Jon Henley speaks to the people doing the jobs no one else wants

**Legal Beagles** · 2nd December 2008, 00:30:AM

FAQ: How safe are my New Star unit trusts?

How safe are my New Star unit trusts?
Unit trusts and open-ended investment companies (OEICs) operate under well-defined rules. Investors buy units in a unit trust, which is managed by a fund management company. There has to be a clear separation between fund management companies, such as New Star, and the unit trusts, which belong to investors. The fund manager has no authority over investors' holdings. If a manager goes bust, or cannot continue for other reasons, the trustee or depositary (for an OEIC) has to take over running the funds and it is their duty to find another management company.
Who are the trustees?
There are about six trustee/depositary firms in the UK, of which the biggest are Royal Bank of Scotland, Citigroup, Bank of New York and HSBC. They ensure that investors' monies are held in a ring-fenced account that cannot be accessed by fund management. The trustee itself can only take money from the account to pay investors wanting to sell units and for fund managers' fees. Investors' money does not pass through the fund manager's books.
Can I still buy and sell fund units?
Yes, contracts to buy or sell investments are with the trustee/depositary and dealing should continue, even if a fund manager collapses. Cheques for unit encashments will come from a separate account, which administrators or liquidators of the fund manager cannot touch. Those investing via fund supermarkets should get sale proceeds from the supermarket. But as investors are likely to shun firms with uncertain investment management, the unit price could be on a "bid basis" - in effect 5% lower than usual - to reflect managers' inability to find new investors to replace those leaving. Investors with monthly savings plans will continue to invest until their direct debit stops.
What if a fund manager goes under?
Trustees or depositaries will generally put the contract out to tender to find a new fund management group, which would then take over the running of the unit trusts. Another established management firm would be likely to take over day-to-day running of funds.
Has this happened before?
Investment management firms have rarely hit trouble. The only unit trust firm to have gone bust was Barings, which was brought to collapse by the rogue trader Nick Leeson in 1995. But the fund management arm (and its investors) were unaffected and the firm still trades under its own name. In 1996, Morgan Grenfell found its "star" manager Peter Young had defrauded its European fund. The ultimate owner, Deutsche Bank, took the loss on its balance sheet, so no investor lost out.
What about the compensation scheme?
The Financial Services Compensation Scheme would only pay out if there was mismanagement by the depositary or trustees. Investors could also claim compensation if they were mis-sold an inappropriate fund, as happened with several high-risk split-capital funds five years ago.

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**Legal Beagles** · 2nd December 2008, 00:30:AM

Future of fund manager hangs in balance

The future of New Star Asset Management, the £14bn unit trust group run by the maverick entrepreneur John Duffield, was hanging in the balance last night as it remained locked in talks with its bankers over its £240m debt burden
Shares in the firm fell by 66% to an all-time low after it emerged that Duffield had begun talks about a debt-for-equity swap that could lead to five banks, led HBOS, in effect taking control of the group.
But last night the details of the debt-for-equity swap had still to be finalised amid concerns that investors were taking their money out of New Star funds.
It was not clear why banks would support a debt-for-equity swap that would further erode value for shareholders and potentially leave the banks with a huge stake in the company that is worth barely £20m.
Any hopes of a rescue takeover by its rival Aberdeen Asset Management also appeared to fade after its chief executive, Martin Gilbert, said he would not do a deal in the current environment that involved taking on a large amount of debt.
The crisis at New Star is a stunning reversal for Duffield, one of Britain's most high-profile entrepreneurs, who set up New Star eight years ago after banking millions from the sale of his previous firm, Jupiter Asset Management, to Commerzbank.
The company endured an extraordinary day yesterday, which began with a statement to the stockmarket in which New Star said it was in "advanced and constructive discussions with its bank syndicate" and that it had requested a suspension in trading of its shares pending an announcement.
But just hours later it revealed that its request had been denied by the UK Listing Authority, the body that oversees share listing and is run by the Financial Services Authority.
Such public refusals of share suspensions are rare in London and the City regulator revealed that New Star had not formally requested a suspension when it made the announcement.
When the formal request was made, the FSA concluded there was not a good enough cause to halt trading, which initially saw New Star fall to just 4p before it recovered some of the drop to end at just below 8p, down 40%.
Sentiment is being affected. It is understood that investors yesterday withdrew £30m-£40m from the group's funds, and more is expected to flood out over the coming day as investors worry if their money is safe. Money held in unit trusts is ring-fenced and overseen by trustees, usually major banks, so it remains safe in the event of an asset management group going bust.
New Star's unit trusts continued to trade normally yesterday, although its International Property fund has been suspended since last week after it ran out of cash to pay withdrawals.
In its early years New Star hauled in billions of pounds from small investors attracted by the firm's galaxy of star fund managers but more recently its funds have plummeted down performance tables.
At its peak New Star was managing more than £20bn and saw its share price soar after a float in 2005 valuing the firm at more than £500m.
But its stock has lost 97% of its value, while funds under management have shrivelled to about £14bn and will fall again in the new year when Family Assurance removes its £1.4bn.
New Star is weighed down by £240m in debt after it borrowed £300m in 2007 to return cash to shareholders. Duffield himself received £45m - or twice the company's market valuation yesterday. He also pocketed about £150m after cashing in an 8.5% stake of the firm at 455p a share. Many senior executives also become millionaires.
Only two weeks ago New Star told investors that it had accepted tougher terms on its debt, which saw the interest rate it pays rise by 1.5%. The debt remains repayable in a single lump sum in 2013.
But at the weekend Duffield approached the syndicate of banks with a deal that would wipe out the debt, but in effect wipe out other shareholders, in a swap in which the banks would take control of the vast bulk of the company's equity.
Many of the shareholders in New Star are the firm's own star investment managers and staff. HBOS, with about £80m, has the biggest exposure to New Star's debt. Other banks in the syndicate are believed to be HSBC, Royal Bank of Scotland and National Australia Group.
Independent financial advisers - the main source of New Star's new business - said it could be years before it restores the confidence of small investors.
Adrian Lowcock, senior investment adviser at Bestinvest, said: "We believe the company is still likely to face an uphill struggle regaining support, against a backdrop of continued weakness in global markets and a recent history of poorly performing mandates."
Mark Dampier, at Hargreaves Lansdown, said he had removed the buy recommendation from New Star funds some time ago "but I'm kicking myself that I didn't say sell rather than just hold".

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**Legal Beagles** · 2nd December 2008, 00:30:AM

Banking: Savers will be covered after London Scottish calls in administrators

Alistair Darling yesterday stepped in to ensure that all savings at London Scottish Bank are protected after the troubled Manchester-based bank ended an 11-month battle for survival and called in the administrators.
The bank, better known for offering loans to people with poor credit histories, has 700 staff and about 10,000 depositors. Just under 1,000 of them have saved more than the £50,000 covered by the Financial Services Compensation Scheme. The Treasury announced that all retail depositors would be covered, and the government would pick up the cost of covering deposits beyond the £50,000 limit.
The Treasury said the FSCS was working with the administrators, from Ernst & Young, and would contact LSB's depositors shortly.
In a statement to the stock exchange yesterday, LSB said that although a "number of parties remain interested in acquiring the group" there could be no certainty that an offer would be made and that the FSA had stopped it taking deposits.
This forced the bank, led by chief executive Robin Ashton, to ask the courts to appoint administrators. They were appointed at 11.54pm on Sunday - almost 11 months since the problems at LSB emerged shortly after Ashton was appointed.
The administrators are expected to continue discussions with potential buyers, who are particularly interested in its Robinson Way debt collection arm. Ashton, chief executive of Friends Provident until 2006, alerted the City to LSB's problems on New Year's Eve 2007, when the bank admitted it did not have enough capital to satisfy the FSA. It tried to launch a rights issue to meet the £13m shortfall and stopped offering new loans while it tried to address the hole in its books and find a way to renegotiate £81.5m of its £140m of loans due for renewal this year.
The group had been best known for its door-to-door debt collection operation, which offered loans ranging from £100 to £1,000 before it expanded into Robinson Way. Borrowers, some of whom may also have mortgages, should keep making their repayments, the administrators stressed yesterday.
The administration puts further strain on the FSCS, which is funded by the industry. The government is granting the FSCS a loan to cover the claims that will eventually have to be repaid by the industry.
LSB's shares were suspended at 2.62p.

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**Legal Beagles** · 2nd December 2008, 00:30:AM

Jon Henley speaks to the people doing the jobs no one else wants

Ship's officer
The Pride of Kent is 180 metres long, 28 metres wide, and weighs 30,635 tonnes. Fully loaded, she carries 120 trucks, 2,000 passengers, and up to 130 crew. It is, in fact, a small floating town that crosses the Channel between Dover and Calais 10 times every 24 hours. And if he plays his cards right, Sebastian Devere Richardson, who is barely 20, could be in full charge of her by the time he's 30.
"Thing is," says Senior Master David Miller, who is on this P&O ferry today not to drive it (as sailors like to say) but to explain the job of ship's officer to me, "we're missing a whole generation. British shipping contracted massively in the 1970s, and lots of people left. The 35- to 45-year-olds just aren't there. Now everyone else is nearing retirement, world trade is growing, and the industry is drastically short of officers. Anyone who comes in now is looking at rapid promotion and a very gratifying career."
That's what Richardson hopes. As the bridge moves smoothly into departure mode (quiet men standing over complex kit, saying "Let's ease her out," "Twelve knots at the pierheads, cap'n," "I have engines, I have thrust" and - best of all - "Aye aye, sir"), he's studying the relative and true wind-speed and direction indicators and a particularly funky screen superimposing a GPS image of the ship on an electronic admiralty chart.
"It's the best video game ever!" he grins. "Er, that's a joke, obviously. But I love this job. I couldn't do anything else. This is such a hugely important industry. And cross-Channel ferries - I'd quite like to do deep sea at some stage, but this is like trying to cross the M1 at rush hour except you're driving 30,000 tonnes. Once you make master, you're really in charge: everything is down to you, from a seriously ill passenger to an unhappy crew member to maybe a hazardous cargo. It's a big, big responsibility, a new challenge every day. And who else gets a view like this?"
Richardson is nearing the end of a three-year cadetship that should see him earn his full officer of the watch ticket next year. The training period is divided between spells at sea and at Fleetwood Nautical College in Lancashire, where he is studying for an HND in nautical science. He entered with the minimum qualification, five GCSEs. "I'm not the brightest spark," he volunteers cheerily, "but if you can do maths and physics, this isn't rocket science. You learn what you need in college, and the rest at sea."
On the Channel ferries, officers work 12-hour shifts, one week on, one week off. Accommodation on board is comfortable, in roomy cabins that resemble classy hotel rooms. There's a gym, a couple of lounges, an excellent canteen. The pay is good: Richardson will be on £26-28,000 when he qualifies: not bad at 21. Then there's a sliding scale through chief officer and up to master, when you could eventually be earning £55-60,000 a year (and since, providing you take your holidays in the right places, you're out of the country for more than half the year, the tax situation isn't bad either.)
"It's not for everyone," Richardson concedes. "A lot of young people wouldn't like the discipline, the fact you can't go out to the pub when you feel like it. This is a completely dry ship; it has to be. You never know when something's going to happen. And 12 hours is a long shift."
Miller, 57, says the job has changed a lot since he started at 16. "Deep sea particularly: you used to have 25 officers on board, and a month in port," he says. "But in those days you'd also set off from London to go halfway round the world armed with a sextant and two chronometers. Nowadays ... well, there are 10 GPSs on this bridge."
We're coming into Calais; despite all the hi-tech gear, there's a guy in oilskins on the bow shouting out the distance between hull and harbour wall. "People will always want to be airline pilots," says Miller. "It's glamorous, isn't it? But technically, this job is every bit as demanding."
Work rider
It's not seven on a November morning, and the sky over the hills east of Thorndale Farm in the Cotswolds is barely tinged with red. This will be a fine day, but not yet. It's pitch dark, and cold. In Kim Bailey's stables, Alice Reader has been at work for an hour, mucking out and watering the five racehorses in her care. Like her colleagues, she'll ride four of them out today: a bit of a trot round the ring followed, generally, by two or three runs up the sweat-raising slope of the all-weather gallop.
After each hour-long outing, they will hose the horses down, dry them off, rug them up, and put them in their boxes with a handful of hay. Then they'll saddle up the next, and do it all over again. They'll do that till lunchtime, when they get three hours off. Then there's more mucking out, watering, grooming and tack-cleaning.
"It's kind of a way of life, really, more than a job," says Reader, 29. "You really have to love it, or I don't think you'd ever do it. It's ... well, quite hard work."
As an experienced work rider, Reader, 29, earns £300 a week. Because of Sunday racing, she works every other weekend. With owners' tips, a share in the prize money and a bit of overtime driving the van on race days, she makes £18,000-20,000 a year. Unlike most of the rest of Bailey's lads and lasses, she has her own place, so doesn't live in the house he provides next to the stables or the flat in town. And she has a horse of her own, which she rides during her lunch-hour and hopes to race in a few point-to-points this season.
"That's partly why I do it," she says. "There aren't many jobs that would let me ride for myself every day." Reader knows about other jobs; she worked in an office once. "They were just the most miserable six months of my life," she says. "My day would begin at 5am when I ran home, to go riding." Reader has been riding since she used to stay with her older sister during school holidays. "She bet me £20 I'd have gone off horses by the time I was 21," she says. "She still owes me."
So why is Britain short of people like her? "It is tough," she concedes. "And it's a really harsh world; if you do something wrong, you don't half hear about it. But it's incredibly rewarding, bringing a horse on."
Watching his charges come steaming up the gallop in the heart of the Cotswolds, Bailey, who has trained Cheltenham Gold Cup and Grand National winners in his time, says pay isn't the big issue. More important are the physical demands (riders can't be too big or heavy, but racehorses - especially jumpers - can be very hard to hold); the cold; the wet; the weekends.
"I've been in this business 28 years and never managed to employ a married rider," he says. "The job is hard enough on relationships; impossible on families." And the world has changed. When Bailey began, most lads were Irish. "Ireland's had its boom," he says. "They can make more money now staying at home and working on a building site. These days, most work riders in Ireland are foreign." It's a vicious circle: the fewer people who come into the job, the harder it is for those who do. "A lad used to look after three or four horses, maximum," says Bailey. "In some stables now, it's eight or nine."
It's 9.15am, and Bailey's riders are back from their second outing of the day. "My plan was to do a proper job and have horses as a hobby," says Reader, leading her huge and heaving mount off for a rinse, "but it wasn't enough. Maybe most people just don't feel that passionately about it. There are so many other, easier options."
Geologist
The official Home Office shortage-occupations list features no fewer than 19 categories of geologist, ranging from hydrogeologist to geophysicist. This is quite a few more categories of geologist than many practising geologists appear to have heard of.
John Cartwright, 43, is managing director of two associated companies, Applied Geology and Ground Engineering, with offices in in Kenilworth, Peterborough and Prestwick in Scotland. He did maths, physics and geology at A-level ("I was just, I don't know, interested in earth processes. Looking at rocks. Walking round muddy fields with your mates"), and applied to do geology at Newcastle. That was full, so he took the engineering geology course instead.
He doesn't regret the early specialisation in a more applied field. "The appeal to me," he says, "is in finding answers to the questions sites pose. I was on a site this morning, a desperate estate that's being redeveloped by a housing association and sits on top of some quite extensive mine workings. There are foundation problems, contaminated land problems - and you're really bringing solutions."
Engineering geologists (as opposed to pure geologists, who are mainly into research) perform desk studies, reviewing existing data about a site. They carry out physical investigations, digging trial pits and bore holes, analysing soil samples and monitoring ground gas and water. Their report states what foundations are needed, and whether any soil treatment should be considered. They may well oversee implementation.
"Sometimes it's more geo-technical," Cartwright says. "If you're on a motorway extension, you'll be more focused on things like the design of the earthworks, slope and rock face stability, soil compacting, that kind of thing. Every job is different. I enjoy the involvement with other professions: architects, ecologists, archaeologists, civil engineers. And you're in the open air. You do this job because you like that."
Part of the present shortage, Cartwright reckons, is down to the "massive explosion" in environmental and geo-technical work. "Contaminated land work, for example. That hardly existed 20 years ago," he says. "Now it's probably 50% of what we do. Much of the work these days is driven by environmental legislation and planning laws with environmental legislation attached. It's a whole industry."
Part is also due to the closure of many undergraduate applied geology courses (including the one Cartwright did) in the late 80s and early 90s. "There's the general decline in people wanting to do maths, science, engineering subjects," says Cartwright. "Nowadays they take a general geology degree, and specialise later. It's one more hurdle, and with the profession so diversified the knowledge base is just much more watered down. It's very hard to find the right people. We've paid to put people through a Masters."
Geology is not badly paid - with two or three years' experience and a bit of overtime you could be looking at £30,000, particularly if you choose to work in oil or mining - and, as Cartwright says, you get to use your skills every day. "Maybe it's just not sexy enough," he posits.
Physics teacher
Apparently, inquiries about maths and science teaching trebled in September, and job applications have reached record levels. But it will take an awful lot of disillusioned City bankers to remedy the fact that one in four schools in Britain currently does not have a specialist physics teacher. "It's not complicated," says Angela Celentano, who does the job at the London Oratory school in Fulham. "Not enough people want to study it at university, and of those who do, not enough want to teach it. They can earn twice as much doing something else."
Celentano, 31, and her colleague Sabina Ricci, 36, both came into teaching late. Celentano was a City accountant and Ricci a computer software engineer. Both love their job, but harbour few illusions about its appeal to the majority. The biggest shock for them both, they admit, was the dawning realisation - as Celentano diplomatically puts it - that "the natural inclination of any group of children is to cause havoc".
Celentano took a 75% pay cut to do her postgrad teacher training course, and was two-thirds of the way through it before she began thinking that abandoning accountancy was perhaps not the worst decision of her life after all. "I just connected with some of my classes, and began to see what the rewards could be," she says. "But you just had to get acclimatised to the idea that kids would misbehave. There's no getting around it, classroom management is a huge part of teaching. The rewards only start to come once you've got that. It took me about two years."
For Ricci, whose pay plunged from £25,000 to £14,000 when she joined a school in Surbiton in an on-the-job training scheme, the shock was even greater. "I went to school in Italy, where on the whole, children behave," she says. "My husband tried to warn me. But I still remember thinking, Oh my God, what on earth have I done?" (Once qualified and with a few years under your belt, teaching is no longer the pittance profession it once was. Five years' experience equates to about £40,000, Ricci says. And job security is second to none.)
The hours are long, though: Celentano is in at 7.45am, teaches from 8.30am to 3.30pm, then has marking, meetings, paperwork and more preparation till around 7pm. "It can be physically and emotionally exhausting," she says. "You're dealing with so many people, and there's a responsibility to deal with each student individually. Obviously, that's impossible with 30 students. But you still try."
And there's the bane of all teachers' lives: external - particularly government - interference. "There's an enormous amount of paperwork and stress," Celentano says. "It's all about targets, grade scores, passing exams, not education. Syllabuses are constantly changing, exams too - all this stuff imposed from outside, by people who know nothing at all about teaching."
The putative influx of City refugees is all the more important because lots of teachers give up, every year. But not Ricci or Celentano, they vow. "It's a job you have to love," says Ricci. "If you have any doubts at all, you'd hate it. " Celentano agrees: "When I started, I thought my reward would be in helping my students with their physics, giving them a better chance in life. But I discovered I really liked the pastoral side too. It's a huge privilege, and a responsibility, when you realise you're actually an important part of their lives."
Overhead linesman
"Bustleholm Substation," says the big yellow sign at the gate. "Danger of death. No entry without authorisation." Standing outside waiting for Ivan Lea, the National Grid's Delivery Engineer, Midlands and north Wales, to let me in, there's already a low, pervasive hum; inside, it's even louder. Here, in a process I do not pretend to understand but which involves large numbers of pylons and coils and metal boxes, 400,000 volts are miraculously transformed into 275,000 and sent on their way to assorted power companies in the Midlands region.
It still sounds like an awful lot of electricity. But that's OK, because it's not me going up the 160ft, semi-live tower to change all its insulators, fittings, shackles and links, it's Lea, 46, and half a dozen younger colleagues, including Barrie-John Manley, 21. These are overhead linesmen: men (and they're almost invariably men, though there is now one woman on the Grid's three-year apprentice scheme) who spend their working days several hundred feet up clinging to an electricity pylon in a hard hat and a harness which, loaded with a full set of linesman's tools, weighs 40kg.
"And this," says Adrian Billington, another member of the team, "is a small tower. Those guys are only about 100ft up. Some of the really big towers, the ones that cross the Thames for example, are 650ft. That's high." Lea and Manley may only be 100ft up, but it's still a long way. Too far, for example, to hear what they're saying, even when they shout. "The cold and the wind are the biggest problems," says Billington, a linesman for a quarter century. "You've been up there three or four hours, sometimes you can't feel your hands and feet. And that's with all these modern materials."
When Billington started, he gleefully recounts, "we didn't even have proper waterproofs. Just a boiler suit and a donkey jacket. There were no elevator platforms to get the heavy stuff up there; you had to haul it. Safety harnesses and hard hats only came in about 15 years ago. All that side of the job's changed. You climb up a pylon by putting your feet on those little bolts that stick out of the legs, see? Was a time we used to race each other up, and slide down avoiding the bolts. There's none of that these days; everyone's much more responsible."
Back down from his tour up top, Lea confirms safety is now the paramount concern. "Everyone's attached, all the time," he says. "But you still have to feel happy up there. You're still wrapping your legs round the side of a pylon and using your hands to do things. And all the safety precautions in the world won't help you feel happy unless you've got a head for heights. "
Manley, qualified for a year, likes it because "I could never work indoors, in an office. Never. This job you're outside, often in beautiful countryside. You're always working in different places, away for a week, and you're a real team. You have to have trust; teamwork's really important."
Is it scary? "You can either do it or you can't," says Manley. "We had to climb a tower as part of the interview. One person froze completely. But no, I've never really been scared. A few muscles help. You learn to climb with the wind pushing you on to the tower, not off it. The gusts are the worst. And the bird mess. You can slip."
The money's not bad: £11,000 a year during training, £22,000 once you're qualified. There's plenty of work, with contractors and area boards as well as the Grid. Much of Britain's electricity infrastructure dates from the early 1960s; the maintenance and replacement programme is massive. The problem is the height thing, and the fact people think it's more dangerous than it is, Lea reckons. But it's a real kick working against the clock, "when a line's down after a storm. That's when training and experience really count. There's huge pressure, you know thousands of thousands of people are relying on you to get their power up again. But you can't take risks. There's a right way to do things, and when it flows ... It's a good feeling."
Vet
Patch is not happy. Jammed into something called a crush cage and with her backside being pulled slowly but inexorably towards Dave Hodgkins and his waiting needle, she's spitting.
Not so young any more, overweight and off her food, the cat needs a blood test. Hodgkins is giving her a tranquilliser. "She's, um, a bit aggressive," he says, holding up a middle finger sporting a long, fresh and angry-looking scratch.
Not that this is the most delicate situation he's faced in 13 years as a vet. In his first job, just two or three months qualified, he had to see to a cow on a farm north of Birmingham. Forewarned that the owner was a sour old sod who would delight in giving a young vet a torrid time, Hodgkins was so nervous that he walked straight into a head-high metal crossbar, knocking himself clean out. On every subsequent visit, the farmer unsmilingly handed him a hard hat.
"At times, this job can horribly frustrating," he says. "You're under a lot of pressure and you really have to restrain yourself. Moments like that are precious."
Hodgkins knew he wanted to be a vet from "a very early age". He's been based in Acton, west London, for six or seven years now, leasing a general small-animal practice that does "just about everything, from vaccinations to intestinal surgery". He works up to 60 hours a week, including a half day on Saturday, and considers he makes "a fair living" (although he detests the paperwork that's part of being self-employed).
"The more you do it the easier it gets," says Hodgkins. "You start out, and you're terrified. But even today, there are always challenges. If you want a lot of satisfaction, you're probably going to have to take quite a lot of stress and discomfort too. This can be an exhausting and dispiriting profession; there are weeks when it seems like everything you see you have to put down. Other times are intensely uplifting."
A newly qualified vet can expect to earn maybe £25,000, rising to double that after 10 to 15 years work. Hodgkins has had his doubts, but says now he'd recommend it to anyone "although only if they've done a really good stint of work experience first. The reality of being a vet is often very different to what people imagine; they think all sweet and fluffy, but you have to do some very difficult things to animals. And have some very difficult conversations with people."
Which may explain, despite the multitudes of children who dream of becoming one, why we don't have enough vets. While the course is long and perceived as very hard to get into, Britain's seven veterinary schools continue to churn out between 120 and 150 graduates a year. But foreign students numbers are high, and most return home after qualifying.
Patch is out for the count and comes back for her blood test. Hodgkins takes a call from a good samaritan who had brought in a fox he'd found injured in the road (it had to be put down). Gizmo has to be neutered. "I'm looking for someone to help me out part-time," says Hodgkins, who'll be putting in a 13-hour day today. "They might take a while to find."

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**Legal Beagles** · 2nd December 2008, 00:30:AM

Government puts RBS lending policy under scrutiny

Royal Bank of Scotland was put on notice yesterday that its lending policy, boardroom appointments and business strategy were being reviewed by the government as it took control of 58% of the Edinburgh-based bank.
The body set up to oversee the government's stake said it was in "active discussions" about the bank's strategy. UK Financial Investments said that John Crompton, hired from Merrill Lynch, would manage the stake that came under government control yesterday after shareholders shunned a £15bn cash call. It has presented the taxpayer with a paper loss of about £2.5bn. The UKFI said it was "putting in place arrangements to secure a robust assurance" that commitments to maintain lending to homeowners and small businesses at 2007 levels for the next three years were fulfilled.
Meanwhile RBS's new chief executive, Stephen Hester, yesterday promised to grant a six-month moratorium to home owners struggling to keep up with mortgage payments. RBS pre-empted any government crackdown on repossessions by asserting that it would give customers falling into arrears six months rather than three months before beginning any repossession proceedings.
The move was welcomed by the Treasury and is expected to become a benchmark for the industry. Liberal Democrat Treasury spokesman Vince Cable said it was "welcome news" for RBS customers. But, he added: "It will be a mere drop in the ocean unless it is followed by the whole industry. The government must now insist that all the nationalised and part-nationalised banks follow suit."
Northern Rock, the nationalised bank responsible for a tenth of all repossessions, insisted it actually took 15 months for homes to be repossessed.
HBOS, which owns the country's largest mortgage lender Halifax, which is accepting a £12bn government rescue package, said it would look at the RBS announcement but felt it already had a package in place to deal with customers in difficulty.
Lloyds TSB, which will take over HBOS next year and is likely to be 40% owned by the taxpayer, said borrowers were usually at least six months in arrears before it began repossession steps.
The Council of Mortgage Lenders will use its annual conference today to urge "an honest assessment of the challenges facing the lending industry". It appealed against the imposition of strict criteria on repossessions for each lender.
"In a large number of cases, borrowers are already able to remain in their home for six months or longer while they work with the lender on implementing a plan to pay off their arrears," it said. "But in cases where there is little or no equity in the property - and no chance of the borrower getting back on his feet in a short period - it may be in the best interests of the home-owner to move towards selling the property rather than allowing arrears to continue to build up over a long period."

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**Legal Beagles** · 2nd December 2008, 00:30:AM

Mortgage lending: New home loans drop to record low

The number of mortgages approved for house purchases hit a record low in October, despite a drop in interest rates that month, figures showed yesterday.
Lenders approved 32,000 home loans during the month, the same as in August, according to the Bank of England. This reverses a slight uplift in September when 33,000 were approved.
The value of the loans dipped below August's level, to £3.9bn, owing to falling house prices and lending restrictions.
Lending for new purchases is running at about 60% below the level of October last year, when 88,000 loans worth a total £12.2bn were granted.
The drop follows a year of falls in the housing market, which has shaken the confidence of buyers, and a period in which lenders have clamped down on high loan-to-value deals, with many of them now insisting purchasers put up deposits of at least 25%.
The value of net mortgage lending in October, including repayments and redemptions, dived 70% from £1.5bn in September to £459m- only 6% of the figure for October 2007.

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**Legal Beagles** · 2nd December 2008, 00:30:AM

Will Hutton on the credit crisis: A late calling to account

A rare silver lining in this recession is that a veil of mystery is being lifted from the longstanding lending practices of British banks. Suddenly they are understood as not necessarily always in the best national economic interest.
Mortgage and business borrowers alike are newly empowered by the £37bn bank bail-out, and change is afoot. Yesterday the Royal Bank of Scotland, now 58% owned by the taxpayer, promised it would give distressed homeowners six months' grace before it moved to repossess their property. Last week it said it would guarantee the level and price of its overdraft commitments to small business until the end of 2009 - providing, it qualified, the risks of their situation did not substantially change.
These are concessions of the sort that have not been made in any postwar recession. They make it impossible for Lloyds-TSB/HBOS not to follow suit. HSBC will not want to be outdone. Only Barclays, suffering the burden of the bail-out terms from its sovereign wealth fund investors, is likely to cling to the banking tradition of being providers of umbrellas except when it is raining. It will no longer be politically acceptable.
Bankers, in fairness, are the custodians of other people's money. They have to provide cash to their depositors whenever they want it, even as they tie it up in loans to homebuyers and business. This confidence trick requires careful managing. British banks' approach has been to keep their lending as short-term as possible, to have it collateralised against bricks and mortar, to keep tight control at headquarters and to recall loans at the first sign of trouble.
It works, but it is brutal. It does not favour long-term investment. It biases lending towards property rather than business innovation. It does not favour manufacturing industry that needs most support in downturns. It makes home ownership high risk for working-class families. And it exacerbates recessions.
There is another approach, more widely used in mainland Europe and Japan. It is best illustrated by a story from yesterday's Financial Times about the Reading-based Magal Group. Owner Gamil Magal wants a £1.5m loan from RBS to tide over his engineering firm during the recession, collateralised against £12m of assets. The company is solid but now losing money; properly supported it might survive. In Europe and Japan, banks tend to be supportive of their Magals, with whom they have long-term relationships. They certainly demand restructuring and redundancy, but they shepherd the scaled-back firms to recovery, offering not just finance but advice and business knowledge.
In Britain banks do not support such relationships. But they do know British financial protocols. RBS, says Magal, responded to his request by sending him an insolvency expert. When RBS was privately owned, he would not have dared complain and tempt such awesome power of life and death. In today's climate, he feels he can go public.
If the banks together support all the firms in the manufacturing value chain then each individual firm is more likely to pull through. Magal needs supporting, but so do his customers. RBS cannot have an open chequebook, but unless it and other banks are more collectively accommodating to firms' requests, they create the very risks RBS is alert to.
UK banks have never been properly accountable for their actions, hiding behind the myth that, as their decisions are taken in markets, they are necessarily efficient. They are not. If more businessmen speak out, and the government has some guts, the next 18 months could see a transformation in British finance. It is long overdue.
• Will Hutton is executive vice-chair of the Work Foundation will.hutton@observer.co.uk

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Jon Henley speaks to the people doing the jobs no one else wants

Jon Henley speaks to the people doing the jobs no one else wants

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