Growing proof that none of them know what they’re doing….except robbing us
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.