Government's latest wheeze
Peter Mandelson, the Business Secretary, outlined the Government 's plans to underwrite loans to small and medium-sized firms this morning, so we'll take a forensic look at them.
The proposals involve providing state guarantees to encourage banks to start lending again to business, which is suffering because credit has dried up.
It is the government's latest wheeze to free up the credit markets, which remain frozen since the banking meltdown last autumn.
We'll be asking: will it work and what risk is there to the taxpayer.
Also on today's programme ahead of the first reading of the Borders and Immigration Bill we'll be looking at migration.
Yesterday the Archbishop of York said immigrants to Britain had "been treated like hotel guests who don't belong" but he blamed decades of multiculturalism for not making immigrants feel at home: "Any sense of a shared common culture is eroded, risking increasing segregation".
We'll be talking to the immigration minister Phil Woolas, and former Tory Party Chairman, Norman Tebbit, both of whom are with us for the whole show.
It's also the first PMQs of the year, so naturally we'll have all the action at midday, and top analysis, of course, from our Political Editor, Nick Robinson.
Broadcaster, Anne Diamond will be here telling us why politicians should be tackling obesity.
And, ahead of his inauguration next Tuesday, we'll be asking what tricks Barack Obama will have to pull out of his hat to get the US economy back on track.
We'll be live from Washington with US commentator Irwin Stelzer.
That's all on today's Daily Politics from 1130am on BBC2.
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Mandy is now being questioned about the sums for his new bank mortgage not adding up.
Yet he is the one handing out Taxpayers money to the banks
Does anyone see a conflict of interests here?
Surely he should not be dealing with this until the mortgage money questions have been answered
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So did Mandy sell his yacht? Or did no one ask that kind of question
I see there isn't a great deal of detail in Mandy's plan, and not really any kind of hard questioning either
Has any reporter actually been to a bank and asked at what stage this credit will come into force or how it will work
Having waited so long it needs to be very quickly accessible where required
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Do you think it would be too much to ask that the government actually work out exactly what and how they are going to do something before they announce it and get false hopes up.
I'm really fed up of seeing politicians telling us how they are going to make everything better, I look for the detail...how cashflow loans to small business are going to be implemented for example...and theres nothing but hot air and retoric. Then it either fizzles out or 6-12months later theres a watered down version, or some statement of intent that nobody can enforce.
We really need a few more politicians willing to roll their sleeves up, work with real people from industry (not just some establishment friend whos more peerage/politician that real implementer).
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If we accept the problems are due to a lack of credit, the next logical question is why is there a lack of credit...
It is because people have realised we were all borrowing/lending too much and are taking fewer risks now...
Which is a good thing in itself, isn't it ?
Its a healthy cultural change for something more sustainable...
I hope we don't undermine that now, by trying to get borrowing/lending going again as it once was. I really don't want to see a return to the stupid old "Don't care how, I want it now" culture that has served us so badly....
What we really to do need now, is to kick-start spending. So we should find a way of putting interest rates for savers back up again, to at least 5%. But I'll admit that 10% would be even better.
People with capital will then have some disposable income from the capital that has been prudently put aside and the sensible side of the economy will be able to start spending again, and drag the rest of you with us...
But such a huge hike in interest rates would obviously cause problems for the existing borrowers.
So all the Government needs to do is guarantee existing loans (incl. mortgages) at the original low interest rates, for the lifetime of those loans.
All new loans would now be much more expensive than they were previously. That's only right and proper, to fund the rates that need to be paid to the savers to get us all spending again...
Anybody who can't afford to borrow at the new higher interest rates either doesn't get a loan or goes bust.
The result is that we're left with some well-run, well-managed, sustainable businesses and a healthy financial culture to give us a solid platform for the 21st Century
We should not be perpetuating the unsustainable business/financial models of the last century. We should be rewarding and encouraging prudence and sensible management of risk.
So I'm sorry, but the unsustainable businesses (like Woolworths) have got to change or go to the wall.
The Governments idea of underwriting debt is therefore sensible in so far as it will create a bit of breathing space to allow business to change. It's worth a try, particularly the scheme that helps exporters...
But overall, I don't think they're doing all the right things. We seem to have a few policies like this latest one that makes a bit of sense and others that are obviously designed to perpetuate the old, discredited lend/borrow/spend culture rather than encouraging the necessary changes for the future...
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4. At 12:29pm on 14 Jan 2009, TGR_Worzel wrote:
On that plan, though, don't we have to take a step back and withdraw the bank bailout so that they go bust?
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In PMQs Gordon Brown stated that the 2.5% cut in VAT would benefit the average family by £5 per week. This implies that the average family spends £200 per week (£10400 per year) on goods or services that attract VAT at 17.5% (i.e. it excludes items such as food, children's clothing, and services with a VAT rating of 5%).
The figure of £5 per week might possibly be correct based on total national annual VAT revenue, but it seems highly unlikely that families who really need financial help will fall into the category of "average" as cunningly used by Brown.
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Re: 5
I see your point, but no.
The Bank bailout was essential. The Government was absolutely right about that.
They couldn't stand by and let everybody's savings disappear overnight. If that had happened, the Poll Tax riots would have appeared trivial. The civil unrest that could have resulted doesn't bear thinking about. The Government did OK on that one...
So what I am saying is the Bank Bailout was good and Mandelson's latest scheme is not entirely without merit, particular if he's helping the exporters, but overall the message that seems to be coming from the Government is that once we've got through the current difficulties it will be quite OK to carry on borrowing/lending/spending as before, as if there is no tomorrow.
I disagree.
It isn't OK to carry on as before.
We need a major cultural change, and to get the ball rolling in that direction they need to start looing after the savers.
Particularly those who have been saving for a rainy day and are now forced to live off that capital because the rainy day has arrived...
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One final thought about rainy days.
It's all very saving for a rainy day.
But on this ocacsion, the fools that seeded the rain clouds in an unwise experiment with the laws of physics (or the laws of finance, if you like) and have caused it to rain in torrents have also pinched my umbrella, raincoat and wellingtons.... !
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Now we have more details
The first loan guarantees are expected to be in place in March, so businesses have to hold out until then
I do not agree with
7. At 2:39pm on 14 Jan 2009, TGR_Worzel
All the government has to do is guarantee savings, which it has done tacitly anyway.
That would then leave the liquidators to pick over any other "valuable" assets within the banks and write off the rest.
Someone would have bought those assets, including all the savers, even if it was a nationalised
The world needs to move on and unviable businesses, or the ones who used the debt free age to fuel huge profligacy should face the music, lessons learnt never to be repeated again.
We would now have a much stronger banking industry and wouldn't need all this loan guarantee stuff.
The nationalised bank could have been sold off within five years for profit, and we wouldn't now be paying for the bankers mistakes.
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I am delighted that Mr. Neil has at last given WW2 as an example of a fiscal stimulus working.
Well done!
It raises a question to which there is no precise answer;the scale of the stimulus necessary when capitalism is in crisis?
Is America still big enough to be the engine of recovery.Irwin Stelzer looked distinctly uneasy;that is a very encouraging sign.
Bryhers.
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What do we pay our license fee for? I can't believe that the lead story on BBC 6pm news is the fact that some junior member of government used the phrase "green shoots".
All those years of experience of BBC political reporting combined with umpteen top university politics degrees...
Question should be: What did you mean by "Green Shoots"? Answer...blah...now analyse the answer.
Headline story that people are going to be insulted by this comment?! Who is? When does "Green Shoots" translate into "screw the unemployed"? It has nothing to do with it. And if the Tories want to pull out their oxford debating society experience and play with the words, let them..who cares..its not the issue.
Reporting on real things is what we want. I'm embarissed just watching your political editor have to build a story on who said that phrase in the early 90's.
What a complete waste of airtime. I for one don't want government to have an encyclopedic knowledge of every phrase and how it was used in the past. I want them to understand how to do their job of improving the economy, and I want the BBC to analyse and provide real facts about the effects of any changes.
We already had a main story, the business loans...so it isnt like it was a poor news day
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The Archbishop of York should be hailed as a man of integrity and courage for his remarks on multiculturalism.
I love the idea of a multi racial nation, which allows us to integrate and still adapt to the flavours of other nations. I would miss genuine Indian curries (Chinese curies don' cut it!) Indeed my son in law is an Australian aboriginal and my daughter in law is Swedish!
The concept of multiculturalism assumes that for good or bad, all cultures can exist side by side as separate entities within a single country. The US, the UK and others, are stark examples of the failure of that concept as laudable as it is considered by some.
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RE: 11 Green shoots.
I think I was more appalled by the media reaction to the story, particularly the BBC's reaction, than the remark itself....
From what I saw of the BBC's coverage last night, it was a witch-hunt.
Just as happened with the Prince Harry story over the weekend, which rolled over into a bit of Prince Charles bashing.
Sometimes 24 hour news is too much news. It seems there's too much airtime to fill, too many correspondents/reporters to keep occupied analysing every conceivable angle on non-stories and repeating it endlessly until somebody in office is bullied into resigning.....
Channel 4 news covered the Green shoots story most appropriately yesterday, from what I saw. It was reported, but that was basically it. They really didn't go to town on the story...
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