Monday 10 August 2015

A Thoroughly Bad Deal


Osborne as usual is taking advantage of Labour’s distraction at this time to sell off RBS and Lloyds to the private sector at a huge losses to the taxpayer, to accountability of the banks, and to the future of the British economy.

This is motivated by his ambition eclipse even the Thatcherite privatisation boom of the 1980s and to oversee the biggest ever sale of publicly owned corporate and financial assets in one year, as well as of course elevating his prospects for the coming Tory leadership race and premiership.

But what may be good for his party and for him will certainly not be good for the country.

First, it is a thoroughly bad deal for the taxpayer.

Osborne has agreed to cut the public shareholding in RBS from 79% to 73%, but at a loss to taxpayers of £1bn.

The scandal of this unnecessary sale is one main reason why it was announced in the summer recess when Parliament wasn’t sitting so that he could avoid hard questioning about its implications.

The £2.1bn of RBS shares were sold at 330p per share, far below the average of 502p per share that the helpless taxpayer was forced to purchase them.

But that is not the real reason why Osborne’s policy is downright misguided.

The banks’ overmighty arrogance, recklessness, and incompetence were the prime reason behind the worst global financial crash for a century, and there not a jot of evidence that they have accepted their responsibility, shown any remorse, or are committed to any serious reform.

Indeed they have fought tooth and nail against reform, have extracted major concessions from a weak Osborne like his caving in by reducing the bank levy in response to their lobbying, have pushed back the time limit for any statutory changed to 2019, and are demanding a very early return to pre-crash business as usual.

Moreover there are five specific reasons why the banks should NOT be returned to the private sector.

Their deregulated lending – for overseas speculation, for deployment of artificial tax avoidance devices on an industrial scale, for exotic derivative financial constructs which were highly lucrative but were at the heart of the crash, and for for prime property sites in central London – do not benefit British industry, but only their own selfish interests for profit maximization.

Only 8% of their lending last year went towards productive investment in Britain.

There has been far too little reform to prevent another massive crash, mainly confined to increasing the capital reserve ratio and setting up ‘Chinese walls’ between the retail and investment arms of banks.

They are still ‘too big to fail’, so that the implicit taxpayer guarantee is still in place.

There is no structural reform: Britain needs smaller, regional, specialist banks that helps Britain in the same way as the German Mittelstand.

And the dark forces of the next crash – the rise of shadow banking and a re-run of the most dangerous derivatives – are not being countered.

4 comments:

  1. Peter Hitchens is excellent on Loony Left Corbyn this weekend. He rightly says Tory supporters of Corbyn should be careful what they wish for. If Labour is trounced again, it will split apart and fold (as Hitchens says, it should have folded years ago) and deprive the Tories of the Leftwing bogeyman that holds them together.

    As Russia told NATO after the Cold War ended, there's no crueller fate than being deprived of an enemy.

    As Hitchens writes the Tories are a hopeless Coalition of leftists and rightists who agree on absolutely nothing and would split apart tomorrow if there was no Labour bogeyman to herd them into the division lobby and voting booth.

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    1. Hitchens agrees with Corbyn about absolutely everything that exists in practical political terms. The only differences are grammar schools and capital punishment, both of which are matters of purely historical interest, and now rather distant historical interest at that.

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    2. There are others, things like Northern Ireland, but they are just as much in the past. Corbyn has more in common with the DUP today, which voted against the Welfare Bill and wants to abolish the Bedroom Tax and which has sat in coalition with Sinn Fein for years, than Hitchens has with either of the Unionist parties.

      Hitchens is an integrationist, a position invented by an Englishman that never got any takeup in Northern Ireland and was rendered obsolete by Scottish and Welsh devolution. The UUP gave up all tendencies, always a minority, in that direction in 1998 and the DUP never had any.

      Who cares about the anti-Cameron right? Standing as itself instead of on Cameron's coattails it managed one MP this year and he disagrees with Ukip about everything anyhow.

      But Hitchens is not on the anti-Cameron right. He is like one of those Hard Left Catholic Labour MPs who oppose abortion and gay marriage while supporting renationalisation, trade union rights, council housing, the Bennite case against the EU, reopening the pits, rebuilding the railways, scrapping Trident, opposing neocon wars and attacks on civil liberties, and aking Jeremy Corbyn Leader and then Prime Minister. He should stop pretending.

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    3. Ah, yes, Powellism. It still has a certain Fleet Street following. But then, it never had anything else. That is true in relation to far more than Northern Ireland alone.

      Douglas Carswell, insurgently elected for the fourth time, is a kind of post-Powellite, unencumbered by the internal contradictions that arose out of the complexities of its originator's personality.

      A true believing free marketeer without complication, Carswell believes that there ought to be absolutely no immigration control whatever. As you say, such is the one and only MP whom UKIP has managed to return this year.

      UKIP really has gone away after the floor was wiped with it. Nigel Farage was recently interviewed about Calais, but only as regular user of the Channel Tunnel.

      Once Labour is committed to the programme that you outline, and especially once that includes being opposed to popular acceptance of the Cameron EU renegotiation to which the Conservative Party will of course be committed, then Peter Hitchens will just have a choice to make.

      He can carry on waiting and calling for either the Conservatives or, if it still exists, UKIP to become Tony Benn With Grammar Schools And Hanging Party of his dreams. Or he can face reality.

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