How Osborne fired a shot across the banks’ bows, stuffed Cable, and took everyone’s eye off the balls-up at RBS
The Chancellor…everything up his sleeve
There have been some severely misleading statements in the
media about Royal Bank of Scotland (RBS) over the last few days – on
both sides of the Pond. Some of this is down to the usual hack idleness
and gullibility; but rather more of it was a campaign of carefully
assembled spin and distraction. Most of these have emanated from George
Osborne.
The ‘Cabinet discussion about Nationalisation’ chatter
This was simply far too convenient to be a coincidence. With a
decidedly dodgey set of results due in three days time, the N word was
leaked. But note also in the leaks: “George Osborne is thought to be
against the idea”. The Chancellor was the source of the leak: it was his
less than subtle way of suggesting he’s The One True Tory left…and
capable of getting tough with banks when needs be.
Partly too, this is a struggle for supremacy between LibDem Business
SecretaryVince Cable, and Tory Chancellor George Osborne. By setting
these imaginary hares running, Osborne has quite specifically distanced
himself from a daft idea like nationalising the rest of the bank: but
knowing that people are acquainted with Cable’s desire to do just that,
most observers assume it’s Vince’s idea.
Further, Osborne’s loan guarantee scheme has been a flop. Bankers
still aren’t lending to small and medium-sized business: given the way
the economy is flatlining, Osborne needs a success. He needs to get
banks lending again: hence all the guff about “exasperation” with bank
lending policies: what better way to scare banks into lending than
threaten to start nationalising them?
All well and good, but Draper Osborne is a long way from stupid, and
one of the better chess-players at Westminster. Barclays is pinned down
by a major scandal, and the wobbly nature of Lloyds/HBOS is gaining
broader dissemination. Tough times are ahead on toxic debt, and by far
the most exposed British Bank is the one the Treasury owns four fifths
of: RBS.
OK, it wasn’t 80% acquired on the Chancellor’s watch. But that’s not
the way it works in politics – and since the Conservatives came to
power, things have got worse there, not better.
Distraction to support the ‘RBS in recovery’ myth.
RBS CEO Stephen Hester indicates that the taxpayer-backed lender is
still “being hit by toxic assets” (as if they’d flown in through the
window rather than having been acquired by the bank itself) yet has
“achieved an important milestone” by repaying all the Government loans
given to it during the credit crisis.
But all that bears little relation to reality. The trend data on
losses are catastrophic: £399m in 2010, £766m in 2011, and now £1.5bn in
the first half of 2012 alone. Some recovery. And the bank still owes
the British taxpayer £46.6bn in relation to the price of buying its
shares. The software ‘glitch’ is also being put forward by slippery
Hester as causing the ‘setting aside of £125m’, and thus a major
calamity over which RBS had no control. Bollocks: that sum is for
customer costs and claims. What we need to grasp is that this cost is
minute – under 0.02% of the glitch windfall, which was in the region of
£80bn – effectively, a below-the-radar bailout. Regulars at this site
will know that I had profound doubts about the reality of ‘the glitch’
from the start.
The sudden introduction of a ‘full nationalisation’ issue just four
days before the results announcement was classic Blairite distraction.
(And don’t kid yourselves: for all his empty promises of eschewing spin,
Camerlot is more addicted to it than New Labour was). A bit of suitable
bank-bashing, talk of a crackdown, good background to Osborne’s latest
lending wheeze….and any rubbishing of LibDem nationalisation notions
plays well with Malcolm Brady’s 1922 troops.
As for the nationalisation threat itself, it is too risible for
words. Coalition leakers were claiming earlier in the week that the
major motivation for considering full nationalisation was “exasperation
at its inability to persuade RBS to lend more money to business”.
Please, please can we all wake up? The Government already owns 82% of
the bank, a stonking voting majority. WTF difference is buying the other
18% going to make?
And so by Thursday, we were all turning to the Treasury pinstripes
for confirmation or denial. The final tick for me was that, by and
large, there was much “playing down” of the story…as if those beastly
journalists had been at it again, inventing all kinds of nonsense. Yet
again, this is standard procedure.
“Osborne is a clever young man,” said a former Treasury grandee to me
on the phone this morning, “but he is in love with intrigue for the
sake of it.”
Correct. The extraordinary thing about these machinations (and my old
Treasury chum is right, wee George revels in them) is that they are
doing him no good at all: a poll earlier in the week among Tory
activists showed that exactly 0% of those contacted saw him as a viable
next Party leader. And ultimately, nothing will be able to distract from
the one Big Issue Osborne cannot dodge: structurally, the economy is
too lopsided and eurocentric to bounce back….and woefully unsufficient
to keep an overcrowded island in work.
We have New Labour social engineers and the Scottish Gold trader to
thank for this awful situation. But like I say, politics doesn’t work
like that: this is here, Osborne is now, and pretty soon this Coalition
is going to be history.
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