Tuesday, 2 December 2008

The numbers are too big

The government tells us it will borrow £78billion in the current financial year although the actual figure is nearer £150billion because they have omitted the vast sums already advanced to banks and those earmarked to give further support to banks in the coming months. It seems to me we have reached the stage where the amount the government hopes to borrow is so enormous that it makes little practical difference for that figure to overshoot. Today we saw a sign that the Chancellor of the Exchequer might have abandoned any notion of keeping debt under control. When it was announced that a small bank, London Scottish, had folded Mr Darling said that all depositors' funds would be guaranteed by the government. It was only a few weeks ago that the formal guarantee for deposits was increased to £50,000, today that limit was cast aside and an unlimited guarantee was given.

It is easy to see why Mr Darling saw fit to do this. London Scottish is a small bank with total deposits of only £273million and the dent in the public purse is bound to be limited. In fact it would be a modest sum even in good times. But it is hard to see that an unlimited guarantee would have been given just two or three months ago, at that time the increase of the guarantee to £50,000 was seen as an exceptional measure. The only thing that has changed is that the government is now in hock to such a massive extent that adding a few extra millions makes absolutely no difference.

This change of approach comes shortly after it was disclosed that the government is drawing up a list of businesses who will be offered financial support if they go bust. That list is in the sleazy hands of Lord Mandelson and we can have no doubt that a major consideration for inclusion is that the business is in a Labour held seat or a marginal constituency. Bailing out the bankrupt was an old favourite of the Labour Party in years gone by. Their paymasters in the big unions required them to do it and everyone over the age of about 45 will remember how it ended. Vast companies produced goods no one wanted and buckets of taxpayers' finest were thrown at them to keep the workers voting Labour. The cost was so vast that the government ran out of money in 1976 and had to borrow from the International Monetary Fund. Yes, the very same IMF poor Gordon has been keeping sweet with calls for it to receive greater funding from the developed world. A major consequence of the 1976 IMF loan was that it came with conditions, including the need for government to cut its spending. That, in turn, caused the unions to get even more shirty and call strike after strike to "protect" publicly funded jobs. By the winter of 1978-1979 the position was simply bizarre with a Labour government being brought to its knees by its own paymasters. The Conservatives came into office in the 1979 general election and started to undo the state industries.

Now it appears that the natural instincts of Labour politicians are resurfacing. For the last nine years we have seen one aspect of this in a steadily increasing public sector crammed to the gills with non-jobs. But until now even this government did not feel it had a free hand to return to the days of state support for manufacturing and trading companies which could not make a profit. Lord Mandelson, with the keen support of poor Gordon and the hapless Mr Darling, knows he can nationalise vast swathes of business because the huge cost will be just a fraction of existing government debt. If the books were balanced and he announced a plan to spend, say, £30billion in bailing out bankrupt car manufacturers he would face a hostile public and press. As it is £30billion looks like the catering budget and will not cause significant public concern. After all, the government lost £2billion on the day it took shares in the Royal Bank of Scotland just last week and that hardly merited a mention in the press. We seem to have reached the stage where the debt figures are so big and so unimaginable to us little people that the government can add to them without fear of losing any more votes.

I believe there has also been a change in public mood over the last few weeks. When the government started pumping money into the banks to provide them with more capital in an attempt to restore confidence between the banks themselves, most people did not know why it was being done. What they saw, however, was the government using their taxes to help an industry noted for paying large salaries and even larger bonuses. It is hardly surprising that Mr and Mrs Ordinary will say "if they can do it for them, they can do it for us" and "if they can find all that money for the banks they can surely find it for schools and hospitals". These are perfectly sensible and fair observations, after all it is Mr and Mrs Ordinary who will have to pick up the tab and they want that tab to pay for things they value. It is unrealistic to expect Mr and Mrs Ordinary to walk happily from their jobs to the dole queue when a tiny fraction of what was paid to the banks could keep them in employment.

Lord Mandelson knows his party's only hope of reelection lies in getting Mr and Mrs Ordinary back on side. For a couple of years Labour has taken a pummelling in opinion polls and even now they are a fair way behind the Conservatives on most polls but the gap has been closing in recent weeks. They need a lot of Mr and Mrs Ordinarys to vote for them again and one way to do it is to claim credit for saving their jobs. Old-style nationalisation was driven as much by political ideology as vote gathering, many of those in the post-war Labour Governments led by Clement Attlee, Harold Wilson and Jim Callaghan genuinely believed that state owned industries would be more efficient and stable than those in the private sector. I doubt that even a youthful Trotskyite like Mr Darling still believes that because the evidence is utterly overwhelming that state run industry is a black hole for taxpayers' money. Today their primary motivation is the buying of votes.

What an irony it would be if the appalling mess caused by poor Gordon's devastating incompetence during ten years at the Treasury and two as Prime Minister will give him the smokescreen he needs to secure reelection. Horrible though it is even to think it, it could happen because the numbers are now so huge that he can buy votes without the public blinking at the cost.

7 comments:

QuestionThat said...

Hi, TFB:

Would you be interested in taking over Question That after I 'close' at the end of 2008? It seems a shame for the domain and 'brand' to go to waste.

If you're interested or merely curious, e-mail me: questionthatblog@gmail.com

ArtPepper said...

Howdy TFBO, I've recently discovered and really enjoy your blog, but as QuestionThat is presumably suggesting I suspect the FB brand is playing a part in reducing the audience for what is often superb and/or witty commentary. Whatever the content of your blog, 'bigot' is now a wholly negative word, you might as well call yourself The FatNazi Opines or The FatFuhrer Opines! Just my tuppence worth. PS I have no connection with QT!

QuestionThat said...

Exactly what @ArtPepper says (I assure you there's no relation)...

Your branding is disastrous for your blog. If your content was like Old Holborn's it would be fine, but it's not.

The opportunity to take over Question That means you can take advantage of its Google Pagerank, prior blogrollings etc., and generally make use of what a blog and domain name which has been running and attracting attention for 14 months offers.

With your current blogger-identity, your audience will always be limited whatever your context.

I don't want any money or other favours - once again I just don't want to see the Question That name go to waste, and I know you would do it proud.

TheFatBigot said...

It's very kind of you both, but you seem to be under the misapprehension that there is something in this for me other than the satisfaction of honing my thoughts on a subject by writing about it.

There is, in fact, nothing else in it for me. Perhaps I would gain additional satisfaction if I averaged 2,000 hits a day rather than 90-100 but it would be marginal and it's not why I write.

"FatBigot" is not a brand it's just one self-deprecating name under which I write. FatBigot is the name I use when writing on matters political, I use another blubber-based name for (supposedly) humorous stories.

That some might miss my pearls of wisdom by reason of an ill chosen nom de plume really doesn't matter. Over the last six months I've become rather attached to my new identity and for as long as I continue my musings (and I have no idea how long that will be) I think I'll stay put.

TheFatBigot said...

Oh, and Mr Pepper (or is it Dr Pepper?) I forgive you the typo of adding "/or" to "and" in the middle of your comment. (tee hee)

Anonymous said...

Mr. Bigot, I fear you have missed an important point about London Scottish Bank.

It is the provider for various savings schemes flogged by cheapo stores of the type Labour voters tend to favour.

They (the Labour voters) were in danger of losing their Christmas sweetie money.

Straightforward client state care and maintenance, from Mr. Darling's point of view.

TheFatBigot said...

Mr Mous, I had read about that aspect of London Scottish's business.

Much though I hate to sound caring and sharing, I'm all in favour of the taxpayer occasionally dipping into the pot to help those of limited means who have had the good sense to save. It can't be done all the time because it would just act as a guarantee for rogues, but I say hat's off to anyone who helps people do the right thing.

Mr and Mrs Ordinary who make £250 after tax, but would rather work for little than sit at home on benefits, and set aside £5 each week to give the children a treat at Christmas are exactly the sort who deserve to be helped. If that gives Labour some votes then so be it, it's the right thing to do.