting because earlier in the conversation you said if that happened we’d have banking chaos.
 
PH: One small country. A small country can be dealt with.
 
Can it? Greece?
 
PH: Yes.
 
Without the banks going bust?
 
PH: Er, some banks will be under particular strain but I don't think the banking system as a whole … the banking system as a whole can deal with Greece. 
 
So you are already assuming the worst in effect?
 
PH: Yes.
 
Inside RBS. And what about the Chancellor’s austerity measures?
 
PH: I think they will evolve rather than be changed radically.
 
You should be in politics! That’s what they he would say, there is no backsliding!
 
PH: I should absolutely not be in politics! 
 
Alison, okay, eurozone?
 
AC: Eurozone, I’m going to put some belief out there because they need some belief, the eurozone so I’m going to go for it holding together in its entirety.
 
What about the coalition?
 
AC: The coalition I think is also important for it to hang together. Clearly Europe was always going to be a point of contention for them but I think they need to keep at it, I would say for the sake of the children they need to stick together in terms of the coalition.
 
So that’s two yesses, what about George Osborne’s austerity plans?
 
AC: Yes, I’m kind of along the lines of it’s got to be a little bit flexible but the core of it will stick over the course of the next year but there needs to be some, I’m not going to use the word evolution but there will need to be some agility around it if necessary, on the basis of how the world evolves and to make sure that we’re responsive to that but the core of it will remain.
 
So what about the rest of the world, one other very big prediction, what’s going to happen next year?
 
AC: Looking at the world overall I think we are going to continue to see aspects I think of protest. 
 
More social disruption?
 
AC: We’ve seen it in Russia and the Arab Spring was phenomenal last year, I don't think anyone could have anticipated the speed, the pace, the action of individuals there so I think the whole protest theme.
 
Philip, one big prediction?
 
PH: Well if I may, I’ll stay on the theme of social protest which is the thing that has been missing in recent years from the crises, political ructions, financial ructions and so on, is France. France has got an unmatched history of getting on to the streets and making a big noise and they do it professionally and properly.
 
Les Miserables was a hit for a very good reason.
 
PH: I’m amazed that the French have been so subdued, I don’t think it will continue so I think they will be on the streets during the course of 2012.
 
Justin, one final big prediction for next year?
 
JK: Well I guess it is actually going to sound trivial in the context of almost everything that we’ve talked about but when I was younger one of my favourite bands was Ian Dury and the Blockheads and he had a song …
 
Of course, the boy from Billericay, wasn’t he Billericay Dickie?
 
JK: He was, yes, and he had a song which I particularly enjoyed which was Reasons To Be Cheerful, it was actually brackets Part 3 but let’s stick with the reasons to be cheerful. I think there are some reasons for us in the UK to be cheerful because look at what next year holds – we have the Jubilee which I think we will pour out on to the streets, not just of London but as we heard, the Queen plans to travel the whole country to celebrate.
 
Still a unifying force I would say.
 
JK: Very unifying and I think it will build up over March, April, May and the four day weekend, because we are getting an extra Bank Holiday in June, that we have will be a fantastic weekend. For the English there will be the swift roller coaster of expectation being dashed, I think we’ll beat the Germans on penalties but lose to the Spanish, there’s my specific prediction and then we’re into an Olympic summer capped off by the Paralympics and I think that one of the things that we should all focus on is that we’ve got lots of things happening in our country next year which nobody else can point to, that on the whole we love getting involved in and the world will either look on from afar jealously or they’ll actually come here as well to enjoy it.
 
I couldn’t leave this dinner without a bit of reflection on my own industry, the media. I think it would be journalistically negligent not to consider the whole phone hacking saga, what’s your take on that Justin? Has it changed the relationship with the media or has it simply confirmed what everybody believed, that we’re all a bunch of scumbags?
 
JK: I think what we saw with the News of the World and how swiftly it came off the newsstands is that we as a public were reminded that we have real power and for a long while I think there was a sense that the media were behaving in a way that was unacceptable but there was nothing we could do about it, was quite prevailing but what this year has shown is that we can have power as consumers with the media as well and it’s incredible. The longest standing and best-selling Sunday newspaper wiped out in a week because it behaved in a way that was not just beyond the public’s acceptance but also was by all accounts illegal.
 
What do you think, Philip, because the financial crunch changed our relationship with your business, has phone hacking changed the relationship with mine?
 
PH: I don't think so. I mean I think it’s a shocking set of events and it needs to be cleaned up and dealt with but actually my view of the media is a different one I think, which is I think it is almost now the principal guarantor of our real liberties and freedoms. You only need to go to countries where they don’t have a free, and occasionally unpleasant and difficult and challenging media, to see the impact that our free press has. I think it’s fantastic. It will occasionally go over the top and all the stuff about phone hacking is dreadful but for God’s sake, we need a strong, powerful, independent, noisy media.
 
Alison, you are nodding wildly here. I mean let’s face it, the media are on your case, not you personally but your industry’s case, day in and day out, many would say absolutely rightly so but you wouldn’t want to dilute that?
 
AC: At the same time a free press is so fundamental to our society and I couldn’t condone anything that sought to highly regulate and control that. It is a free press though with responsibility and I think some of the talk around some sort of independent type of oversight I think is absolutely right and maybe a few bankers and actors and maybe the odd tobacco representative might be on that independent committee.
 
Can we have a little toast to 2012, to your customers and our viewers, to 2012. Nice to see you. Customers and viewers, cheers.
[All: Cheers]
 
END