Bradford & Bingley nationalisation, is it a good deal?

As I have said, not for the first time, I am no financial expert, but I am a little confused about the ‘part nationalisation’and ‘part sell-off’ of the Bradford & Bingley deal. I accept that there is probably still more detail to come about, but from the little that is available, I find myself wondering, whether the government, on behalf of the hard-pressed taxpayers of this country, worked out a good deal.

In the past, building societies received deposits, in order that they could then use that money to offer mortgages and loans to others. The saver would receive interest on their money, the mortgage payer would pay interest on their borrowings and the building society would take a commission in return for the introduction and managing of the arrangement. Although this model has been turned on its head, with the wholesale trading of these mortgages, the principle should still be sound.

Therefore, if the government have taken on all of the mortgage debt of the Bradford & Bingley, estimated to be some £50bn, why not retain the deposits as well? Instead, they “sell”, the ambitious Spanish conglomerate, Santander, some £20bn of saver deposits (2.7 million people), for the miserly some of £612m. How can this be a good deal for the taxpayer? How can the government be so sure that the savers interests are protected, given we don’t really know that much about Santander. In fact, if the government were responsible for the sale of these customer deposits and something were to happen to Santander, would the government be culpable or liable, given it was they who negotiated the deal?

This particular arrangement can’t be good for the employees either, because Bradford & Bingley employed some 3,000 people and operated 197 branches. Does anyone imagine that a foreign owned bank, will give a toss about these employees? No, from what I can see, the UK government has passed over the profitable side of Bradford & Bingley to the Spanish owned bank ‘Abbey’, whilst leaving the British taxpayer exposed with just the bad mortgage debt. What was the point in getting rid of depositors money which has traditionally been used to offset mortgages? Looks like a very poorly thought out deal to me and somebody needs to explain why? Santander must be rubbing their hands with glee at the at the apparent naivety of the UK government.

I would not normally be a supporter of nationalisation, although in this case, as in the case of Northern Rock, there was probably no palatable alternative. However, I do believe that the government is responsible for driving home a decent deal for the taxpayers, they have a duty of care to the public purse and a responsibility to the taxpayer. No matter how urgent the problem, they should not lose sight of this. Yet here, from what I can see and perhaps against the views of many other observers, I fail to see how anyone, other than Santander would be considered to a be a winner.

Gordon Brown criticises companies for off-balance sheet activities

What a hypocrite Gordon Brown is, this man lauded for his so called economic competence. In an in interview with Sky News, Gordon Brown criticises companies for running “large off-balance activities”. He then goes on to say, “We cannot excuse the irresponsibility that took place in a number of institutions. And, you guessed it, he did this with a straight face and no sense of irony.

So, this is the same man, that to be certain that he did not break his own golden rules, ensured that the cost of the Private Finance Initiative’s (PFI’s), were not included on the government’s own books. These are calculated to cost the tax payer some £172bn between now and 2032. This is the same man that forked out £110bn of tax payers money in loans and guarantees for Northern Rock, once again, ensuring that it was not included on the government’s balance sheet.

Then there is a further £1.7bn that the government must pay for Metronet’s debts, this figure is also excluded from the governments balance sheet. There is also a further, estimated £790bn in government pension deficits, this is another liability that is excluded from the government;s balance sheet. Now I accept that this may be ‘legal’ but it is morally wrong and serves only to deceive us all into a false sense of security. Some would argue that the game that these large companies and institutions alluded to in Gordon Brown’s interview did nothing more than he has.

Now, Gordon Brown has says that “It’s got to be cleaned up and its got to be cleaned up quickly.” I would hope, that when he is considering these words, he will consider his own actions, because their are many in this country that would consider his own actions as “irresponsible” and “inexcusable”. Enough said!

 

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Gordon Browns own words come back to haunt him

Over at political website Power to the People there has been analysis of some of the statements made by Gordon Brown in Labour Party Conference speeches or, as Chancellor in his budget address. Oh how, in the current climate, these words are coming back to haunt him.

Specifically, Gordon Brown, promised there would be no return to “Boom and Bust” and that he would not permit “instability, speculation or negative equity” in the property market whilst he was in charge of the UK economy. That notwithstanding, he has of course, also claimed credit for our economic growth, which I guess he can, but of course, his flawed, naive strategy allowed this to be achieved “on tick”. Surely, even a basic understanding of economics would have made clear, even to a “prudent” chancellor, that this boom would have to end (“bust”) and then, when the dust had settled, we would all be expected to repay our debts.

Gordon Brown may be prime minister now, but he cannot simply wipe away his 10 years as chancellor, during which he presided over a consumer boom financed on credit as well as a massive spending spree by the government, much of which was poorly invested. Today the Daily Mail suggested that there should be an end to Labour Party in fighting, to allow Gordon Brown to get on with the job of getting the UK economy back on track. Now here’s the thing, if Gordon Brown is so deluded, so removed from the real world that he cannot see where his policies have added to and fueled the current economic situation we are facing, how on earth can we trust him to do what is right for this country now? Maybe the tabloids are concerned that they, almost without exception, were also the very people that lauded Gordon Brown as a prudent and wise chancellor?

 

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Gordon Brown, economic competence and his Legacy

Most politicians worry about their legacy, Tony Blair for example seemed to be permanently preoccupied with how his tenureship as prime minister would be viewed by future generations. No doubt, it sometimes pal, Gordon Brown will have similar thoughts. So I have taken a moment or two to list some of his ‘achievements’ which will hopefully act as an aide-memoire when he comes to having his autobiography written. No doubt I will have missed one or two, so please feel free to fill in the blanks, he may need all the help he can get.

1. Raided private pension schemes to the tune of £100bn over 10 years, whilst allowing public servants to retain their gold-plated, index linked, early retirement pensions.
2. Introduced more stealth taxes than any other chancellor in history, equivalent to an extra 10p in the Pound on the basic rate of tax (source: Grant Thornton).
3. Sold the UK’s gold reserves at the bottom of the market despite expert advice not to.
4. Introduced ‘green taxes’ knowing full well that the revenues gained would not be spent on green initiatives, another successful stealth tax to add to the collection.
5. Successfully achieved goal of becoming prime minister without going through the inconvenience of being elected by the people.
6. Sold out the UK’s sovereignty to unaccountable, foreign elections, in spite of a promise to allow the public to decide through a referendum.
7. Destroyed the union and in the process, ensured that his countrymen received more money per head than those in England and Wales.
8. Missed virtually every financial growth target announced in each successive budget without so much as a murmur from the press.
9. Successfully managed to dupe and the press into believing that he was an iron chancellor driven by prudence, when in fact he was a spendthrift.
10. As the architect and driver of the revised PFT initiative proposed by the conservatives, saddled the country with a bill of £170bn which must be paid by 2032, without having to include the figure as part of the public sector balance sheet.
11. Managed to keep the £780bn public pensions deficit off the books, even though this is equivalent to over £30,000 per household and must be paid out of future tax receipts.
12. Managed, without any consideration of the irony, to lecture people on their level of borrowings, whilst building up nearly £500bn of dept of the governments own ‘credit card’.
13. Introduced a complicated tax credit programme that managed to lose £2bn every year through fraud and errors.
14. Left the taxpayer saddled with £1.7bn of Metronet’s debt having been the person that pushed through the Private Public Partnership initiative for the London Underground.
15. Managed to convince the public that local authorities are responsible for the doubling of council tax, whilst actually placing responsibility for all additional services firmly with the local councils.
16. Managed a real blinder, by camouflaging the inflation rate by changing the measurement from RPI to CPI.
17. Underwritten £17bn of debt for Network Rail, without having to include it on the public balance sheet.
18. Survived the embarrassment of claiming in March 2006 that 31,000 government employees had been trimmed off the payroll, whilst the Office for National Statistics claimed one month later, that the headcount had actually increased by 62,000 a difference of 93,000!
19. Managed to introduce such a complex set of rules and regulations, designed to extract maximum tax take, that the annual Finance Act  (summary of tax changes in the budget) has increased from 300 pages or so in the 1980’s to over 10,000.
20. At a time when businesses are struggling and people are having to tighten their belts, presided over a government that has some 78 acres of empty space if office buildings and grace and favour homes.
21. Managed to push another 3.5m people into the higher income tax bracket, using a favoured trick of ‘fiscal drag’, where the tax threshold is raised more slowly than earnings are rising, so that workers end up paying a higher proportion of their income in tax
22. Twice shifted the timing of the ‘economic cycle’ in order that the so called “golden rule” would not be missed, resulting in a brazen massaging of the figures.
23. Ensured that there are now twice as many tax collectors as there are nurses, demonstrating firmly where the government’s priorities lie.
24. Managed to convince people that they are “better off under Labour” even though each family pays more than £5,000 in extra tax, compared to 1997.

I could continue, but there is a real risk that this page would just take too long to load. Perhaps I should keep a copy for Gordon Brown’s ghostwriter!

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