SPIV ECONOMICS

Figures from the Office of National Statistics [ONS] have recently revealed that once the liabilities of the two nationalised banks, RBS and HBOS/Lloyds, are added into the government accounts, then the national debt stands at a frightening £2trillion - or £33,000 for every man, woman and child in Britain.

Government borrowing is expected to reach £87billion this year - 47.8% of national income, which is well above Gordon Brown’s now abandoned 40% ceiling.

Meanwhile, Labour are making a big noise about the pensions and bonuses that the bankers have been helping themselves to. If Labour was sincere in its opposition to such bonuses and pensions, one wonders why they approved them.

Northern Rock, which lost £1.4billion in 2008, is to introduce a new bonus scheme to reflect its new role to increase mortgage lending. The chief executive, Gary Hoffman, said:

‘Pay for performance is not a bad thing. Someone who goes the extra mile is likely to deserve more.’

Meanwhile, it was revealed that HSBC gave £32.4million in bonuses to its five highest paid bankers last year, despite a 60% fall in profits and despite taking taxpayers’ cash from Bank of England in a swap for long-term mortgage loans. HSBC is now trying to raise £13billion from its shareholders to strengthen its balance sheet.

But Labour has focused attention on the greedy, yet hapless, Sir Fred Goodwin who made special arrangements to secure an early retirement pension of £693,000 per year. This is despite the fact that as chief executive of RBS he presided over a loss of £24.1billion last year. This is the biggest loss in British corporate history. The 50-year-old Sir Fred’s pension pot has been especially doubled from £8million to £16million to ensure that he would receive a pension of £13,000 a week for the rest of his life. Given that RBS is insolvent, this is taxpayers’ money that Sir Fred is being lavished with.

Sir Fred also has other pensions worth £37,000 per year from previous employment.

Sir Fred has responded by pointing out that the Treasury minister, Lord Myners, had been specifically told of the arrangement and had agreed to it in October last year. This makes it a binding contract which Labour will not be able to renege on despite all their grandstanding. Despite calls for his resignation, Lord Myners, a close ally of Mr Brown, shows no signs of any contrition for his actions.

Setting aside the anger that Sir Fred’s special pension arrangements provoke, the real story of the day was the scale of the RBS loss and that Labour were using taxpayers’ money to insure up to £325billion of potential future losses at that bank. This is in addition to another £25.5billion direct cash injection, which follows a previous cash injection of £20billion.

Meanwhile, Peter Cummings, 53, who was in charge of HBOS corporate lending division where losses have reached £6.7billion, has been awarded a pay-off of £600,000 and an expected pension of £400,000 per year.

Losses at HBOS totalled £10,8billion and need to be set against the profit of £807million of its new partner Lloyds, which is now in talks with the government for its own bad debt insurance scheme. It is expected that the taxpayer will need to insure up to £250billion of bad debts of the new Lloyds Banking Group. The Lloyds share price continues to plummet.

The danger posed to the taxpayer and the economy by all these insurance guarantees with which Labour is bailing out the bankers is potential awesome [see the English Rights Campaign item dated the 20 February 2009].

Labour are now getting ready to print money and give that to the banks too.