How a government that has saddled taxpayers with liabilities of up to £850 billion – roughly £40,000 for each household – for bailing out the banks can now parade itself as the party for ordinary people as opposed to the “Tory toffs”, is beyond belief.
The bailouts of the banks are the largest, swiftest transfer of wealth in the history of British capitalism. And it was carried through by New Labour which, in turn, had presided over the same banks as they built fortunes on what proved to be calamitous mountains of debt.
In July 2008, while still chancellor, Gordon Brown hailed the dawn of a new “golden age” in the City of London; a few months later, this time as prime minister, he was pouring money down the throats of the bankers to the point where they were almost drowning in taxpayers’ cash.
The government spent £117 billion buying shares in banks and lending directly to financial institutions, a National Audit Office (NAO) investigation published today calculates. That represents a liability of £5,530 for every one of the 21.1 million families in Britain. When are other commitments are added in, the total rises to £850 billion.
And where has all this money gone? Despite being taken into state control, Royal Bank of Scotland (RBS) and Lloyds-TSB have failed to meet targets for lending, according to the NAO. In effect, although the NAO naturally doesn’t draw the same conclusion, taxpayers have financed the transfer of cash to other banks and the write-off of so-called “toxic assets”.
All to do what? Preserve a banking system that operates entirely in the interests of shareholders and senior staff and one that dazzled the government so much that the Treasury gave RBS clean bill of health less than a week before having to bail it out in October 2008, according to the NAO report.
Joining the queue for state hand-outs were financial advisers and lawyers who between them shared £107 million of taxpayers’ money in fees for services and advice during the crisis, and could receive a further £5.8 million in bonus payments. Nice work if you can get it.
Now the board of the largely state-owned RBS is threatening to quit unless it can pay out large bonuses to senior staff. New Labour is caught like a rabbit in the headlights. It can’t afford to alienate the bankers who might then move out of London to friendlier environments, and whose support helped to create New Labour in the first place. Yet public anger against the bankers is mounting as it dawns on people that massive public spending cuts are on their way after the forthcoming general election – whoever wins.
In the end, the laws of capitalist competition will prevail over the hot air from ministers like Lord Myners, himself a former fund manager and chairman of Europe’s largest property company.
The “choice” between New Labour and the Tories boils down to no choice at all. Just as Blair and then Brown carried on where the previous Tory governments had left off, Cameron’s New Tories will, if elected, deepen the class divisions and gross inequality they inherit from the present government.
The economic crisis is intensifying, as today’s announcement of the closure of the Corus steelmaking plant on Teesside shows. As far as the financial system goes, no one really knows the size of the huge debt overhang out there and may make the credit crunch look like a slight blip when the reckoning takes place. While the main parties play their political games ahead of the election, the threat to all our futures continues to mount.