Fraser Nelson

A bonfire of taxpayers’ cash

A bonfire of taxpayers' cash
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And what, exactly, is the point of this mind-blowingly large bank insurance scheme? I haven't blogged on this so far as it just leaves you numb: as Charles Moore says in his Notebook in this week's magazine, you just stop reacting. Another £300bn? A £10bn loss from Lloyds/HBOS - and that's our problem now? Or is it? Whatever, Mr Brown. The taxpayer has endured so much pain that the new blows don't register. Our nervous system is already in ruins. Billion is the new million. Trillion seems a made-up word, although it's popping up with greater frequency. The next in line is quadrillion, which sounds like some kind of a 1980s boy band. But what is unnerving  me is the absence of any scrutiny, or strategy.

No one is keeping tabs on how much taxpayers' cash is gone forever, how much we can hope to get back, what the paper loss to the taxpayer is so far.  UBS has issued a damage report otulining the numbers for their shareholders - see here. Why the hell hasn't RBS done one? The answer is that its owners, the government, don't really want people to know what the damage is. Instead of keeping tabs on behalf of the taxpayer, Gordon  "two books" Brown has just started a new series of national debt excluding the banks. Purpose: to conceal from the taxpayer what he's done. He rejects the ONS definition of national debt, but won't give us a new one. Just his own make-believe set which excludes every penny sent down this vortex of the imploding banking sector. What's the real story? He won't say. There are all too few banking experts in the press able to find out. In politics, complexity is the second last refuge of the scoundrel (pension funds are the last - or, in Brown's case, the first).

One final point. When banks are nationalised, the cost of their being able to borrow should - in theory - converge with that of the government. Household debt is the no.1 problem issue in Britain right now, so relieving the cost of servicing that debt would represent (as Brown likes to say) real help. It would allow more repayments to be made and the debt pile to be reduced. But Brown's moves are not achieving this basic goal.

The below graph shows what aficionados know as the Libor-Sonia spread: 

the difference between the base rate and the inter-bank lending rate (the latter being far more relevant in setting retail interest rates). It is soaring. The real cost of borrowing is not being helped by these bailouts. So what's it all about, Alfie? What Brown seems unable to comprehend is that our problem is not lack of new debt - but the increasing cost of old debt. And if his bailouts won't fix that, there's no point.

Written byFraser Nelson

Fraser Nelson is the editor of The Spectator. He is also a columnist with The Daily Telegraph, a member of the advisory board of the Centre for Social Justice and the Centre for Policy Studies.

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