27 APRIL 2002, Page 28


Martin Vander Weyer says that Derek Wanless is

very bright — but that may not be why Gordon Brown chose him as his health adviser

THERE was a certain logic in Gordon Brown's appointment of the former NatWest boss Derek Wanless to inquire into the future of the NHS. The bank and the health service both fell into the category of 'once great British institutions.; both faced management problems associated with internal resistance to change; both had millions of disgruntled users accusing them of failing to provide a customer-driven service.

What was odd about the appointment, however, was that Mr Wanless was available to take it only because NatWest had ceased to have a future of its own, and because he himself had ceased to work there, having been ousted in 1999 shortly before the bank fell to a humiliating takeover by the Royal Bank of Scotland. Examination of his record indicates that, far from applying brilliant strategic analysis to NatWest's problems, he was a weak chief executive who went along with a doomed strategy against his better judgment. Far from thinking outside the box, as is surely required for the NHS, he failed to challenge an outdated management mindset which during his tenure succeeded in shrinking NatWest's stature from market leader to derided also-ran. Not for nothing did City wags dub him `Wanless Chinder' or, less witty but more direct, 'Derek Hopeless'.

These are harsh judgments: in mitigation, no one has ever suggested that the 54-year-old Mr Wanless is anything other than a pleasant, well-intentioned man with a first-class mind and an admirable family life. He is a product of a meritocratic system of which Britain and NatWest can be proud. The only child of a storeman in a Tyneside cement works, he won a scholarship to Newcastle's Royal Grammar School, which spotted his gift for mathematics. The National Westminster Bank recognised it too, and gave him a L450-ayear scholarship to King's College, Cambridge, where he took a first with ease.

He joined the bank after graduation in 1970, starting as a clerk in Darlington and rising to become area director in the northeast at 35. Meanwhile, he married Vera, a local lass he had known since she was 16; they have five children. Everything written about him mentions his passion for Newcastle United: one report adds that he was also 'once spotted playing air guitar at an Eric Clapton gig'.

This product of a 1950s childhood and high-street banking's promotion ladder was in fact conventional in every way, except for a brain that enabled him to play blindfold chess against multiple opponents. By 1986, the year NatWest overtook Barclays as Britain's most profitable bank, he had been called to London to take charge of personal banking. By 1990 he was running the whole domestic branch network — which means, incidentally, that he was responsible both for the exceptionally harsh treatment of smallbusiness borrowers in the recession, and for a memorably irritating series of television ads which tried to counter the PR damage.

Inside NatWest, everyone knew that Wanless was destined for the top; they just didn't expect him to get there so soon. But the 1987 Blue Arrow scandal in the group's investment bank, County Natwest, shortened the careers of a layer of executives above him, including the chairman. Lord Boardman, who resigned. Boardman's successor, sent in by the Bank of England, was the barrister Lord Alexander, who had little business experience but firm views. When he wanted a new chief executive in 1992 he promoted Wanless. at least three years earlier than Wanless himself might have expected.

'He came out of the blue with this reputation as a mathematical genius,' says one top banker of the era, 'but I don't think NatWest people really looked up to him as a leader.' `He should have been a formidable competitor,' says another, -but he turned out to be a bit conformist and woolly. He was unlucky to have got the job too soon. He was overwhelmed by Bob Alexander, and surrounded by people who were their own men.' One insider describes a clique of senior executives who 'legged Wanless over', keeping him in the dark and steering him away from radical change. 'He should have fired them all, but

he was so non-confrontational. Nice bloke, no balls.'

To the media, Wanless was young, bright and clean. But it gradually became apparent that he was making remarkably little impact on the issues facing the bank. The first of these was whether NatWest should continue trying to make a go of investment banking: post-Blue Arrow, County NatWest had been reconstituted as NatWest Markets, and the board remained eager for the prestige of owning a global securities house. Wanless voted for closing the loss-making equities business at a 1992 board meeting, but lost the vote and acquiesced in keeping it going for five more years. 'I saw it as my job to implement the board's strategy,' he told Philip Augar, author of The Death of Gentlemanly Capitalism. 'The board would not have appointed me if I had said that investment banking was not the right strategy.'

Not a man to challenge orthodoxies or take too firm a stand, then. NatWest under Wanless engaged in a race to be the biggest British loser in investment banking. It bought a collection of expensive corporate finance and investment boutiques, without cohesion or shape. It threw another bundle of money at an attempt to build a presence in the United States, until that part of the plan was binned in 1995. At home, branches were closed and jobs shed, but little was done to defend NatWest's traditional stronghold in small-to-medium business banking. 'We were very grateful to them really,' says a former rival, 'They were the least threatening of competitors.'

The sad truth is that Wanless, whose annual pay reached £840,000, made very little difference: he was not tough enough to change the bank by internal reform, or decisive enough to do so by acquisition. When he finally tried to buy Legal & General, investors thought the idea so dull that they responded by putting NatWest into play as a takeover target. The Scots queued up to bid, and Alexander's successor, Sir David Rowland, handed Wanless his P45.

Perhaps the mild-mannered Geordie was merely a scapegoat. Even the most lasersighted, ass-kicking corporate commanderin-chief might have been defeated by NatWest's accumulated weaknesses. But that was no good reason to ask Wanless to write a blueprint for the NHS.

It is possible to think of worse candidates for the job among Labour's business friends — Lord Simpson of Marconi, or Bernie Ecclestone — and of better ones: Martin Taylor, once Wanless's opposite number at Barclays, is at least as clever and more articulate. But Taylor famously challenged his chairman and his board: he might have come to his own conclusions about health funding and stuck to them. In Wanless, Gordon Brown knew he was picking someone he could trust to run the numbers efficiently without deviating from 'the right strategy', namely the Chancellor's own preference for a tax-funded service. Seeing enemies at every turn, Brown hates debate and shuns intellectual opponents; Wanless, as it were, was one less to worry about.