It was another very expensive day for taxpayers in the Commons yesterday. First came a statement from a junior Treasury Minister committing taxpayers to back £260 billion of Lloyds toxic assets. This was the Ministerial spin on the real statement that we were taking a controlling interest in a £1 trillion bank. Then came the Supplementary estimates, weighing in at a modest extra £36 billion. There was still no mention of printing money, and all attempts to ask about that were blocked with the surprising answer that this was a matter for the “independent” Bank of England. Funny that. I distinctly remember them asking permission of the Chancellor.
Neither the Chancellor nor the Chief Secretary to the Treasury was willing or able to explain these huge sums to us. The Chancellor, we learn, was busy dreaming up new financial lame ducks we go and help, with his scheme to lend lots more money to Eastern Europe, as if we had not yet borrowed enough!
The Lloyds bank package was bizarre. Apparently taxpayers are to stand behind the potential extra losses on £260 billion of Lloyds assets, but in the process of doing so will gain control of the whole bank.
I asked what was the point of taxpayers “insuring themselves” in RBS and Lloyds. Are there any circumstances in which the government would let RBS or Lloyds go under, now we are the majority owners? I assume not – or otherwise what was all this spending on bank shares about? Given that we do stand behind these banks, lock stock and barrel, stand behind every CDO, commodity future, loan to a foreign oligarch and every failed mortgage, why then do we need a separate insurance scheme for some of the toxic debts? We the taxpayer have to stand behind all the possible losses on all the assets of these mega banks.
Was it just a device for consultants and advisers to charge more fees to the taxpayer? Why didn’t these mega banks have a handle on their toxic assets already, and why can’t they just get on and manage all the assets for us in the normal way? The Minister could not be bothered to answer this question, so he tried to answer a different one. As always one was left wondering whether he simply hadn’t a clue, or whether he knew the answer was embarrassing and it would be better not to go there.
The Conservative front bench concentrated on what we were meant to be getting for committing our trillion (or £260 billion). The government triumphantly told us this huge financial commitment would mean Lloyds would lend an extra £14 billion this year. Asked by Mr Hammond if they would continue to use their normal lending criteria before making an advance, the government confirmed they would. It is difficult to see that on this basis we will get £14 billion of lending LLoyds would otherwise have not made. It would be a very expensive way of gaining an extra £14 billion of lending, if that’s what you really want to do. I doubt even that will work.