The government is spending money like water in a dangerous way. Its endless schemes to prop up the banks are wasteful, delaying the necessary changes in the banks to sort out their past losses and mistakes. Future generations of taxpayers are being lumbered with huge debts, whilst the economy continues to decline rapidly.
I have set out an alternative much cheaper way of handling the banking crisis. The one helpful change so far in the government’s conduct is the realisation that RBS, a bank larger than our national Income, has to reduce risks and try to control its losses better. I regularly speak in the House when there is opportunity on the damage done to savers by the very large cuts in interest rates, to taxpayers by the profligacy, and to the economy by delay in tackling the underlying monetary and banking crisis.
There is no one single quick fix, no easy way of sorting out the excesses of the past. As a country we need to save and export more, and spend and borrow less. The adjustment is painful., At the moment government action is serving to delay it, and serving to penalise savers and exporters, the very people who we need to encourage.
Parliament has been badly damaged by this government. I am not allowed to table questions on where all our money goes in these banks, as the government claims they are “at arms length”. Yet we learn that a Minister demanded the sacking of the CEO of RBS without asking the right questions concerning the man’s pension arrangements. We are told by another Treasury Minister that they are going over all the bonus and pay arrangements in the state owned banks. That does not sound like arms length to me. In view of the colossal sums being spent and lost, Parliament should have a right to be told and to cross examine those responsible.
The government is undertaking too many expensive initiatives without giving any of them time to work. It needs to calm down, and do just two things well. The first is to get the money supply right, which it has messed up both ways in the last four years. The second is to get the banks to work their way through their portfolios of bad loans and poor investments, cutting risk and taking losses where necessary, with minimum recourse to public money. It should not be buying any shares in banks, given the scale of the losses. It needs to give powers back to the Bank of England so it can run our money markets properly and supervise our banks sensibly. The Brown reforms both wrecked our money markets and our banks.
I keep people up to date with the twists and turns of this crisis daily through www.johnredwood.com. There is a palpable and justified anger now about the incompetence of the authorities and the huge waste of money. The old rules have not been suspended by the crisis. It is better for governments to live within their means. Every penny spent should get us value. The money should be concentrated on front line staff, good service provision, and benefits for those in need. So often the deserving do not get enough, whilst spending on the government itself runs amok.
I look forward to some commonsense returning. If it does not we all end up the poorer, heavily in collective debt. You cannot solve a problem brought on by borrowing too much by borrowing more. You cannot mend the banks by transferring all their problems to the taxpayer. You need to work patiently away at every loan and every investment, to try to get the best result you can. You cannot create a sense of fairness if you reward those who made enormous errors and penalise those who try to take responsibility for their own lives and pay their own way. Today it is savers being attacked. Tomorrow it will be taxpayers, as the bills come in for all the debt this government is busily amassing at the taxpayers expense.