Growing proof that none of them know what they’re doing….except robbing us
The Slog: Following last night’s reference to selling Lloyds Bank in
the Mansion House address from the Chancellor – in which almost nobody
noticed the bailin reference – The Slog has gone back into the Commons
archives to look more closely at whether those in charge know what
they’re doing when it comes to selling State Banks. It’s disturbing
reading….and highlights a lack of agreement about what to do generally.
It is the sticky lot of the regular socio-economic commentator to try
and work out – almost daily, in fact – whether those in charge of the
world are pernicious, or incompetent, or both. Last night, Bright Thing
George Osborne – he of Oxbridge and Westminster lineage – stood up at
the Mansion House to make the traditional speech about Britain’s fiscal
and economic position. Quite early on in this epic, the Draper dropped
this little grenade into the mix:
“High-street
banking will be ring-fenced so that taxpayers are better protected when
things go wrong. We will be able to bail in creditors when a bank fails
rather than turning to the public purse.”
It’s a weasel worthy of Harold Wilson at his
peak: what, we wonder, is the difference between a creditor and a
taxpayer? What is the difference between turning to the public purse,
and turning to the public’s savings….aside from the latter being quicker
and more discreet?
Now there’s a lot of concern around at the
minute about how great or crap the governing class is at flogging banks,
and much breath was bated last night about what the Chancellor might
say about on the subject of selling Lloyds…this is the same Lloyds from
whom Vince Cable tried to persuade the CoOp Bank to buy 632 branches,
having already been forced into a bad Brittania takeover. Wee Georgie
announced that “we are actively considering options share sales in
Lloyds. Of course, we will only proceed if we get value for the
taxpayer. And we have no pre-fixed timescale or method of disposal”. I
have maintained from the start that there is no way the public will get
anything like its money back on the bailed-out banks. Lloyds is trading
at higher than we paid for it (remember, it was a fire sale)
but set against the market as a whole my opinion would still be that
Lloyds is undervalued. What does the political/Treasury track record
tell us about government disposal of banks on the great-to-crap
spectrum?
Following a close study of George Osborne’s
Mansion House speech last night, I have just finished reading a Commons
Treasury Committee transcript
from fifteen months ago, in which Treasury Sir Humphrey, Nicholas
Macpherson, gets cross-examined by various TAC and PCAC Members of
Parliament. Many of these drones (Michael Fallon for example) ought
themselves to be in the dock at the Old Bailey, but that’s not important
here. The key thing to note is that MacPherson has been the Permanent
Secretary to the Treasury since 2 August 2005. Put another way, he’s the
boss, and all the sh*t hit the fan on his watch. He’s also a big fan of
Stephen Hester. He also went to Eton. He also went to Oxford. So then,
all very familiar Ruling Class stuff. In this telling extract, he’s
being asked by the CTC how things went on the Northern Rock
re-privatisation:
Stewart Hosie: Sir Nicholas, the
report talks about the Chancellor announcing the sales process for
Northern Rock. Since then, we know £1.4 billion has been put into it;
that has been written down to £1.19 billion. That is different from the
£27 billion put into NRAM, but it is nonetheless a significant sum of
money. It has been sold for £747 million, which may rise to £1 billion.
Should the sale have been delayed to allow the economy to strengthen and
a bid to come in that might have recouped more of the cash?
Sir Nicholas Macpherson: That was
the question that we had to address. Why, as an Accounting Officer, did
I think this sale represented value for money for the taxpayer? Partly
because there is something corrosive about being in the public sector if
you are running a business, particularly if it is a bank, for all sorts
of reasons that I expect this Committee is all too aware of, and
Northern Rock in the public sector was not making a profit. It was due
to continue to make losses. I did not see any obvious sign that just
hanging on would make a lot of difference. I have been involved with
Northern Rock-
Chair: Sir Nicholas, it made £410 million before tax in 2010.
Sir Nicholas Macpherson: I am talking about the good bank of Northern Rock.
Chair: Yes, the good bank. It made £410 million profit; it is here in your report.
Julian Kelly: Northern Rock Asset Management.
Chair: No, no, we are not talking about that. That is the bad bank.
Sir Nicholas Macpherson: The irony was it was the bad bank that was making the money; it is the good bank that is losing the money.
Q67 Mr Love: So why don’t we sell the bad bank?
Sir Nicholas Macpherson: That is an interesting question.
It really is straight out of Yes Minister isn’t it? What you might
call the blind mice in pursuit of the lizard’s tail. Treasury boss
scribbles on back of envelope, CTC tries to decipher what he’s on about,
Treasury boss says “Quite frankly squire, your guess is as good as
mine”. The Good Bank, the Bad Bank, and the Ugly Rumours.
But hidden not far below the surface there is that Sir Nicholas probably thinks that the bad/good nomenclature was misinformed.
But it gets even more concerning, as we discover that Sir Nicholas
MacPherson also thinks the Osborne Plan for recovery is missing the
point. Another truly remarkable excerpt from MacPherson’s evidence: (my
emphasis)
“If I look at the size of the state, historically Governments have
found it quite difficult to get the state much below 40% of GDP….With
the benefit of hindsight, what is clear is that – largely reflecting wider economic conditions, not necessarily profligate public spending – the state got too big around about the late 2000s.’
MacPherson’s thinly-disguised point here is that, if your banking
system has f**ked up so badly you need massive State expenditure to pull
it round, then saving £16bn here and there is peeing in the Pacific.
This is a point I’ve been making for months; but having said that, I
worry that the Secretary of the Treasury didn’t notice New Labour
spending heading for the stratosphere after 2003.
The Americans call it Snafu. The Slog calls it IABATO – It’s all bollocks and that’s official.
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