Report to Shareholders in UK PLC by the Chief Executive
This year will be difficult for your country. Our turnover (output) will continue to fall, as it has been doing for the last half year.
I have decided to use this opportunity to expand the cost base substantially. I intend to increase the numbers on the payroll and to raise their pay. I intend to pay bonuses to all employees who helped us make such large losses in the banking subsidiaries. I do feel we need to build up their morale when they have had such a setback. I rule out the conventional approach of our competitors who seek to husband cash and cut their costs at times like this.
I have also decided we need to borrow more. We will have to increase our borrowings by around 10% of our turnover in both 2008-9 and 2009-10 anyway, given my commitments to increasing our costs.
I think we need to go much further. This is a good time to take on more debt. I have decided we need to at least treble the debt. I intend to do this through two major acquisition programmes.
In the first I have been buying up banks and bank shares. This sector of the economy has been performing very badly. I do not wish to exploit their bad luck, so I will pay above the market value for some of the shares we buy. We have already bought all of Northern Rock, and the assets of Bradford and Bingley. We have a majority share in RBS and a substantial minority in Lloyds. Our own accountants think this will treble the country’s debt. Outside auditors suggest this is an understatement.
Just in case these acquisition programmes do not expand the debt enough, I have decided to accelerate the borrowing programme further by buying the worst assets off the remaining banks. I could probably expand our borrowing and liabilities by as much as an additional £400 billion by doing this. It could also be done quite quickly.
Some shareholders question the wisdom of this, pointing out that many banks got into trouble by borrowing too much in the first place. They ask how can we borrow all this money? I have taken the precaution of seeing that our interest rate setting subsidiary, the Bank of England, has taken the price of borrowing down to 400 year lows in preparation for this. Just in case there are problems I am about to sanction printing the money we need for the takeovers, to ensure we can get all the cash we may need for this ambitious programme.
It took my predecessors in this job 500 years to reach borrowings of just half a trillion pounds (£500 billion). I am proud to tell you I expect to be well above £2trillion quite soon. Our own Central bank subsidiary is showing the way by now having a balance sheet 120 times its share capital. Meanwhile I will continue to lecture everyone else on the importance of prudence.