Time to end the war on banks?

The UK and Germany both have large economies with certain strong sectors. Germany flourishes with a strong car industry. The UK flourishes with a strong financial sector.

There the similarities end. Germany does everything possible to back and support its car industry. The UK has spent the last seven years exposing the faults and defects of its banks, and hurled many accusations against them.

I fully understand the unpopularity of banks, and have no time for malpractice or bonuses paid to senior executives who have actually made losses for the shareholders. I opposed the bank bail out purchases of shares by the Labour government. If offences have been committed then the perpetrators should be dealt with by the law.

I do think now the hostility to banks has gone too far. There are many decent, hard working people working for banks. Our banks are involved in and facilitate practically every transaction that keeps our economy going. We need successful commercial banks to lend sensible amounts of money to individuals and companies to fuel our recovery. We need a strong globally competitive banking industry based in London to sustain our balance of payments and tax revenues, which have in the past depended on the financial sector for a large contribution.

It is currently fashionable to attack the top end business of banks because they supply expensive services to rich individuals and companies. In this they are in exactly the same place as the German car industry, which specialises in making expensive cars for the rich and for companies. The German government does not go on a moral crusade telling their high end car producers they should make fewer dear vehicles for people who already own cars and who by definition do not”need” the latest high priced product. The German government does not even take very strong action to cut the average CO2 emissions of the vehicles made by the German industry, although it is signed up to global warming worries.

The German car industry should affront all Greens and people with left wing ideas. It consumes large amounts of natural resource, uses big quantities of energy in making the product, and sells machines which are relatively fuel intensive in use. Some people dare to own several cars, though they can only use one at a time. The government subsidises energy for industrial use in Germany, conscious that EU energy policies are damaging to industry without subsidy. The German administration seems to take the sensible view that what is good for the car industry is good for Germany. Selling more cars to the rich creates more jobs for German workers.

The UK recovery has been impeded in past years by the regulatory demands that the banks should hold much more cash and capital. As someone who said the banks should hold more capital and cash prior to the crash, I see the wisdom of demanding good standards to ensure liquidity and solvency. I think the regulators have now done enough, and should allow more lending by banks. There are many good projects and investments that could benefit from more long term loans. The regulators should ask themselves how much more is it wise to take from the banks in fines and compensation demands for past mistakes? If they fine too much the banks will be able to lend less and will be looking for additional ways to put up fees and prices. When the government comes to tax banks it also needs to ask how much more can it afford to take out?

We read that HSBC is considering leaving London to establish its headquarters in Hong Kong. There are a variety of reasons given. If none of the reasons are tackled they might go.There is the bank levy which is charged on non UK activities as well as on UK ones.There are the higher capital demands from the EU and the Bank of England limiting the ability to lend and to earn a good return, when the bank is a strong one with plenty of capital already. There is the move to segregate regular banking from investment banking. There is the EU control on bonus payments. Taken together these are leading some to argue that HSBC should take its headquarters away from London and from the EU. I think it is time to reconsider, and to create a climate where large and successful banks are willing to base themselves here. If we lose too many of our major financial companies, we will lose tax revenue, sales revenue for exported services and spending power in our economy as well paid executives go elsewhere.


  1. Gary
    June 10, 2015

    I agree let’s end the war on banks, let them go into the free market and stand on their own feet and we taxpayers will leave them alone and spend our money on things we really need.

    realistically, banks have no future. the internet is destroying the middleman, and with trustless peer to peer networks, banks days are numbered. As sure as the sun rises. Good riddence.

    1. Hope
      June 10, 2015

      No it is not time to forget banking. The two toffs might think we ought to, but they need to make sure that banks act correctly and suffer the consequences of their improper or criminal behaviour. Is this not what Camoron is talking about at the moment to prevent corruption? Meanwhile Gidiot is fleecing pensioners even more. It is reported today that pensioners pay 30 percent of tax and have no interest on their savings. Contrary to the two toffs, pensioners might be living longer, although I doubt it, but they still pay tax.

      Tha banks have had a very easy ride without any substantive changes to prevent fraud or a recurrence of a crash. Time for real change and then leave them alone. Separate private from investment banking. Make all directors personally liable and the it might force them to instil true ethical behaviour.

      Reply The government issued more generous Pensioner savings bonds to provide more interest. Many pensioners with pensions and other investments have benefitted from the rise in values of financial assets in recent years

      1. Lifelogic
        June 10, 2015

        The government also has reduced pension contribution limits and caps and restricted tax relief for higher earners. Continuing Browns pension mugging.

        1. Lifelogic
          June 10, 2015

          Also the situation where pension providers are overcharging people trying to cashing in their pensions under the new rules. All the chaos was foreseeable and could have been prevented – had it been through properly by by government.

          1. Hope
            June 11, 2015

            Fund to lending scheme. The govt lends cheap money to banks so there is no need to pay decent interest rates to people. A blogger made the point recently this all helps the banks coffers, able to borrow cheaply lend expensively and pay little interest to customers. At what point do they stand on their own feet. Osborne’s latest gimmick is about surplus when this appears to be a dictat by the EU. Break up of banks demanded by the EU and complied with etc. none of its business. UK govt should be in charge.

      2. Hope
        June 10, 2015

        They also increase tax on pensions, VAT and utility bills hit pensioners more than other sections of society. Your leader ought to be able to think mor ebrodly that not everyone was born with a silver spoon in their mouth and will be left a fortune by their relatives. Most of us carve our own way in the world and deserve to spend as much of our money that we have earned. Before he gives waste fully gives away our money to despots on overseas aid or to fatten his Oxbridge conte porkies in consultancy aid jobs perhaps he needs to consider his countrymen on food banks, fuel poverty and anxiety to pensioners trying to live within their means because of financial obstacles he placed in their way. Moreover when he makes cuts in the UK to public services consider how the recipients of the wasteful foreign aid spend the money ie policing, space programmes, lear jets. And he does not have a say how the Eau spends about Ā£2 billion of the overseas aid that he also throws away. He might consider some us worked hard to earn this money for him to throw away!

      3. A different Simon
        June 11, 2015

        Hope ,

        I always thought an investment bank primarily made it’s money on fees and commissions for services provided – i.e. socially useful activities .

        Recently , the term seems to have been mis-applied to organisations who’s principle activity is proprietary trading – trading on their own account on a massive scale .

        Far better to remove banking licenses from hedge funds and trading houses which call themselves banks .

        If that is done separating retail banking from true investment banking would not be necessary or desirable .

    2. bluedog
      June 10, 2015

      ‘the internet is destroying the middleman, and with trustless peer to peer networks,’

      But without a guarantor of settlement and with transactions taking place across jurisdictions, peer to peer is a licence to commit fraud on the one hand, or to suffer from bad debts on the other. The internet cannot suspend the rules of commerce, whatever it’s promoters may assert.

    3. Alexis
      June 10, 2015

      Internet commerce would be completely useless without banks though. They play a vital role there.

      P2P lending is a fascinating new field, though risky and of limited value at the moment.

  2. Gary
    June 10, 2015

    Germany exports as much machines as cars.

    in 2014 it exported $267bn of cars and $262bn machines. We can quibble over $5bn. Machines are not for the elite.

    1. libertarian
      June 10, 2015

      Germany also IMPORTED $105 billion of cars in the same period

    2. Michael Walzer
      June 11, 2015

      Just showing how JR often talks rubbish when he forgets to think before writing.

  3. Mike Stallard
    June 10, 2015

    I have been very close to some left wingers. They have a fatal desire to saw off the branch they are sitting on. Immigration? We are nice, so let them all come – so long as they do not move into our estate. Coal fired power stations (which provide a lot of our electricity cheaply and reliably) – not on any terms whatsoever because they are dirty and they go against the Green theories. Cars? Definitely not (they ogle the very big cars though and love it when they can get one). Smoking? Definitely not. Sugar? Even worse. With an underlying theme of being sexually attractive and anti-marriage at an age when you ought to be a grannie.
    And so on…
    So your article does not surprise me at all. Jealousy and covetousness, interference and bossiness all in the name of being nice people, unlike the Nazi Tories who are only in it for the money!

    1. Lifelogic
      June 10, 2015

      Indeed “saw of the branch they are sitting on” puts it rather well. Hypocritical, unable to see how thing really work, little understanding of logic, human nature, economics, business or science. All about raw emotion over reason are other ways.

      The road to hell is paved with superficially good (but usually misguided) intentions.

  4. Lifelogic
    June 10, 2015

    This is all largely true but there is still a huge lack of competition in the lending market. How can it be that they can get away with paying lower interest for company deposits than for individuals, how can it be that they can get away with paying .025% interest on unsecured deposits they charge 9% on overdraft to businesses more sound than the banks and often secured lending too.

    Current customers are paying huge margins for the bank old losses. This is a clear sign of lack of competition, poor regulation and too many barriers to entry to the market.

    On lending they are still slow, over picky and over expensive. Lending on commercial property seem no mainly to be limited to a maximum of a 5 year term by most banks.

    I see Osborne is going to tie his own hand up!


    Perhaps the best way to ensure Britain has money to spare is to stop pissing it down the drain of HS2, the green grants, the expensive energy agenda, or building aircraft carriers without aircraft etc.

    1. Denis Cooper
      June 10, 2015

      But it’s not a case of making sure that “Britain” always has money to spare, the budget deficit or surplus in question is just that of the British government, only one actor in the British economy, not that of “Britain”, the whole country.

      I expect Peter Martin will have something to say about this!

      1. petermartin2001
        June 12, 2015


        Yes you’re right.

        If the British government receive more in taxes from the British economy than it spends back into the British economy, ie runs a surplus, then there’ll be less money in the economy. Is that a good thing?

        Add in that the British economy is also losing money to pay its net import bill, then that’s even more money being lost to the economy. That can’t be a good thing. It’s a recipe for not just recession but Greek style depression.

        1. Edward2
          June 13, 2015

          But if the Government uses that tax surplus to wisely reduce its debt and so reduces the cost of debt interest paid out each year that would have a positive effect.
          A neat mathematical balance and I know you like those Peter.
          And if hat tax surplus came from a growing private sector then there is no need for the economy to have less money overall.

    2. petermartin2001
      June 12, 2015

      There’s no real competition in the lending market. The tendency is that all interest rates fall to zero unless the BoE intervenes to prevent that.

      At present banks don’t get much interest from the BoE either from bonds or their deposits in their reserve accounts. Therefore they aren’t particularly interested in paying much interest to their depositors.

      When they lend money they naturally will prefer to lend with as little risk as possible. The ultimate in low risk, ie almost zero risk, is buying govt bonds. They’ll happily lend out at a 3-4% on an 80% (or less) housing mortgage. There’s only a small chance of any default and if this happens they can repossess the property to recover their loan. It’s money for jam really. Lending to businesses is much more risky. They’ll probably not want to take that risk but if they do they want higher interest payments to cover that.

  5. agricola
    June 10, 2015

    The decent and hard working rarely seem to get to set policy . When everything hit the fan in the banking world, the banks penalised their small customers by calling in perfectly sound loans and did irreparable damage to the industrious. They then got bailed out by government to be allowed to continue their personal greed. Just take a look at the difference between what they pay for individuals money and what they charge those who borrow. You could argue that the antisocial way they run the personal finance industry has given birth to the pay day loan industry with all it’s social consequences. Among their sins you overlook market rigging as one of their evil practises. It could be that at the top levels of management in banking there is little idea of what goes on in the engine room. This is why few people like banks.

    You seem to have a big down on the German car industry, sounding almost socialist. If you look at it objectively, it does not just make high end vehicles. There is Ford, GM Opel, and VW to mention but a few. I seem to remember Mercedes supplying most of the taxis in Eastern Europe at one time.

    As far as the price of energy is concerned, perhaps your government of the past five years should not have gone off on a green tangent. We might then have had cheaper energy from an industry on a sustainable basis.

    If government could concentrate on the unacceptable excesses of banking and many other financial activities, but otherwise leave best practise to the industry we might create a better economy.

    1. JoeSoap
      June 10, 2015

      My BMW 320 does 65mpg, my JLR car did 40.
      My UK business loan is at 6pc, my savings get .25%.
      My company has a better gearing and liquidity track record than the bank I m borrowing from.
      I think we can see why German cars are popular and banks aren’t.
      Skew that interest rate differential to a more reasonable 2-3% then start posting this type of article. Clearly there is less competition in lending than in the car industry, and without that competition our businesses remain strangled. Hopefully peer to peer will kill the banks and grow our borrowing companies to more than make up for the loss of banks.

      1. Lifelogic
        June 11, 2015

        Indeed the banks are able to extract huge margins due to a lack of real competition in the market. They are overcharging new customers to fill the holes made by their past bad lending. In a competitive market they would not be able to get away with this. Tesco cannot double its margins as customers would leave, but with the banks there is no where else to go. Hopefully people will be able to cut out the expensive middle man banks with pier to pier lending. But I have fears over this too for some lenders and it does not cover many borrowing needs, long term mortgages for example.

    June 10, 2015

    Not having the banks here will save the British taxpayer the cost of bailing them out in future though of course there will be calls for a complete nationalisation of them next time. Be assured there will be a next time.
    It is to be noted HSBC does not consider Germany a good place to set up its headquarters. Nor any other place in Europe; nor in America; nor in Canada. In fact; banks who you suggest JR should be left alone, do not wish to base their businesses anywhere on Earth where they are under proper scrutiny. Good riddance to the banks.

  7. Ian wragg
    June 10, 2015

    Germany not only supports the car industry but manufacturing in general. Apart from its crazy energy policy, even dafter than ours, they invest in good education and training. Not like the quasi apprenticeships in burger flipping that we offer.
    They also protect their financial industry with the ECB based there.
    German politicians seen to put the country first.

    1. libertarian
      June 10, 2015

      Stop being an idiot Mr Wragg, you’ve been told and shown the evidence multiple times that high level / degree level apprenticeships in all forms of engineering are available in the UK.

      The biggest difference between the two countries manufacturing is the treatment of corporation tax , capital investment and research and development.

      1. Jerry
        June 11, 2015

        @libertarian; Mr Wragg has a valid point (as you have also been told before), for all the “high level / degree level apprenticeships” you can cite there are the equal but opposite low standard training that should never have been called “apprenticeships”, and yes that might well include ‘burger flipping’ were the only real training at that point in the career structure (forget future career progress that some employers give much later) is given in food hygiene or some other statutory H&S training – which can often be gained elsewhere without entering an “apprenticeship”. Calling something an ‘apprenticeship’ and then doing little more than train people in what they should have been taught at school, or at least what anyone keen to enter an industry should; have gained as an entry prerequisite is absurd and open to abuse by unscrupulous employers and trainers.

        Oh and the biggest difference between the UK and Germany is how employees via their unions are treated, in Germany the unions and management work as a team, not as rivals, as is so often the case in the UK.

        1. Edward2
          June 11, 2015

          The majority of union members are in the public sector now Jerry.

          1. Jerry
            June 12, 2015

            @Edward; Was that just a “statement of fact” of some sort (and probably wishful thinking to boot), or was it meant to be a reply to something I said, if the latter to what does it refer?

          2. Edward2
            June 12, 2015

            Your post was again praising Germany for its strong unions, bit of a myth actually, as in engineering and manufacturing most are works councils, or works committees.
            Working with management for everyones benefit.
            Strikes are rare.
            Not the politicised and militant mainly public sector unions we have in the UK

          3. Jerry
            June 12, 2015

            @Edwads2; Then you are trying to pick an argument on mere semantic, let be rephrase what I said, “workers” and management work as a team, not as rivals, as is so often the case in the UK. What ever….

          4. Edward2
            June 12, 2015

            No I’m not trying to pick an argument Jerry just pointing out an alterrnative view to your own.
            But I realise it comes as a shock that others might hold a different opinion to you.
            Its happening in private industry Jerry without formal unionisation, as the membership figures show.
            Its in the public sector where we still have the old style 70s unions.

          5. Jerry
            June 13, 2015

            @Edward2; But you didn’t disagree with me, quite the opposite, in your haste to try and rubbish anything that sounded like leftist support for unionised labour!

            “Its in the public sector where we still have the old style 70s unions.”

            Try telling that to the private rail companies, amongst others…

          6. Edward2
            June 13, 2015

            There are regular strikes affecting the travelling public by rail unions still flexing their power, very different to say the way unions in the modern automotive and engineering industry now cooperate with management to improve the lot of their members.
            Private rail companies inherited the workforce and sadly have to put up with their 70s style unions that came with them.

    2. sjb
      June 10, 2015

      Why do you think Germany’s energy policy is crazy, Ian?

      “In 2015, it is expected that for the first time, Germany will generate more electricity via renewables like wind and solar than by its aging set of 8 nuclear reactors. The cost of electricity in Germany is historically low this year as a result of the wind and solar installations in the country, and is half what it is in Britain.”

      1. Jerry
        June 12, 2015

        @sjb: But how much electricity does Germany import though, more than likely from French nuclear? As for cost of electricity, indeed the cost per KWh in Britain is over priced!…

    3. petermartin2001
      June 12, 2015

      Ian Wragg,

      Germany runs a current account surplus of over ā‚¬200 billion euros p.a. In Germany that is generally assumed to be a good thing. But, a surplus in money means a deficit in the trade of real goods and services. In other words the Germans are living well below their means. So is it really a good thing for German workers? Germany isn’t quite the idealistic model of worker-capitalist co-operation that you are suggesting. You might want to look up the idea of mini-jobs in a German context.

      The huge euro German surplus not only deprives German workers of their wages, it also deprives Germany’s trade partners of euros. Where do those euros come from? Germany cannot create euros like Germany used to create DM. The UK and USA cannot pay in euros. They pay in Ā£ and $. So unless the ECB are creating euros to pay German exporters those euros have to come from other euro using countries.

      That doesn’t do much for their economies. It’s no wonder the eurozone is in such a mess.

  8. Lifelogic
    June 10, 2015

    I think HSBC would be very wise to move it HQ, why employ lots of people in the UK who have to give nearly 50% of their wages to the government (to largely waste). While also suffering the bank tax or worldwide balance sheet, corporation tax, poorly designed slotting rules and incompetent bank regulation. Then being the constant butt of abuse from politicians. Perhaps it is time for me to buy a few shares in them after their dismal share price performance for over ten years.

    What is needed above all is better accounting rules, sensible regulation, auditors who are appointed by other than the companies themselves, auditors who have some real liability for errors. They often get away with total incompetence. Also some sensible control by shareholders over executive pay and options. They so often run companies into the ground while paying themselves a complete fortune. Some effective controls over often incompetent senior staff are needed.

    1. J R Hartley
      June 10, 2015

      Indeed what we need is better accounting and the actual enforement of rules al9omng with true accountability. The fact that many banks own SPV’s which carry the debt they originate against which is at best a dubious interpreation of (if I remember correctly) IAS39, (or worse ed).

      If the UK’s only comparative advantage is a corrupt form of financial services then we are well and truly (in trouble ed).

      War on banks? – there has even been one – if HSBC wants to move to China and it;’s more robust punishment regime – let it. Whining and carping for special treatment for a sector that is nothing but rent seeking.

  9. alan jutson
    June 10, 2015

    Afraid the Banks have only themselves to blame for the situation they find themselves in.

    Yes the regulators were, and still are to a degree, part of the problem, as was Government action and policy at the time.

    Whilst I am all for giving incentives to people for doing well, those incentives need to be tempered with penalties for breaking the rules.
    For decades a few people (relative to the number employed in the industry) were paid obscene sums of money for little real and genuine effort.

    The few thought the gravy train would never end, whilst many of their customers were slowly being screwed to the floor and bled dry.

    The problem the Banks have, is that people have long memories, so no matter how good they may now become, they have been tarnished by past performance.

    1. lojolondon
      June 10, 2015

      Your first two sentences are contradictory – regulation was relaxed, and that relaxed regulation was not enforced. The government of the time was entirely to blame for the boom and bust that occurred, not the banks.

      1. alan jutson
        June 10, 2015


        The fixing of Libor rates, interest rate swap contracts, PFI, and a host of other scandals, were run by the Banks, not the Government.

        I agree that government was responsible for the regulations and the performance of the regulator at the time.

        1. alan jutson
          June 11, 2015

          oops should have been PPI.

  10. Antisthenes
    June 10, 2015

    Banks looking to either curtail and/or up and leave because of increased costs and regulation is a perfect example of how lefty and popular rhetoric based on emotion/ideology rather than hard facts put into practice causes economic damage. Add to that an EU bureaucracy that makes policies heavily influenced by French protectionism, German commercial interests and Brussels social engineering then the recipe for losing wealth creators and entrepreneurs to less regulated and costly areas of the world is a reality.

    Can we leave the EU now please. Also scrap RedEds climate change act and make sure lefties never again are allowed to govern us.

  11. agricola
    June 10, 2015

    As an addendum to my earlier submission it is apparent that the chancellor’s freeing up of the pension industry has resulted in a bucket of worms for many pensioners. The pensions industry either does not understand the new rules or wishes to play them to their own advantage by refusing to comply with legitimate requests from their pension holders. Either way it is an expensive and very frustrating time for many pensioners who reasonably believed that what the Chancellor was offering was available. Apparently not for many. I think we should maintain our hostility to the banks and financial services industry until they prove themselves to be customer oriented.

    1. ian wragg
      June 10, 2015

      Agricola, later this year we oldies are able to top up our state pension by Ā£25 per week, Ā£1300 per year. I thought this was good until I got a figure which I would have to pay.
      The government wanted Ā£19,400 up front, this means that to break even I need to live to 85. As I pay tax I would have to live to 89. Considering I can get 3% on deposit I would have to live to 92. It is ok if you are 80 years of age and your wife is 50 as she can get half when she retires. I don’t think many qualify.

  12. DaveM
    June 10, 2015

    The war on banks comes mainly from the media when it has no-one else to witch-hunt, from what I can tell. If people really hated overpaid underperformers they’d stop watching football. The left hates the banks, but then they pretty much hate everyone anyway.

    HSBC is going to go to HK because that’s where they see the future. It is not leaving the UK because there is a possible Brexit looming; that’s just being touted by pro-EU media.

    What the Germans ARE good at is sharing capitalist-generated wealth. That’s what we are bad at. Whenever we make a bit extra it seems to be swallowed up by central govt and disappears…who knows where?

  13. botogol
    June 10, 2015

    You could write a similar article : time to end the war on London.

  14. forthurst
    June 10, 2015

    “The regulators should ask themselves how much more is it wise to take from the banks in fines and compensation demands for past mistakes?”

    Whose regulators? Not ours, who consistently have turned a blind eye to fraud. Why should they care, if the banks are not American? From all appearances, it looks like a very lucrative protection racket.

    Where would HSBC go? At least in the financially amoral West, senior execs can be fairly confident their collars won’t be felt.

    “There is the move to segregate regular banking from investment banking. There is the EU control on bonus payments.”

    There is a potential conflict of interest when banks (no names) can operate as both agent and principal in respect of the same market, particularly when they have large capital backing which could be used to maintain a large false market over a significant period.

    Reply The UK Regulator does not turn a blind eye to fraud, and if evidence of it is available they will take action.

    1. ian wragg
      June 10, 2015

      Why has no one been jailed for the financial crash in the UK unlike America.

    2. Brian Tomkinson
      June 10, 2015

      Reply to reply,
      How many prosecutions have there been?

      1. Edward2
        June 11, 2015

        You can be involved in the failure of a business without fraud being a factor.
        Should senior staff or directors of failed companies end up in court for imcompetence?

        1. Jerry
          June 12, 2015

          @Edward2; “Should senior staff or directors of failed companies end up in court for imcompetence?”

          Well the HSE think they should, even though it was someone else’s, so why not for financial incompetence! The clue is in the job title, and remuneration settlement…

          1. Edward2
            June 12, 2015

            HSE prosecute companies for breaches of health and safety law.

            Some people want those who run companies, especially banks, the current boo boys, to be jailed for their company failing.
            Very different things.
            Fraud is already a crime as are breaches of the powerful Companies Act.
            Serious breaches can lead to fines, disqualification from holding office and jail.
            If bank directors have broken the law they can already face serious consequences.

          2. Jerry
            June 13, 2015

            @Edward2; Once again you miss the point, ignorance is no defence when it comes to H&S, why should it be when it comes to financial issues and what others are doing in the name of the directors within the company?

          3. Edward2
            June 13, 2015

            Ignorance of the law is indeed no defence.
            The point you miss Jerry is that you have to have broken the law to get prosecuted.
            There are laws against fraud and there is the Companies Act which has strict rules on how directors of companies must act.
            If those that ran failed banks have not been prosecuted that is because they have not done something that they can be charged with.
            Unless you know something specific?
            At the moment being a poor or incompetent director of a business is not a criminal act.

  15. Richard1
    June 10, 2015

    The continuing war on banks is the one ‘success’ of the labour govt and party who more or less successfully blamed ‘the bankers’ for the crash and recession in order to obfuscate their own role. The cause of public anger to the banks is mainly the foolish and unnecessary Ā£70bn Brown bank share purchase scheme. Maybe that’s why he did it – to channel anti-capitalist anger? The banks have made many errors and as pointed out in a post above face disintermediation at every turn, but the general war on London’s financial services industry by the EU and the left needs to be stopped, it is doing the UK no good.

    1. Denis Cooper
      June 10, 2015

      Of course Brown didn’t buy the shares of banks to “channel anti-capitalist anger”, it was to prevent an imminent meltdown of the financial system. It may not have been the best way to do that, but his motivation was pretty straightforward.

      1. Lifelogic
        June 11, 2015

        It certainly was not the best way to do it. It was a disastrously expensive way and it still did not protect the sound customers of the bank. Many of whom were damaged by the banks clawing back funds of them and overcharging.

      2. Richard1
        June 11, 2015

        It was an exceptionally foolish measure and was rightly criticised heavily at the time by, amongst others, out host here. Brown may not have done it as a Machievellian ploy to make people more anti capitalist I admit, but Labour have certainly used their own foolish and misconceived policy to try to generate political support through attacking capital markets. Perhaps it will change if eg Mary Creagh wins the Labour leadership, but that seems very unlikely.

    2. Jerry
      June 11, 2015

      @Richard1; [re the so called “Crash-Gordon” chant from the political right] Well if a party political inspired half-truth is repeated long enough then I suppose it stands an evens chance of being mistaken as the one and only ‘full fact’…

      As for the share purchase scheme, the biggest risk at the time was contagion causing, as Denis Cooper says above, an imminent meltdown of the financial system. A risk that was halted in its tracks.

      1. Richard1
        June 11, 2015

        Can you or Dennis Cooper explain why to prevent a financial meltdown it was necessary to subscribe Ā£70bn in new equity to banks, which included extensive non-UK operations, at a price far in excess of the fair market value at the time?

        1. Denis Cooper
          June 12, 2015

          Of course it wasn’t, but we are talking about the motivation for what was done rather than the details of what was done.

        2. Jerry
          June 12, 2015

          @Richard1; No I can’t and yes it was probably far more extensive than necessary but with financial meltdown possibly a week or two away [1] it might well have been better to over react than under react and perhaps do nothing more than grease the slope still further.

          [1] remember that in over about two months there wasn’t a Monday morning that didn’t bring bad news from the UK or USA, sometimes both, in deed the phrase was born “Another Monday, another Bank”…

    3. A different Simon
      June 11, 2015

      The banks have brought disrepute on the whole financial sector and London .

      London has an innovative insurance underwriting sector to be proud of but the perception of it has been contaminated by the filth emanating from the crony capitalists at the banks .

  16. A different Simon
    June 10, 2015

    The banks no longer have the culture nor personnel to lend directly to small businesses . Thus they cannot finance a recovery .

    They seem to have started to outsource lending ; the banks provide wholesale finance to alternative finance companies which then do a lot of what the old Mr Mainwaring did and originate the loans to small businesses .

    Couldn’t the Govt provide the wholesale money to alternative finance and stimulate the economy that way ?

    1. JoeSoap
      June 10, 2015

      Indeed. Shaking hands with the “unwashed” in industry is too grubby these days for your Bank staffer. Basically their task is take the cash from BOE @ 0.5% or from retail at less, then lend it on to asset finance houses in chunks of a few million at 5-7%. So on a Ā£10 million advance, say, that’s Ā£550K a year or so income. Not bad for a few hours work. The finance house will make a far lower % margin and do most of the donkey work. Basically the question is whether the bigger patsy here is the government and public for lending money at zero to half a percent, or the industrialist paying 6-12%. Before it is mentioned the risk element here is totally neutral – the average retail depositor or borrower is likely more solvent than the bank in the middle.

  17. Bert Young
    June 10, 2015

    ( Sorry I have been “out of action” for the past week and not able to respond ; hope things will now get better ) .
    I fully support your views today that the Banks have been finger rapped ; They need motivation and encouragement now to pull themselves back to a world leading commercial and merchant banking service . The regulatory condition that now exists is the means by which this service can be monitored and controlled ( the ring fencing of the 2 sectors as recommended in the Vickers report , was a critical step forward ). The regulatory system must have an “open door” to the public and make frequent reports showing how its controls are working ; obviously its staff must be of the highest capability and skill . Definitely the Government must cease regarding Banking as the cow to be milked and must do everything to focus London as the leading international banking centre .
    On a closing note , I do wish to commend your speech in the House yesterday . It was statesmanlike , forceful and convincing . Standards are set in many ways ; yesterday you put down a marker of dignity , intelligence and eloquence .

    Reply Thank you for your kind comments.

    1. lojolondon
      June 10, 2015

      Hear – hear. John is often our only voice in Westminster.

    2. ian wragg
      June 10, 2015

      Well spoken unlike that Quisling Clarke who spoke after. etc ed

    3. Denis Cooper
      June 10, 2015

      Yes, it was an excellent speech.

      And excellent background headshaking as well, during the speech of another MP.

    4. Lifelogic
      June 10, 2015

      Dignity , intelligence and eloquence indeed it was all those, alas not qualities that seem to help that much in politics today.

      1. Jerry
        June 11, 2015

        Mr Redwoods most important contribution wasn’t his speech own at all, it was his body language during the speech from the Right Honourable member for Rushcliffe….

    5. Ken Moore
      June 10, 2015

      Agreed it was good to see Dr Redwood at his best fighting best he deserves our thanks – it was a very good speech delivering a volley of powerful arguments. Here was a politician at the top of his game after many years of honing his craft.

      I particularly liked JR’s blunt dismissal of the nonsense of ‘pooled sovereignty’.
      Either your sovereign..or your not.

      Who was the Mp that failed to give way to Mr Redwood given a swift rebuke? – excellent stuff.

  18. David Price
    June 10, 2015

    ” If offences have been committed then the perpetrators should be dealt with by the law.”

    Is the problem that the approach taken to deal with the banks has resulted in punishing their shareholders and customers but not those actually responsible?

    If you don’t actually punish the people who actually commited the offence or broke faith or caused the problems then you will not actually adjust attitudes for the better. But go ahead, just carry on paying off the greedy and incompetent people while punishing everyone else and you will continue to wonder why all bankers get tarred with the same brush. It’s the same for politicians, civil servants, lawyers, journalists, anyone.

    1. A different Simon
      June 11, 2015

      A little bit different for politicians .

      Take the expenses scandal – which was really a storm in a teacup and would have been regarded as such in most countries of the world .

      The political establishment decided to use the crisis as an opportunity to get wrid of a few members of the awkward squad by throwing them to the lions .

      Take Labour’s Dennis McShane , his views on the EU are opposite to mine but on every subject he argued his case sincerely which I respected him for .

      He couldn’t be relied upon to tow the party line or keep his mouth shut so they singled him out to make an example of him .

      Compare this to the establishments attitude to prosecuting politicians with “Alzheimer’s” .

  19. margaret brandreth-j
    June 10, 2015

    I have always contended that our banks should be strong. Through generations and civilisations the strongest economies are those who have built up capital in some form or other. I do not fully understand economics or the financial ins and outs of the city yet in my commonplace mode, I can see the obvious.

    Then there is the independent power and possible corruption of those in the higher eschalons of banks to consider. It only takes one bad apple in powerseeking organisations to wipe out a whole generation of financially stable potential middle incomers. This has happened John.The ones running about doing all the dog work in banks can’t probably even see the wood for trees. It is a mindset of competivity where certain aspects are not allowed to leak . ( Is this fictional or do we belive the writers who try to get this point across?)

    I know that in the UK the financial centre is based in London , yet why should this not extend?

    Reply There’s nothing stopping it. HSBC UK is moving its HQ to Birmingham. RBS was based in Scotland and Northern Rock in the NE, but unfortunately they got overextended.

  20. Kenneth
    June 10, 2015

    Mr Redwood, in my humble opinion this is never going to work properly.

    Heavy bank regulation and high capital requirement for new entrants results in a cartel of a few very large companies. The resulting mix of risk-unaware customers and banks playing the system ends up with more scandals down the road and yet more regulations.

    This direction of travel eventually leads us to a nationalised bank.

    I have a possible solution: why not give customers a choice between the heavily regulated model we have now and an unregulated banking sector. As long as they are clearly labelled as ā€˜unregulatedā€™, customers can choose which to use for their banking needs.

    This would surely result in 1,000ā€™s of banks springing up, operating at a lower cost to the regulated banks, but inevitably, with the occasional bank failure.

    Let the People decide!

    1. Lifelogic
      June 10, 2015


  21. Johnny Norfolk
    June 10, 2015

    Yes lets end the war on banks by the left. Its what the EU want to end Britains position in the world. We have one chance to save it. We need to take back our own country.

  22. Cliff. Wokingham.
    June 10, 2015

    I agree John; we do need to end the war on banks and, in my opinion, the war on business. We have allowed ourselves to have the agenda set by the left.
    We need to stop the “Boo hoo hoo, he’s got something I haven’t got take it away from him Nanny” attitude.

    Perhaps I am old fashioned but, when I hear someone has managed to get a very high salary or a big bonus, I think good luck to them. I don’t feel envious or resentful.
    The left have set a minimum wage but, it appears they want to set a maximum wage too.
    If an employer is daft enough to pay a kid a few million a year to kick a ball about, why should I worry? If a top CEO is paid a huge fortune and a huge bonus, good luck to him or her!

    We need to reign in the State’s Broadcaster and put an end to the politics of envy. Put the effort in and you too will have a good salary. Educate yourself to obtain a high level of skill in a specialist area and you too can do well. Life is seldom fair but those that put the effort in tend to be rewarded. Let’s restore our meritocracy and stop the crazy “Everyone must win prizes” it will benefit us all in the long term and will benefit our country too. We didn’t have an empire because we all sat their moaning about how much better someone was off compared to us.

    Let’s reinstate the “I’m Backing Britain” campaign of the 1960s.

    By the way John…..Are you able to tell me if the government are still working on your old project of reducing the number of quangos and the great repeal bill. The government are no longer hamstrung by the LibDems, well other than Mr Cameron:-) , so are they taking those projects forward? I would appreciate an answer because it will save me writing to you, my constituency MP. I thank you in anticipation.


    Reply Mr Javid is looking for repeals as part of his deregulation drive. I have sent him the Economic Policy Review from the opposition years to remind him. The Treasury are currently conducting a spending review which could include the suitability of various quangos.

    1. Cliff. Wokingham.
      June 10, 2015

      Sorry…..There not their paragraph Three…..Just to keep the grammar police happy:-)

    2. Mike Wilson
      June 10, 2015

      …We need to stop the ā€œBoo hoo hoo, heā€™s got something I havenā€™t got take it away from him Nannyā€ attitude. …

      When you give people the power to create money out of thin air and lend it out at interest – you have the right, and responsibility, to make sure the power is not abused. The banks in this country have abused that power. They have lent trillions into the housing market – pricing the next generation out of home ownership and into life-long renting – with no security of tenure. They have taken the country to the edge of bankruptcy needing hundreds of billions in bail outs – or we would have had the banking system – and economy – collapse.

      Contrast that with the German car industry – manufacturing items in demand all over the world – creating jobs and bringing money into the country.

      Can’t see how you can compare the two myself. Just imagine how cheap houses would be – how much better everyone’s life would be if, say, houses were a third of the price they are now. House prices are a simple function of the cost and availability of credit. It has always struck me as absurd that something that takes about48 man weeks to build has to be paid for over 25 years and, now, is unaffordable to about 80% of the next generation.

      1. Cliff. Wokingham
        June 11, 2015

        Hello Mike.

        I think you make some interesting points however, I would suggest house prices are fixed by a few factors.
        The number of properties for sale at any given time and the number of people able and willing to pay for them. It is simple supply and demand.
        At the moment, the demand side out weighs the supply side. Many people will cite immigration as the main driver of this, but I think that is too simplistic. There was a major culture shift in this country which I feel created the problem. We allowed people to have children with no means of supporting them and we housed them, whilst letting the supply of council housing to diminish. This, in effect, drove ordinary people, whom in the past may well have rented their home from the council, into the private rental market. This surge in demand led to sharp price rises in the cost of property.
        Because there were so many poorer people, many of whom were single parents, demanding places to live, the council housing stock was used up.
        When I first got married, young engaged couples could put their name down for council housing and within a couple of weeks of getting married, they would be housed. This does not happen today due to the lack of housing stock. This drives more and more young people to have kids just to get housed. Our local council will tell you that they don’t give priority to single mothers however, what they will do is put them into B and Bs and then give people in these places priority for being housed.

        I also think house prices are linked to wage levels; high wages in an area will mean high house prices. If house prices were a third of what they are now, I suspect wages too would sink to a level of about a third of what they are today.

        I would point out that the majority of Germans actually rent their homes, they are not obsessed with home ownership as we are in the UK.

        I do not think the banks are blameless but they only really do what the state wants them to do and allows them to do. There comes a point in time where the constant bashing does little good and just makes people demoralized and resentful.

        I think we have suffered a perfect storm in this country. Too many people chasing too few homes and needing too high wages to make us competitive with the rest of the world. Sadly, when we expect the state to do so much for us, too much of our generated wealth is used to fund the state.
        Imagine how much better off we would all be if we shrunk the size of the state to about a third of what it is today.
        We would become naturally competitive again because, less of our effort and thus costs, would be going to keep Nanny funded. We need a grown up discussion as to just what we want the state to do for us. I say let people keep more of their money because they’ll spend it better than the state and will get better value for it.

    3. Jerry
      June 10, 2015

      @Cliff. Wokingham.; “Letā€™s reinstate the ā€œIā€™m Backing Britainā€ campaign of the 1960s.”

      …and once free to do so, the “Buy British” campaign of the 1970s -well perhaps a “Manufactured in Britain” campaign at least!..

  23. Alte Fritz
    June 10, 2015

    History I know, but no one hated the banks while their corporation tax receipts rolled in to fund the spending spree. All a bubble of course,

  24. Mark
    June 10, 2015

    Time to end the war on energy bill payers.

    Why is DECC endorsing the ludicrously expensive Swansea tidal lagoon that will produce highly variable intermittent power at enormous cost?

  25. JoeSoap
    June 10, 2015

    Jack’s family owned a scrap metal business. Jack built it over many years based on folks bringing him their old copper pipes which he melted down and sold on in bulk at a profit. Jack’s sons got greedy, and started making deals with other scrap merchants to fix prices else he’d buy them out. People were being paid far less than market price for the scrap copper, and the sons’ best trick was putting sand in the middle of a copper ingot before they sold it on. The family made a fortune, mortgaged large houses and the business profits only just covered the mortgages. One day, the copper price plummeted at the same time as the sand idea was uncovered, and Jack’s sons called the local council-“Help!, we’ll be bust by midnight unless you buy us out! We’ll lose our houses and be ruined!”

    The local council could see that people relied on Jack’s business – the business rates were also important, and miraculously it bought them out at an enormous cost. The following year the local rates bill doubled. Jack retired on the proceeds, and all the sons paid off their mortgages and had nice long holidays, too.

    The council told local people not to worry, they could continue to use Jack’s for scrap and the Company wouldn’t sell their ingots on with sand any longer, but that actually meant that people would be paid even less for their scrap than before. The sons still ran Jack’s, but they were now reformed people and were quite happy to behave well so long as they were paid by the council a salary comparable to the previous one.

    The local people weren’t so happy, though. They realised that they had been ripped off before by Jack’s deals, and that his “sand in ingots” scam meant he had also been stealing from the people he had sold to. Now they were being asked to rescue Jack’s company out of the local rates, and they knew Jack’s was still ripping them off. The whole business was seedy and unwholesome, and although the council were happy to be getting business rates again and that it was employing people, the local people thought the business should be closed down or broken up. The local people would rather have let new entrants into the town to compete with Jack’s, but of course now that the local council owned shares they turned down planning on any other scrap business which might be interested.

    The along came the local MP, saying that Jack’s taxes were important to local people and that the survival of his scrap metal business was essential to the prosperity of the town. People shouldn’t still be knocking Jack’s….

    Would you be that MP in that situation, Mr Redwood?

  26. REPay
    June 10, 2015

    Despite some of the comments above, banks are here to stay, and they make a massive contribution to tax revenue. The mid-1980s liberalization did a great deal of good to revive the UK economy after the privations of the 1970s – something successive governments have benefited from though the last Labour government regulated it poorly.

    London needs to stay as a key financial center for the UK to prosper. This is concomitant to the need for improved education to create science and technology based jobs.

  27. majorfrustration
    June 10, 2015

    I think the war would have been over years ago if some of the very top people in the failed banks had been put behind bars. But as we use to say in Midland its only the lowly Grade 3 Managers that get the boot – the PBI of banking.

    1. A different Simon
      June 11, 2015

      Majorfrustrati0n .

      Sounds like the old “deputy heads must roll” .

      What is PBI please ?

  28. The Prangwizard
    June 10, 2015

    There must be a change of direction, away from endless regulation and control. Away from the attitude of ‘something must be done’ when something goes ‘wrong’, even as trivial as a train running late, leading for thousands of demands for compensation. Most people don’t seem to realise how fortunate they are.

    How do we change peoples’ selfish attitudes? Words from the top are needed and the broadcast media in particular which often promotes victimhood must be challenged when they endlessly run such stories. We know that they are motivated by the pursuit of controversy and sensation principally for their own advantage.

    The anti-business attitude so prevalent is unhealthy.

  29. Jerry
    June 10, 2015

    “The German administration seems to take the sensible view that what is good for the car industry is good for Germany.”

    A great pity that first Thatcher and then Blair/Brown thought otherwise of the UK….

    1. formula57
      June 11, 2015

      British Leyland was not comparable to Daimler Benz though.

      1. Jerry
        June 11, 2015

        formula57; “British Leyland was not comparable to Daimler Benz though.”

        Jaguar and Daimler, both brands within the BL group, were, or could have been had the re-investment been present.

    2. Edward2
      June 11, 2015

      It was millions of customers choosing products they preferred that did most damage rather than politicians.
      Although they did not do much to help.

      1. Jerry
        June 11, 2015

        @Edward2; “It was millions of customers choosing products they preferred that did most damage rather than politicians.”

        Remind me of how many BMC/BL Minis were sold,

        Oh and do remind us who still owns a stake in the VW group.

        My point, the (West) German state [1] backed their car industry, the UK government didn’t most of the time but when they did our politicians (or their appointed minions) tried to tell graduate and time served automotive engineers how to build the things and what will sell…

        [1] states to be precise

        1. Edward2
          June 11, 2015

          In the sixties and seventies many BMC/BL minis were sold Jerry but gradually imported makes became more popular.
          But this is over 30 years ago.
          Imports were often better quality, often cheaper and of good design.
          And UK customers preferred them.

          Germany had better tax rates for industry, less destructive unions, better management, a stronger more stable currency, newer machinery and equipment and a Government that gave aid to the stronger companies rather than propping up loss making lame ducks as we did.
          But lately the UK automotive industry has made a great come back.

          1. Jerry
            June 12, 2015

            @Edward2; VW (akin to our BMC/BL) was a “lame duck” at one time, back in the late 1960s and early ’70s, with a very limited and outdated model range – and, as they say, the rest is history…

        2. Jerry
          June 12, 2015

          Edward2; “But this is over 30 years ago.”

          As was the (original) VW Beetle and VW Golf/Polo, you point being what, other than to highlight the woeful under investment in the UK motor car industry during the 1970s…

          “Imports were often better quality, often cheaper and of good design.”

          As anyone who knows anything about the motor industry will agree, your statement of fact about is very much still a debating point, some cars from the far east were even being supplied without heaters into the 1970s when both UK and European manufactures had made them standard. Define better designed, many imported cars rusted quicker than our own, even your beloved German cars.

          “But lately the UK automotive industry has made a great come back.”

          Go on Ed, name me one current mass production British owned car manufacture…. you’ve have made my point for me!

          1. Edward2
            June 12, 2015

            Millions were invested Jerry, but were wasted propping up old failing companies rather than spent on closing old plants and building new ones, due to Governments makibg political rather than sound business decisions.

            Its not important which particular person or country owns a particular company Jerry.
            We live in a global manufacturing environment.
            The UK and UK individuals also own companies all over the world.
            What is important is that millions of UK jobs and huge amounts of tax revenues are being created here.
            Your little England, buy British campiagn is like your ideas on the current expanding UK engineering industry, 30 years out of date.

          2. Jerry
            June 12, 2015

            @Edwaed2; “Millions were invested Jerry, but were wasted [../ultra-capitalist rant/..]|

            Please (re)read my second reply to you about this, especially the paragraph that starts “My point, the (West) German state…”, what do you not understand about my remarks?

            Oh and there was no need to build new factories, just invest in new products and production lines, which BL were eventually allowed to do at many plants and did successfully – only trouble was it was to fatten it up for sale, the rest is history as they say. šŸ™

            “What is important is that millions of UK jobs and huge amounts of tax revenues are being created here.”

            But how much of the profits stay in the UK, reinvestment is not even assured, there might well be “millions of UK jobs” in the motor industry today but what about next month, next year, look what happened to the Transit van factory, and no there wasn’t a poor record of labour relations – Ford say their decision was based on pure economics, costs being cheaper in Turkey.

            “30 years out of date.”

            Indeed you are Edward, along with everyone else who considers Thatcherism a religion.

          3. Edward2
            June 12, 2015

            You are just continually showing how little you know about the UK and German automotive industries Jerry.
            Something I’ve been involved in for decades in one way and another.
            If I showed your posts to people I know in the current industry they would be astonished at your description of the past and the present forms of their industry.

            Your desire to halt globalisation and world trade is a one way ticket to poverty for all.
            Only UK owners of UK companies, no capital or profits to be allowed out of the UK, restrictions on imports etc etc
            What retaliation do you think our trading partners would introduce on us ?
            Sounds like a 70s centrally commanded socialist Labour eceonomy to me.

          4. Jerry
            June 13, 2015

            @Edward2; More filthy post and pans trying to call the kettle black, you are the one stuck in the past refusing top learn the lessons of the past, Germany has a very successful motor industry, the UK does not, as I said, please name a single UK owned mass production car company.. Go on Edward, name that company, if you can.

            “Your desire to halt globalisation and world trade is a one way ticket to poverty for all.”

            Were have I said anything of the sort?! I am suggesting that we are a little (no, a lot) more like Germany, but if that is living outside of globalisation, and if that is poverty for all…

            “Sounds like a 70s centrally commanded socialist Labour eceonomy to me.”

            Yes the Germany car industry, and wider economy, can appear that way at times, and what a success it has been for them.

          5. Edward2
            June 13, 2015

            You dont need to highlight your typing Jerry I can read OK without it.
            We have a thriving UK automotive industry which employs hundreds of thousands and creates millions in taxes for the UK and I am relaxed that investors and owners are foreign.

            We live in a modern global business world.

            If we in the UK want to invest in companies in other nations and trade throughout the world then we need to allow and accept this.
            Many German companies have foreign investors and owners and purchase equipment and parts for assembly from all over the world, a fact you have forgotten.

  30. acorn
    June 10, 2015

    Dear Chancellor of the Exchequer, please read before you go to the Mansion House.

    “The first financial responsibility of the government (since nobody else can undertake that responsibility) is to keep the total rate of spending in the country on goods and services neither greater nor less than that rate which at the current prices would buy all the goods that it is possible to produce. If total spending is allowed to go above this there will be inflation, and if it is allowed to go below this there will be unemployment. The government can increase total spending by spending more itself or by reducing taxes so that taxpayers have more money left to spend. It can reduce total spending by spending less itself or by raising taxesā€¦.

    In applying this first law of Functional Finance, the government may find itself collecting more in taxes than it is spending, or spending more than it collectsā€¦. [In] the latter case it would have to provide the difference by borrowing or printing money. In neither case should the government feel that there is anything especially good or bad about this resultā€¦.

    An interesting, and to many a shocking, corollary is that taxing is never to be undertaken merely because the government needs to make money paymentsā€¦. Taxation should therefore be imposed only when it is desirable the taxpayers shall have less money to spendā€¦ [to avoid] inflationā€¦.

    [The] government should borrow money only if it is desirable that the public should have less money and more government bondsā€¦. This might be desirable if otherwise the rate of interest would be reduced too lowā€¦ and induce too much investment, thus bringing about inflationā€¦.

    The almost instinctive revulsion that we have to the idea of printing money, and the tendency to identify it with inflation, can be overcome if we calm ourselves and take note that this printing does not affect the amount of money spentā€¦.

    Functional Finance rejects completely the traditional doctrines of “sound finance”ā€¦. [It] prescribesā€¦ the adjustment of total spendingā€¦ to eliminate both unemployment and inflationā€¦ the adjustment of public holdings of money and of government bondsā€¦ to achieve the rate of interest which results in the most desirable level of investmentā€¦ the printing, hoarding, or destruction of money as neededā€¦.

    [The] result might be a continually increasing national debtā€¦. [This] possibility presented no dangerā€¦ so long as Functional Finance maintained the proper level of total demand for current output; andā€¦ there is an automatic tendency for the budget to be balanced in the long run as a result of the application of Functional Finance, even if there is no place for the principle of balancing the budgetā€¦.

    As long as the public is willing to keep on lendingā€¦ there is no difficulty, no matter how many zeros are added to the national debt. If the public becomes reluctant to keep on lendingā€¦ [and] the public hoards, the government can print the money to meet its interest and other obligations, and the only effect is that the public holds government currency instead of government bonds, and the government is saved the trouble of making interest payments. If the public spends, this will increase the rate of total spending so that it will not be necessary for the government to borrowā€¦ and if the rate of spending becomes too great, then is the time to tax to prevent inflationā€¦. In every case Functional Finance provides a simple, quasi-automatic response.” (Brad DeLong on Abba Lerner’s 1943 essay on “Functional Finance”.)

  31. English Pensioner
    June 10, 2015

    Surely most businesses prefer to be in a location where they can maximise their profits with the minimum of interference. If HSBC see their future in the Far East, but would be subject to UK (or EU) regulation and taxes if they remained here, it is surely common sense to move to a more favourable location if there is one.
    When it comes to salaries in the banking industry, at least they are quoted as being per annum. If you look at footballers’ wages, the media invariably quotes them as being paid per week. Perhaps if more people could multiply by fifty-two they might realise that bankers aren’t so highly paid after all!

  32. mickc
    June 10, 2015

    No, it is time to introduce true competition into banking, or break them up.

    The difference with Germany is that German industry makes products the rest of the world wishes to buy; the banks make profits from defrauding its customers, particularly the citizens of the UK, and are then rescued from their own errors by the taxpayer (so much for their fabled “expertise”).

    If the banks wish to leave, no obstacles should be put in their way…let some other fools pick up the bill, not us.

    The casino/spiv culture of the City has not benefited the UK….and it has certainly corrupted our politics.

  33. Jon
    June 10, 2015

    Far too much responsibility has been off loaded from the Ministers and Government to Regulators. Regulators don’t answer to the public or to businesses like governments do.

    As an example just today t=in the papers there are scare stories surrounding cost of advice for drawdown, tax hits on people taking their whole fund as cash. There are providers insisting on advice in cases and being regulated that means a cost. The reason is clear, the regulator can take a different view from the government ie some individuals are not capable of managing and making decisions on their own finances unlike the statements from the Treasury and Pensions Minister.

    The advice could be don’t take it all as cash due to tax and income longevity but the decision is down to the individual. The Regulator a few years from now could turn round and say that individual was not capable of managing their finances and find the provider liable for their loss of income. Ministers need to regain some control and responsibility. Alternatively the regulator needs representation on it’s board from the industry if elected ministers are unwilling to take responsibility.

  34. turbo terrier
    June 10, 2015

    The banks would have got a lot more sympathy if they had actually owned up and bought charges against their own and the public had actually seen people going to jail.

    We cannot go on beating them up even the worst criminals in the land seem to be able to get a second chance. Not many use it but that is their choice.

  35. Iain Gill
    June 10, 2015


    Do you know if the PM’s response about work visas for non EU workers includes intra company transfer visas or are they going to be excempt again? Is he going to do anything about the many getting indefinite leave to remain simply for working here a while? Is he going to charge national insurance for the first 12 month here? Is he going to tax supposed expenses which would not be available to Brits? Is he going to make tax allowance pro rata with the amount of the tax year their visa allows them to work here? Is he going to stop free schooling for families from countries which do not provide reciprocal education for British families? Can you flesh out the substance of the PM’s soundbite? Or will it be more hype no action?


    1. Mark
      June 11, 2015

      I saw that announcement. There were only 68,000 immigrants who came here to work from outside the EU out of the total of 290,000 non EU immigrants in 2014, while there were 58,000 non EU emigrants leaving the UK to carry on their careers elsewhere. He may raise a little more money in visa charges, but it is not going to make a big difference to net migration by trying to get these numbers down – especially when they include foreign nurses and doctors, footballers and senior managers in multinational companies, who will all be protected anyway for good reasons. Your point about Mode 4 migrants, not counted in official immigration statistics, is also well made.

      1. Iain Gill
        June 11, 2015

        The information technology business is swamped by non EU work visa holders, and those who have been given indefinite leave to remain simply for working here.
        As a proportion of the entire IT workforce they are very high.

  36. Roy Grainger
    June 11, 2015

    “I fully understand the unpopularity of banks, and have no time for malpractice or bonuses paid to senior executives who have actually made losses for the shareholders”

    Why does ANY bank employee get a bonus when the bank makes a loss ? When I worked for a private sector company that made a loss I got a pay cut and it seemed fair enough. The problem is that they know they will not be allowed to go bankrupt like a normal business. I’m all for the continuing attacks and taxing of the big banks and hope that multiple smaller banks will emerge to create true competition between banks none of which are too big to fail. For a start the bank levy needs to continue until we recoup the loss we’re making selling RBS shares, Ā£7 billion is reported today. Also I couldn’t care less if HSBC leave, they have been known for years in my industry for their “creative” tax solutions for ex-pat workers. Let them go. It takes a massive risk off the UK balance sheet.

  37. petermartin2001
    June 12, 2015

    I’m not sure the phrase “war on banks” is justified.

    The problem is that the banks have managed to privatise their profits but socialise their losses in recent years. There is still that risk, IMO, so the issue cannot be considered solved. There has to be a 100% guarantee, on the part of government, that there will be no bail-outs in future and that banks will be allowed to go bust just like any other business can go bust.

    I’m not sure governments are capable of making that guarantee, given the central importance of the banking and financial systems to the wider economy.

  38. Lindsay McDougall
    June 12, 2015

    Since you have raised the issue, what precisely is the bank levy for. Is it a supplementary profits tax or is it to demonstrate the Government’s desire to ‘do something’ without going to the trouble of prosecuting criminal activity?

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