Ah, but its entirely different. As much as the MOD try hard to waste huge amounts on big TVs, 1000quid chairs, and perpetual procurement projects the army can only use up one bullet at a time really. Highly ineffiecient.
If Brown really wants to blow our collective money fast he needs the help of the city boys. Nobody can throw away money so efficiently. I'm suprised he didnt think of it sooner.
The olympics is a great cash hole, selling half the countries gold at the market low point, and the dome was a nice effort to get warmed up. But loaning money to failed financial enterprises. Thats where the losses really are. And the credit crunch has only really just started. So much potential to burn more of our taxes propping up the fat cats.
Yeah, but this is money for money we are talking about. As far as this incredibly inept gobment is concerned, anything to do with image and money is more important than defence.
That bank is all about . . . money, and if it falls, it makes the gobment look bad as a financial centre. No spinning your way out of that one. Plus there are a lot of voters who go to banks, a lot more than join the forces.
People would indeed have lost any money above about 30K that they had invested in Northern Rock accounts.
More importantly (from the governments perspective) a number of trade unions who are customers of NR would have been cleaned out and ceased to exist. This would no doubt have impacted badly on union donations to the Labour party.
Now we can't have that, can we? Hence gov.uk has raised twenty odd billion by borrowing to bail out Northern Rock. I mean, why not? It's not as if the Labour party, the unions or Northern Rock are footing the bill. That's down to the poor bloody taxpayer.
The Tories really should be getting the boot in a bit harder about this.
Interesting view of the whole Northern Rock set-up.
How to deal with blatant blackmail
The Government faces having millions of pounds extorted by City financiers cashing in on Northern Rock
Last week I asked, perhaps a little hyperbolically, whether tens of billions of pounds of taxpayers' money should be diverted from health, education and social services to subsidise the bonuses of stockbrokers and salaries of bankers - and added that the employees and shareholders of Northern Rock seemed to assume a divine right to public support of a kind that nobody would dream of offering these days to car workers or miners. In response, I was upbraided by several bankers and politicians for confusing a temporary commercial loan, backed up with 100 per cent security for repayment, with old-fashioned government featherbedding.
Maybe my critics were right. I certainly hope they were, since I have a compelling interest, as a citizen, in the health of the British economy and the proper function of the Government. But if the £20 billion advanced to Northern Rock by the Bank of England in the past two months was really a commercial loan and not a state handout, then somebody needs to explain this to the company's directors, shareholders and financial advisers. And this explanation had better be delivered urgently by the Chancellor himself, with no buts, ifs or maybes. For in the leaked sales memorandum that Northern Rock tried to suppress yesterday through a court injunction the company's directors have prepared one of the biggest tax demands in British history.
And to judge by the leaked papers, this conspiracy to raid the Exchequer may have extorted the Chancellor's acquiescence, if not his active support.
If these statements sound as exaggerated as my comments last week, I'm sorry. But they seem to me quite a moderate response to the audacious proposals circulated by Northern Rock to potential investors this week. These proposals, published in yesterday's Financial Times under the terms of the limited injunction, include three astonishing assumptions - a better word would be presumptions - about government support.
The first is that the Bank of England's £20 billion line of credit, instead of being repaid in February, would continue until 2010 - at least to the tune of £6 billion. The second is that the interest on this line of credit would be reduced despite Mervyn King's insistence that Northern Rock must pay a penal rate for its support. The third is that, in the event of a break-up, the Government would keep a lien only on Northern Rock's riskier assets, allowing all the most secure mortgages to be sold off to private bidders, while taxpayers took their place at the end of the creditors' queue.
Do these proposals still sound too technical and arcane to justify my accusations of attempted larceny and extortion? Then consider the more politically explicit version published in The Guardian under the headline Taxpayer may lose £2 billion in bank rescue. According to this story, potential private sector rescuers are not just demanding a lower rate from the Bank of England but pressing the Government to waive completely the interest bill on its £20 billion loan.
They are highlighting the benefits of a bid for the job prospects of the bank's 5,500 workers in Newcastle and Sunderland... Alistair Darling is well aware that Labour has a majority of seats in the North East and needs to protect them ahead of the general election. Mr Darling is also being told that if he has the temerity to demand payment of the interest due to the Bank of England for the Northern Rock bailout, the Government could face accusations of profiteering which are unlikely to play well with MPs in the affected constituencies.
Suddenly it becomes clear why several of the self-styled bidders for Northern Rock have been high-profile public figures who have publicised their rescue plans on newspaper front pages, instead of trying to buy the company on the cheap through the usual means of quiet behind-the-scenes negotiations. They know that the easiest way to make a fortune from a Northern Rock rescue is to squeeze billions of pounds of subsidies out of the Government. And the easiest way to do that is to spin the story so that the Government and the Bank of England, instead of the company's own directors, bear the blame for the job losses at Northern Rock.
This is exactly the kind of City blackmail that I described hypothetically on this page last week. Now that this has come to fruition, the question is how the Government and the Bank of England should react. The answer is obvious.
The Chancellor should make a public announcement that there can be no question of extending any state funding beyond February, whether Northern Rock is under new ownership or remains in its present form. If, by that time, the company has not managed to secure private funding, the Bank of England will call in its loans and put the company into administration. To prepare for this contingency the Government will immediately present a short emergency Bill to Parliament, allowing the Treasury to honour its guarantees to depositors and creditors by offering £1 for all Northern Rock's assets and liabilities in the event of the company going into administration. Since the company would face a demand from the Bank of England for immediate repayment of more than £20 billion, there would be no question of either the administrator or the shareholders refusing this £1 offer.
Once this Bill was passed, the Government would be in a position to repay Northern Rock depositors within 24 hours of it being placed in administration. Meanwhile, Northern Rock's mortgages and other assets would be handed over to a newly created public sector company similar to Railtrack, which would sell them off, either directly to the credit markets or to other mortgage lenders, over a period of time.
If the Bank of England, the Financial Services Authority and the Treasury were right in their assessment two months ago that there was nothing fundamentally wrong with Northern Rock's book of assets, then the Government would be able to sell them off over a period at a good price. In that case the Treasury would recoup all the money paid out on deposit guarantees and might even make a modest profit.
If Northern Rock's assets turned out to be less valuable than expected, the Government would suffer a moderate loss. But, given that the Government would not be a forced seller, the Treasury's loss in gradually disposing of Northern Rock's assets would be much smaller than the subsidies or soft loans that almost any private sector bidder is now almost certain to demand.
If Northern Rock's directors can organise a genuine financial rescue, they should be allowed to do so. But any such private sector offer must repay every penny of public money with full interest by February, as originally required. Anything short of that would not be a financial rescue offer. It would be a political blackmail demand.
The government has not lent the money for the sake of northern rock but for the benefit of economy as a whole.
Look at the run on northern rock if left unchecked it could have caused major confidence problems.
Think about house prices they go up in part because people think they will go up. If Northern rock had collapsed it would have skaen confidence in the city confidence in uk banking. Markets are built upon confidence. If every one thought house prices would go down they would. Finace markets could be far more volile than houses as houses are not as convienant or quick to change. People could switch from the uk rapidly. This is also ignoring all the "sheep" problems that would be created and those from a general slow down such as house prices spending etc.
The government/bank of england dug a hole (I know the government have passed accountability to the bank of england chancellor still sets inflation targets they dont really have a free hand even on interest rates)
they should have acted quicker and more decretley. From the situation they created lending this money was best of a bad set of options. If the bank was broken up these morgaes could be refianced and money recovered. Its by no means 23 billion writen of. Depending on what happens and what is done some money could be lost but its misleading to compare this 23 billion to 23 billion spent on something. Because of the mess that was created it was vital for the good of the economy which in turn is for the country as a whole that something was done. It should not have come this of course. Iragardless of the governments spending this loan had to be enabled.
Of course this is this ideally would not have happened but to compare it to spending although a good headline is not enteirely pertinant.
There is a big article in the FT today(15 Nov) on this subject.Various figures are being bandied about as to what NR is 'worth'.Certainly the Government will not want to see it liquidated,so that's one outcome that cannot happen.As a creditor of NR for north of £20 billion,they will have a major say,in any outcome,in any sale.Jobs will have to go,in any solution.
It is postulated that any organisation with £20 billion to spare,could find far better uses for it,than buying NR.At the least,if the shares of NR are valueless,the government may well have to stage some kind of takeover,like it or not.
NR calls itself a bank,yet their CEO has passed no banking exams.Since neither NR nor any of the responsible Government Agencies,stress tested the major assumptions on which NR funded the shortfall between it's deposits and the ammount of mortgages,that it was writing,then the Government must take some of the blame for the present outcomes.
I was in NE UK the other day,listening to local businessmen winging about 'lack of Government support to NE UK'.They do not consider that £20 billion plus,forms any part of such regional 'help'!!!!!!!!!!!!!