Fred “the Shred” Goodwin, the disgraced ex-boss ofRoyal Bank of Scotland, is estimated to be receiving an annual pension worth nearly £600,000, as the government prepares to declare a £10bn loss after selling its final stake in the bank as early as this week.
The banking group, now known as NatWest, is expected to return to full private ownership within days, drawing a line under a £45bn state bailout that saved the bank from the brink of collapse at the height of the 2008 financial crisis.
The 17-year effort to off-load the government’s 84% stake in the lender has come at a substantial cost to the public purse, with the government expected to fall short of recouping its financial support.
Shares have only recently pushed past their pre-financial crisis levels – closing at 524p on Friday – but the bulk of the government’s shares have been below the 502p at which they were bought. It means the government could end up recovering roughly £35bn of the original £45bn spent on the rescue package in 2008, marking a near-£10bn loss.
Meanwhile, yearly payouts have soared for Goodwin, the boss blamed for helping push the bank to its near-collapse.
The former RBS chief executive, who was sacked as part of a non-negotiable condition of the state rescue, originally walked away with a£16m pension pot that paid out about £700,000 a year. But public outrage forced Goodwin and the bank tohalve those payouts to £342,500 a year.
However, after nearly two decades, an agreement that linked his payouts to the rate of inflation has pushed that figure ever-closer to the original sum. The bank is now spending about £598,000 a year on Goodwin’s pension nearly 17 years after the bailout, according to estimates by wealth manager Quilter shared with the Guardian.
NatWest Group declined to comment. The Guardian was not able to reach Goodwin for comment.
Goodwin’s excessive spending on a string of acquisitions, private jets, and a sprawling £350m campus in Edinburgh, were criticised for leaving RBS without sufficient financial buffers that could have helped the bank to ride out the credit crunch hit in 2008.
Goodwin was widely known to be a ruthless boss, earning his nickname “Fred the Shred” for making harsh cuts to his workforce amid his expansion efforts. That included a decision to slash 18,000 jobs after RBS’ flashy £21bn takeover of NatWest in 2000, one of the largest cost-cutting exercises in banking at the time.
By the time of the bailout, Goodwin had expanded RBS into 50 countries and grown its assets to £2.2tn – more than double the size of the UK economy that year. Had the government failed to step in, shock waves from the bank’s implosion in 2008 could have led to a systemic collapse in the wider economy.
The government was concerned that its failure could wipe out the savings of everyday customers, and prompt panic about the health of other lenders across the UK, creating a domino effect of failures across the industry.
The bank’s eventual emergency rescue made Goodwin – now 66 years old – a lightning rod for public anger over the cost of bank bailouts, which led to years of government austerity that many blame for hollowing out public services across the country.
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Goodwin was also slow to say sorry for the record-breaking losses that he left behind at the centuries-old bank. He was laterstripped of his knighthood in 2012, amid concerns that he had“had brought the honours system in to disrepute”.
The government has spent nearly two decades trying to take the bank off the public books, through a combination of sales to institutional investors and a drip-feeding of shares into the open market. NatWestfast-tracked the processthrough multibillion-pound share buy-backs, helping the stake drop from 38% in December 2023 to 0.9% earlier this month.
NatWest’s current chair, Rick Haythornthwaite, said last month the bank wasindebted to the public for keeping the lender afloat.
“We remain incredibly grateful to the government, and to UK taxpayers, for their intervention and support, which protected millions of savers, homeowners and businesses at a time of global crisis,” he said at the bank’s AGM in Edinburgh.
He added the government was always expected to lose money on the bailout. “I don’t think they ever went into this is an investment … This was a rescue of a sector, and they did well as a result.”