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Tories to break up banks?

Robert Peston | 12:40 UK time, Wednesday, 8 April 2009

Royal Bank of Scotland and Lloyds Banking Group could be dismantled after the next election, if the Tories form the government.

George OsborneHere's why I say that, in the form of excerpts from a speech that's just been delivered by George Osborne, the Shadow chancellor.

"We cannot allow one part of our economy to behave in a way that puts the rest of the economy at risk when it fails. We need to think deeply about whether we can sustain banks that are not only too big to fail, but potentially too big to bail.

By dint of its substantial shareholdings the government has a powerful influence over the future structure of the UK banking industry, whether it likes it or not.

When the time comes to sell off those shareholdings we need to think very carefully before simply selling them to the highest bidder without thinking through the consequences for the wider economy.

We should look at whether Britain in fact needs smaller banks.

For it would be a bitter irony if we came out of this crisis with a banking system that was even more concentrated and even riskier than the one we had before it."

The background to these remarks is that Royal Bank's balance sheet is considerably bigger than the total output of the British economy and it liabilities are considerably great than the entire public-sector debt of the UK.

Hence Osborne's allusion to banks that are "too big to bail". Or to put it another way, in rescuing RBS, the government has mortgaged all our economic futures to the rehabilitation of this giant bank.

As for Lloyds, it became far and away the biggest retail bank in the UK when it was permitted to buy HBOS last autumn.

In fact, it only rescued battered HBOS because the deal offered a once-in-a-generation opportunity to become the unchallenged market leader in British retail banking.

So if the next government were to dismantle Lloyds, depriving it of its enormous share of the current-account, savings and mortgage markets, that would be a reputational disaster for Lloyds' management.

There are two further implications of Osborne's remarks: first, that he would privatise Northern Rock as an independent bank, rather than flogging it to another bank; second, that he would ask the City watchdog, the FSA, and the competition authorities to consider whether other big British banks should be broken up. Even those where taxpayers don't have a big stake.

In the City, where I am tapping out this blog, this is big stuff.

To do my normal thing of ramming home the bleedin' obvious, the opinion polls are currently saying Osborne will be the next chancellor. Which means that his ambitions for what our banks should look like after the spring of next year are at least as significant as the future plans of the current chancellor.


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  • Comment number 1.

    As much as I dislike Labour, I'm not sure I trust the Tories to get it right. They ain't got no vision. No fire.

  • Comment number 2.

    I hate to say it but Osbourne is right! Either the banks have to be so structured that they do not bring down the whole economy when one or two fail.Or they have to be so regulated that they cannot take any risk that puts them in the position they currently find themselves.

    I suspect that we will actually end up with a combination of the two, not least becaus the regulation would need to be international.

  • Comment number 3.

    Osborne said "When the time comes to sell off those shareholdings we need to think very carefully before simply selling them to the highest bidder without thinking through the consequences for the wider economy."

    My first thought is.. watch RBS & Lloyds shares take off. Now there's surely no chance of full nationalisation of either of these wounded colossi, the only way is up!

  • Comment number 4.

    Robert, you should have reported who this speech was intended for. Most politicians trim their message according to their audience.

    Too big to fail/bail sounds a sensible message, but frankly I'll believe it when I see it. The next government will have to devote nearly all of its political capital to implementing the combination of tax rises and spending cuts that are the Blair/Brown/Campbell/Mandelson legacy.

  • Comment number 5.

    A very suitable and sensible proposal. The bigger the organisation, the more it looses its sense of purpose. That applies to Banks, Insurance Companies and Government institutions such as the NHS. Stafford Hospital being a good example of an organisation ignoring its objectives and forgetting its sole purpose for being there.
    Keep it simple, keep it as local as possible and put the name on the tin that explains what is does. My only question would be is it really a policy from Osborne, he is not usually known for making common sense proposals that the Country wants.

  • Comment number 6.

    Sounds sensible to me, combine that with an ethical banking policy accross the board (which afew banks already follow voluntarily) and you will have the beginnings of a return to what banking should be.

    There is growing evidense that many people are voting with their bank accounts and switching to more ethical banks anyway out of a sense of disgust and outrage at the behaviour of the spiv bankers at best...some would say fraudulent who are still in power and still have their knighthoods.

    it is a disgraceful situation, it is at least encouraging to see the conservatives proposing something which is required and to an extent bucks their traditional perspective as being the party that is most friendly to banks and big business.

    Encourage more of this switch to ethical banking.



  • Comment number 7.

    This is excellent news (if the Tories win).
    These monster banks MUST be broken up to protect the taxpayer in future.
    The bits that go bust, MUST then go bust.
    No more bail-outs.
    The public should only guarantee the High Street branches, and their current and deposit accounts.
    All other business, broken into other smaller companies, must then stand on their own two feet or go bankrupt,(international investments and mortgages, business loans etc).
    Investors will then have to beware...because the UK public cannot afford any more bail-outs.
    Lehman Brothers is the key example.

  • Comment number 8.

    It seems to me that the next logical step would be to separate investment banking from retail banking. Banks with purely retail operations would then have an implicit, or perhaps I should say explicit guarantee from the Government.

    At present the banks with trading operations have all their risks offloaded to the taxpayer. Has anyone asked the obvious question of where the capital that the banks trading operations use comes from? Given the support they are receiving from the taxpayer it would appear that we are providing this directly where the government has a stake or indirectly where the central banks are providing the funds.

  • Comment number 9.

    The LLoyds HBOS merger would never have been allowed in "normal" times. There was a sensible anti-competition rationale for this. It would make sense to de-merge them.

    But would smaller, shareholder owned, banks not take silly risks in future, just like the ones we have today did, just because they were smaller?

    If the thinking is, banks must be smaller in future so that they CAN go bust, doesn't sound like a particularly sensible part of a Financial Regulation strategy.

    What happens if all bankers remained the greedy beasts that they are, (perish the thought) and all banks (small or large) once again found themselves in a situation where they were all going bust all at the same time, a bit like they did today? Are we saying we would not bail out any of them? And if we did how would we go about picking and choosing? Don't really think George has thought this through.

  • Comment number 10.

    The issue here is how to handle financial globalization: bigger UK banks are good to make them well-positioned internationally, which one could argue is good for the UK financial system but, smaller UK banks are good to the retail consumer as pointed in the blog post. What is best? Ensure that big UK banks can compete internationally in making big deals and acquisitions? Or make sure that smaller UK banks are competing against each other within the UK and providing the best retail value?

    Same happened with the wave of water, energy and IT privatizations in the last 10 years in Europe. Every country was playing a double game: trying to promote internal competition and avoid national monopolistic practices but also trying to beef up their national water/energy/IT company so that it could be well-positioned to acquire other European, South American, Asian companies...

  • Comment number 11.

    in the long term this has to be the right strategy. The giant banks are the ones who have caused suchhuge problems. often by having more firepower than the government.

    However, you can't say we don't have a choise at the next election. The current government plan is to make these state owned banks support their own political policies to the hilt.

  • Comment number 12.

    Another common sense policy.

    Now we just need to apply the same logic to Supermarkets and the suffocation of the High Street, (independent competition), by groups of chain stores often collectively owned, in conjunction with control of planning regulations - developed to ensure that LOCAL business are not swamped by competition and can only establish themselves where needed and therefore thrive. This surely is common sense - ultimately providing a long term, positive, stable economy.

  • Comment number 13.

    Is RBS too big to bail? Probably. If money is the lifeblood of the economy then RBS is currently on life support and that has to be a concern going forwards. But the long term solutions run far deeper than breaking up financial giants. Trust and confidence need to be restored and relationships rebuilt. [Unsuitable/Broken URL removed by Moderator]

  • Comment number 14.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 15.


    Interesting comments from GO.

    I can see where he is coming from and it does make sense on some levels. I don't think however such a plan would ever be fully implemented, and of course some of what you say is the conclusions you have drawn rather than what came from GO himself.

    I agree that if I was in Lloyds TSB's management I would be very nervous indeed. Having been shoe-horned into doing the HBOS deal by Flash Gordon and the Blundering Badger, the prospect of being pooper-scoopered out by Dave and George and by the same virtue having destroyed billions in Lloyds market cap would make me very, very uncomfortable.

    IMHO smaller banks probably are the way forward IN THE FUTURE but at the moment size matters. Bigger banks have more cash deposited, hence have more leverage with governments when things go pear shaped. Hence why Santander and HSBC are more capable of withstanding the maelstrom. In the future (whenever that is)the economy will need a competitive banking environment to function properly. But for now we have to soldier on. As the banks start making profits (which some are) then so will the rest of the economy.

  • Comment number 16.

    "Tories to break up banks"

    They think we do not remember that they were the ones who started us on this disastrous low(no) regulation path.

    Cut the heart out of a Cameronite Tory and you will find Thatcher stamped on it!

    The Nation will be fools if they believe a word that they say.

  • Comment number 17.

    If the banks are infrastructure and cannot be allowed to fall then logic says that they should be in public ownership. The bits not need as infrastructure can do what they want. If that means going bust then go bust.

    The french model on state ownership appears to work well and is next door, its not exactly they other side of the planet. On a casual observation - EDF is now having to be brought in to sort out the UK power generation needs. The french water industry unlike the UK privatised one retains all assests in the public sector and buys in private managment. At the end of the short term managemnt contract the management team can apply for a new one or be given the boot. All investment in the water system remains in public ownwership. The french banking system and loan criteria seem to have been less err exuberant than the UKs. They still, relative to the UK, have affordable housing. They still have a state owned car industry. They still seem to have a fishing industry. Although they have not done it for a long time if they are not happy with the people at the top they do something, they chop their heads off. Doubt it would be done now but it does show motivation for reform. Here all we seem to see is profit taking and asset stripping.

    RBS, turnover bigger than the UK, private multinational, does what it wants in any number of countries and yet the UK taxpayer is supposed to pick up the tab if it goes wrong. Its ridiculous.

  • Comment number 18.

    Banks became too big before all of this started, and now they are even bigger. How can one chief executive and one chairman manage such an inflated organisation?

  • Comment number 19.


    Re supermarkets - I like the sentiment ultimately but you need to think this though properly. By placing restrictions on supermarkets and breaking them up you can create an inflationary problem. Supermarkets have incredible purchasing power, as people want to spend as little as possible for food and essentials and more on the non-essential stuff. By creating more trading partners for the suppliers of these products, you create competition, leading to higher prices for consumers in the end. And less money for the non-essential stuff.

  • Comment number 20.

    Lloyds management have been incredibly naive not to see this coming. The shotgun wedding confirmed by Labour was never going to be well regarded by a Conservative government.

    Even if the preference share conversion is taken up by existing shareholders this will only delay the inevitable move to government majority shareholding when the B shares are converted. As such they are beholden to whatever the prevailing political whims might be.

    Blank and Daniels sold the HBOS deal on the basis of the resultant market share. It now appears that the Lloyds TSB shareholders will have all the pain of the rank HBOS lending book and when that has passed through and profitability restored the increased market share to which they aspired will be removed as part of the return to full private ownership. Rather than rise as indicated in an earlier posting the shares will probably tank.

    Ironically the strategy Daniels is pursuing of retaining a number of different brands within the Lloyds Banking Group will probably make it easier for the business to be split up again at the appropriate time.

    Blank is associated with the Labour party but both he and Daniels must be praying for a miraculous Brown re-election, to prevent Osborne being able to enact his suggestions, to have a shred of credibility left.

  • Comment number 21.

    Common sense. Some idea of the future emerging at last.

    People are tending to forget hat the Tories ran this country for most of modern times. Until this lot got in Labour had only ever managed one term at a time, largely to remind the Tories that we're a democracy - although the cost is always high due to the mess Labour leave behind.

    Of course, with old Maggie still being fashionably unpopular it's hard for the Tories to say this at the moment. It is precisely because they are afraid of the "Maggie Factor" that they cannot remind us of what it was like under Labour - anyone remember "the winter of discontent" with strikes disrupting the country before union power was curbed?

    So for Labour to be giving us the "no time for a novice" routine is truly laughable - they are evidence of what happens when you allow novices free rein (and for too long)... credit crunch, recession, nothing in reserve.

    To see the sensible ideas emerging from the Tories is, therefore, hardly surprising. They know how to run a country, Labour have simply improved their ability to pander to the masses to win elections.

    But while the chickens are home to roost... election now please.

  • Comment number 22.

    With proposed 'policies' such as these my blood freezes !
    Sounds like spin to me. Superficial sound bites blah di blah. Does Mr Osbourne really have Gravitas in the City where you have been tapping at your keyboard today Mr Peston ?

    I did not vote for any Party at the last election....and cannot warm to any now. Or perhaps I could vote instead for the All Night Party.

    Yours ever, RP

    Disgusted in Westminster.

  • Comment number 23.

    Great idea in principle, but isn't the problem that local size-restricted banks would be unable to compete with the large international banks?

  • Comment number 24.

    Its not just the Banks that need to be dismantled...we need to dismantle parliament and get rid of all those spiv MP's

  • Comment number 25.

    4. David_Kilpatrick

    ''Too big to fail/bail sounds a sensible message, but frankly I'll believe it when I see it. The next government will have to devote nearly all of its political capital to implementing the combination of tax rises and spending cuts that are the Blair/Brown/Campbell/Mandelson legacy.''

    Fair point but I don't see it as a problem. it will be we have looked at the books the books are bad. Here's the bill, not our fault, look to Brown. As for Blair/Brown/Campbell/Mandelson. Blair has jumped ship and his war crusade is looking increasingly dodgey. Brown will have no credibility. Campbell has shown he has nothing to spin. Mandleson comes across as doing nowt. Paying for the Brown bill is unavoidable. everything else is open. Lets hope

  • Comment number 26.

    What a load of rubbish - Imagine the backlash & lawsuits from Lloyds TSB & HBOS shareholders whether institutional or private as the only reason the deal was agreed was that the current government backed it.

  • Comment number 27.

    It shall come to pass and for what its worth, he (for once) is BANG ON THE MONEY!!!!

    Break them up!

  • Comment number 28.

    This is possibly the wisest comment that young Osbourne has made. He has earned a tick in the box at least.

    Just think we could have the Westminster Bank, the National Provinvial Bank and Martin's Bank back on the High Street.

    Also what an excellent way of splitting retail banking from the spooky stuff.

    Are we seeing a rejection of Big Business by the Tories? Now that would be news. Bet Brown copies: or BBC for short.

  • Comment number 29.

    Fascinating stuff if you're right Robert, my fear is that this is mere puff from Tory HQ however.

    The tories have a built in big boy protection on balance- will they actually upset the apple cart and see this through??!

    I'm sure they'll do something with the rock, easy enough, but isn't this just simply a way of avoiding regulatory issues and policy decisions that are actually the best way to avoid this happening again?

    i.e. 'we aren't sure how/whether to regulate but there's a chance that this could happen again so lets try to stop the next implosion being quite as large [by forcing smaller banks]'.

    In a global economy wouldn't this also significantly undermine our banks' positions, potentially making them look less attractive and making it harder for them to compete?

    Arguably the perception of the banking industry is such that even allowing a small bank to fail couldn't be allowed to happen in any event as it completely undermines consumer confidence- that won't change even with caps on bank size.

    I'd like to think this might be a valid way forward, and in the short term-perhaps it is, but i'll take a bit more convincing.

  • Comment number 30.

    He has a valid point. Maybe RBS is too big to bail out. After all, if money is the lifeblood of the economy then RBS is on life support and that has to be a huge concern going forwards. But the long term solutions to the downturn run far deeper than breaking up financial giants. Trust and confidence need to be restored, relationships rebuilt and resilience regained. [Unsuitable/Broken URL removed by Moderator]

  • Comment number 31.

    17. At 1:28pm on 08 Apr 2009, glanafon

    Best post I've read for ages!

  • Comment number 32.

    blistering BLUE barncales!!

    like just about everyone else here so far, I think that breaking up the banks and also splitting retail from investment, would clearly be common-sense so completely agree

    it has become so rare to hear anything sensible from a politician that it is hard not to be suspicious; would the Tories really do it? would it be a priority?

    but at least it seems that they are starting to develop a separate platform from Labour; I'll be even more impressed if they create some distance between themselves and their friends the Hedgies

    nevertheless the Tories won't be getting my vote, any more than Labour

    'cos I'm a poop-deck socialist and crow's-nest commie; and my parrot agrees, as usual

    hang on there's 'a fusilade of missiles' coming in; no I see now that it's only an empty plastic water bottle after all, so that's ok

  • Comment number 33.

    #21 Chris911t

    As has already been pointed out on this blog, it was Thatcher's devotion to low regulation (later copied by 'new labour' (old tories)) that started us along this road to ruin.

    This labour party has made a number of mistakes, most of which have been the result of adopting traditionally tory policies.

    To suggest that the public school Cameron/Osbourne double act will ride in to the rescue is frankly laughable.

  • Comment number 34.

    16. John_from_Hendon

    "Tories to break up banks"

    '.....The Nation will be fools if they believe a word that they say.'

    Fair enough John but go down to the bookies or search GE odds and see who is expected to get in. And the bookies dont lose money often. There are not a lot of choices. In fact there looks to be probably no choice and unless you are in a marginal seat your vote could be meaningless.

  • Comment number 35.

    28 makes a good point re a break Business v tories, of course the tories know they will be in power so business will just have to get used to it.

    We have seen Labour steal the tory party, are we about to witness the tory party steal the old labour party?

  • Comment number 36.

    Could they start with re-establishing National Girobank (or whatever it ended up being called) back into local post-offices, please?

    Or perhaps, into supermarkets and hypermarkets? (Or has Tesco already got that one covered?)

    If it brings back doing 'face to face' / 'over the counter' business with financial institutions, I think it might just turn out to be pretty popular.

    Or, rather than "post-offices", perhaps we need some new thing, money offices, where people can do basis banking things using a variety of banks (and perhaps buy their newspaper or pick up their dry cleaning too). Some sort of multiple-bank 'agent', rather than a single-branded bank branch.

    (A bit like those 'multi-denominational' airport or hospital chapels).

  • Comment number 37.

    apeman383, in response to your reply on my earlier post...

    On the contrary. I sell in my store many items cheaper than supermarkets yet I don't get the footfall. Who's robbing who?

    Additionaly we have become obsessed with excessive house prices, hi-tech gadgets and other meaningless non-essentials. At the same time putting less value on what we eat, what it contains, where it came from and more importantly it's true cost to produce. So on the one hand your argueing for lower cost of products (and using supermarkets who aren't aways the cheapest option) at the checkout and end up paying more tax to pay producers (around the world) subsidies instead of paying a right price at the till and you buying what you want and not subsidising products you don't use!

    I suggest it's you who need's to think about it!

  • Comment number 38.

    Yes some sensible talk at last.

    But remember this can only happen if we get this bunch of Labour jokers out!

  • Comment number 39.


    I don't see a direct link to the speech, so forgive me being a little sceptical about your interpretation

    Where is the balance from Darling about what they will do...or are they still making it up as they go?

  • Comment number 40.

    8. At 1:05pm on 08 Apr 2009, fractalfinance wrote:
    It seems to me that the next logical step would be to separate investment banking from retail banking. Banks with purely retail operations would then have an implicit, or perhaps I should say explicit guarantee from the Government.
    This is precisely where it all started to go wrong when the Glass-Seagall Act was repealed by Republicans in the USA who thought they knew better than their forebears who passed the act in 1933 through hard-learned, first-hand experience of what contributed to the Great Depression there. See link below...

    Don't know if there is any equivalent law or regulation in the UK? Perhaps another blogger can enlighten us?

    Anyway, smaller banks doesn't automatically equal better banks. Good regulation equals better banks by making them all have to conform to good, honest practice and gives a level playing field for the "good guys" to combat the "chancers" and not have to join in to survive.

  • Comment number 41.

    At last! Was someone reading some of my previous comments???? Not only have these mammoth corporations (mammoths are extinct, note) completely warped world trade and brought on us the social evil of globalisation, but they make no sense. How many diplodocus's (diplodoci?) were there in the world at one time. Probably not so very many. Why does this matter? Well, when they start to fail, you find there's a systemic weakness and little ability to react to, adapt to or evade the problem. Further, in reality there's only a limited amount of trade that can be done between them (though this is disguised by the size of the business they do). When you have more, small businesses, they are necessarily conducting more transactions between them. They may lack the economies of scale so beloved of merger fanatics, but the concomitant of that is more people employed to do the same value of business, which at least socially is a good thing, along with the greater number of wealth creators you have (in mediaeval terms, burgesses). Also, you have more biodiversity and resilience.

    In short, smaller industry flexible and good, bigger industry rigid and bad. It's just a shame we had to find out the hard way. All the while that political leaders keep trying to shore up the model which what got us into this mess, though, the more they are ignoring evolution. Are they in fact creationists?

  • Comment number 42.

    A good reason for banks to be split up would be the separation of the Retail and the Investment (gambling) banks as we could then choose where to put our money.

    As for asking the FSA what to do, I do not think they are competent.

    I think they did not see this bubble. If they did, they did not act.

    No point asking someone what to do in the future if they cannot see what is going on before them, especially if they are supposed to be looking very hard.

  • Comment number 43.

    Well somebody had to say it!
    Last week I saw an English economist saying same thing on US tv "too big to fail - Too big to exist" Anyway they aint big they're just fat different thing altogether.

    All that matters is like the those suicidal bankers of urban myth/legend nobody wants one to land on them.(My apologies to Steely Dan)

  • Comment number 44.

    The idea is in the right direction. The superbanks are just too big to manage let alone perform the appropriate risk management procedures on the wide variety of global investment vehicles.

    I also cannot see how or indeed when either Lloyds Group or RBS Group could be in a financial position that would convince investors that a return to the private sector was a worthwhile investment. Surely the days where the superbanks declared a net profit of GBP Billions are over, never to return? Selling these monoliths piecemeal might be a more attractive proposition.

    The problem arises in how the carcase of the part-nationalised banks is to be cherry picked. I do not recall that all aspects of the privatisation of rail, utility companies etc as being a resounding success.

    Small and medium size business would benefit from old fashioned banking where a branch business adviser/manager would adjudicate on bank lending as opposed to a centralised back office function often determined by a computer generated model. The KISS acronym comes to mind: Keep It Simple Stupid!

  • Comment number 45.

    Is Georgie boy shorting RBS and Lloyds.
    Cos whenever he opens his pouting mouth, whatever it is he is talking about crashes to the pits.And boy have those banks crashed since Georgie spouted.
    This is the treasurer to be making a statement of intent about government owned companies and causing their share prices to plummet.
    If this is him as deputy-batter for the UK economy God help us all if he ever gets elected.
    We have already seen what happened to our poor old pound after his previous ham-fisted outbursts.
    I thought he had been gagged!
    Where's Ken, is he still down the pub?
    With friends like the Tories, the UK Economy does not need enemies.

  • Comment number 46.

    Smaller PRIVATE banks would ultimately be gobbled up on the cheap by large foreign banks so they would go the way of the rest of the family silver like water, electric, gas, etc.

    As ever GO is taking a leaf out of Nu Lab's book and spinning an ill thought out sound bite.

  • Comment number 47.

    Tories to break up Banks? Sure - when all their little porkies grow wings. Osborne is talking through his Hat.

  • Comment number 48.

    With smaller banks all that will happen is they will be taken over and big banks either foreign or domestically owned will eventually result.

    Both this and the fact that bank bailouts are intertwined with conditions leading to boosting domestic lending and screwing lending abroad.....

    ....means there needs to be an international bailout mechanism with economies stumping up their share relative to where the problems are.

    e.g. Ireland should have helped in the RBS bailout to the extent that Ulster Bank was problematic and the UK in the Bank of Ireland bailout to the extent that BOI UK caused the problem loans.

    It would also mean national regulators could not wash their hands when all their banks are taken over by foreigners.

    I just dont think it is long term realistic to expect we wont have large global banks again.

  • Comment number 49.

    Depends what you mean shei-la by, ''too big''. Perhaps otherwise-known as greater job losses in the interim.

    Surely the acting factor is ''not to overpay for what you are getting''. Thus enormous bank(s) can be taking on at, say, 1% or less, value.
    Any improvement in the business is added value,ripe for realisation in the market, or as a ''carry forward'',like ''goodwill'' in the domestic economy.

  • Comment number 50.

    So if Mr. Osborne breaks up Lloyds Banking Group what happens to existing private shareholders??

  • Comment number 51.

    Robert - I know your Banking connections are excellent and yes this may be important in a couple of years if/when the Tories get in, but it's yet another Banking story. Some more of the real world please.
    If you haven't yet noticed, an hour ago the Washington Post published an article stating that General Motors was well into preparations prior to filing for Chapter 11 protection.
    That's a business story. This isn't.
    TM - StH

  • Comment number 52.

    Irrespective of what he may or may not do, its about time our expense ridden masters actually did something to MAKE THE BANKS Loan us our Money back so we can run our businesses and get ourselves out of the mess they have put us in. Georgeous George & Dastardly Darling WAKE UP PLEASE before we all end up Jobless, Homeless and not in a position to CLAIM ANY EXPENSES, let alone LIVE!¬!

  • Comment number 53.

    Mr Pirate post 32. I would expect your parrot to agree with you.

    After all he is surely wise enough not to bite the hand that feeds him unlike our bankers.

  • Comment number 54.

    What is this Osborne clown up to?

    Our very own heir to the Osborne baronetcy of Ballentaylor, Tipperary.

    An ethical Tory. How on earth did he manage to come out of his social and educational background wearing blue?

    We are in the midst of repairing the biggest global financial mess up in history and Osborne is arranging to open a wound that we have just managed to close.

    Do not trust this man. Do not trust the Tories and there new green tree insignia.

    Labour must hang their head in shame - but be careful about allowing your chagrin to sleepwalk you into voting for a political party who don't even who they are any more.

    I am not comfortable with this lot.

    I am no old-school Labour voter. I am 32 years old & my vote is available to all political parties.

  • Comment number 55.

    I have second thoughts on the Tories Spin, I feel for all those LloydsTSB mere mortals (the workers Band 8 etal) at the bottom of the LloydsTSB food chain. Some of those people have contributed to the share save scheme for 20+ years helping to towards their pension will be for nothing if the Tories do as they have indicated then thousands of people will recieve nothing, whilst the big fat cats at LlyodsTSB have recieve large pensions, they do not give a stuff about the staff who are always pressured to sell..sell..sell. Meet the targets......or you're off

  • Comment number 56.

    Mr Osbourne may sound like he is talking tough about not having banks that are too big to fail, giving the impression that the tories would let banks go under if they mess up, but I think he wants banks smaller so that they CAN be bailed if they get into difficulties. No Government of any colour will ever let a British bank fail, look at what happened in America when they did!!

  • Comment number 57.

    Two of George Osbourne's failings are that he just doesn't think things through and he is incapable of grasping the bigger international picture.

    If our banks are properly regulated there should be no need for further crises of the kind we've just experienced and no further need for massive bailouts. We already have sufficient banks to ensure competition and creating smaller banks will surely just make them prey to takeover by larger financial institutions including those outside these shores.

  • Comment number 58.


    You're hardly taking an objective viewpoint are you? I had a suspicion that you were a retailer.

    Anyway, I think you just made my point for me. We live in a consumerist society. Do you really think this (very unpopular) government is going to take such a dangerous political move, or the next one having just come to power. Get real, people want cheap things - it doesn't mean it's right.

    And FYI a bit about me: I'm a tory, I support Hugh Fearnley Whittingstall's Chicken Out campaign, my father is a farmer and mother owns a pharmacy. My feelings for the supermarkets are so-so for obvious reasons.

  • Comment number 59.

    I can't take Mr Osborne or anything he says seriously. He will have to go before the election.

  • Comment number 60.

    #45 Onward-ho

    If you are trying to convince me that George Osborne's comments have caused the weakening pound, how do you expect anyone to regard anything you say with credibility?

    Tories are enemies of the UK economy? Haven't you heard? Labour have been in charge since 1997...

  • Comment number 61.

    This is my very first post. I have been reading your blog most days for about 4 months, and have mostly found it informative and interesting.

    I have to tell you though that lately it has become boring a repetitive. You are the BBC’s Business Editor but you concentrate virtually all of your efforts / output on one sector Banking.

    I run a small engineering Company, 14 people soon to be 8 having announced that 6 people are to be made redundant. We started up from nothing 7 years ago following the closure of our previous employer a Swedish owned multinational. We had 4 people at the start and grew, through hard work, year on year. Then bang last November orders started drying up and here we are trying to ride out the storm.

    I know I am not the first person to ask this but I would like to add my voice. Please move on with the story. You are the BBC’s Business Editor not the BBC’s Banking Editor.

    Or is it self preservation as maybe the only Businesses left in this country at the end of this will be the Banks!

    Great countries are built on the back of manufacturing things! Look at the rise of China and the decline of the UK and USA over the last 15 years.

    Its time to wake up! We very much need people with your position and influence to lead the wake-up call. Not to keep wittering on about the Banks! Look where they have got us!

  • Comment number 62.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 63.

    Do you not remember Georgie running the pound down and being gagged afterwards?
    It is beyond dispute thet the Tories wrecked the UK economy 1979-85 and 1990-93. I lived through the dreary decline of dead Britain after the Tories smashed our industries in the 1980s, and the 17% mortgages of the early nineties and nearly 10 years of negative equity.
    They were the Frank Spensers of our recent history with their bonkers war in the Falklands, and the alliance to the senile Reagan.
    Nothing Labour have ever done could compare with the disasters inflicted by dumb Tories with their loony tune ideas.....remember Poll Tax?.... and uncaring policies.
    Get out and read some history, Foxy!

  • Comment number 64.

    U.K. 'will not recover until 2012' ...

    ... says a National Institute of Economic and Social Research study.

    How many people will be unemployed by then, do you reckon? How many companies will have gone bust? And what contingency planning can ordinary people do about the fall-out, if this is true? (or SME's, for that matter).

    Oh don't worry about HMG - it'll have civil disorder contingencies in place. In fact it already has - just needs orders to be signed up by the Secretary of State.

    And don't worry too much about the banks, either. I suspect they'll survive in one form or another.

    Worry about yourselves.

  • Comment number 65.

    Excellent. We don't need multinational banks doing business on our high street - keep them apart.

    Could we also get multi-nationals out of our farming industry and our fishing industry. Protectionism ? Yes. Some industries need protection having been robbed and abused by the common agricultural policy.

  • Comment number 66.

    #33. GHBRich wrote:

    'To suggest that the public school Cameron/Osbourne double act will ride in to the rescue is frankly laughable'.

    I'm fascinated by your emphasis on 'public school' and imagine you typed it with the sort vituperative spite usually emanating from the left wing and a sneer on your face as you did so. Of course it would be churlish to point out that Tony Blair also went to public school, and even Gordon Brown was selectively educated (although to his political credit he openly despised it). Were I to nitpick, I might point out that Michael Foot went to a fee paying prep school, and many other Labour Grandees of the 20th Century were products of the Grammar School system which true left wingers also seem to despise.
    My point, if I may be allowed to make it, is that as a parent myself, if I can afford to buy a better education than the state provides for my children, then I will. If I can get a better start in life for my children by dint of them being better educated through the fruits of my own hard work, then I will be proud to be able to have done so.
    It matters not one whit to me if our political leaders have been to Eton or to the local comprehensive and it is time to stop harping on about it.

  • Comment number 67.

    I've said on here before that RBS in particular should sell off it's foreign subsidiaries including the former NatWest business.

    It could then concentrate its efforts on working with the Scottish Govt and Scottish industry to grow and broaden the Scottish economy.

  • Comment number 68.

    The sentiment is right in my opinion - huge banks should not hold national economies to ransom. A sense of justice led calls for nationalisation. When the govt balance sheet couldnt take it, the UKFI half-way house was conceived which has thrown up all sorts of hazards. Avoiding ransom by banks may be more important than recovering HMG share value perhaps.

    But before we get into this debate, how are we going to repair the lending capacity shortfall caused by, predominantly, the collapse of the securitised debt markets. This is like an acid dripping onto our ability to recover. What are the Govt and Lending Panel Forum saying. Where is the clearing house for securitised debts? Will there be a clearing house established, and if so when? Will there be a sovereign guarantee for asset backed securities? Otherwise, the banks will retain them as corrosively illiquid assets and continue to deleverage.

  • Comment number 69.

    This is a step in the right direction. These sentiments should apply to ALL sectors of industry. Not just banking and not just the UK. Business has gotten so big that their budgets are bigger than most of the countries that they operate in and are far too powerful. It is not good for citizens or consumers.
    Trouble is, I don't trust the Tories to carry this through when their mates are the bankers and chairmen who will be most affected.

  • Comment number 70.

    "Mr Osbourne may sound like he is talking tough about not having banks that are too big to fail, giving the impression that the tories would let banks go under if they mess up, but I think he wants banks smaller so that they CAN be bailed if they get into difficulties."

    And what is your problem, Muggwhump (56)?

    Are you suggesting that all banks should be so big that when they go bust, as happens from time to time when dud managers or crooks get at them, they should be unrescuable to the extent that everyone with money in them on deposit loses everything?

    Look at it this way. In the last 18 months, for one reason or another, 5 British banks and one building society have either crashed or would have done without rescues - Barings, Northern Rock, Bradford and Bingley, the Halifax, Royal Bank of Scotland, Dunfermline, and as an aside, Lloyds (which was busted by the HBOS fiasco).

    Fifty years ago, this would have been a nuisance, as it was when a small bank named Barings collapsed in 1995 courtesy of Nick Leeson. However, pause and think about the institutions that have gone down with the others: the Bank of Scotland, NatWest, Churchill, a railway operating company (Angel trains? or one of the other ROSCOs, is owned by RBS) various foreign institutions, all in the firing line because of dud management by a handful of boards. These institutions were less a house of cards than a line of dominoes - touch the first and the lot goes down.

    I like the ideas in this article, but I'm a bit sceptical about them. Osborne's suggestions if they bear fruit would mean we had less risk in the financial sector, because it would be spread. The contagion from a collapse would be less, and if the State had to do a rescue we wouldn't be crushed under a huge weight of debt that has still not fully stabilised the banks. They're what John Redwood has been screaming for for months. However, Osborne has never held a government post, and I'm frankly doubtful that he can pull off such an immense regulatory and indeed cultural change if he makes it as far as No. 11.

    Finally, no Lloyds should never have taken over the Halifax. However, when it is broken up (as it will have to be in the next few years) how about the Halifax regains its independence and Lloyds goes international with the money it raises? Many of its problems would have been averted if it had taken a German bank over instead (and I believe it did consider doing so). That way they keep their size and strength, spread the risk, we get a more diverse banking sector - everyone wins! Of course, that's a best case scenario - much more likely is that Halifax is floated off as a dog and Victor Blank has to fall on his sword. That would be sad - he did his best to keep it all together, and I doubt many would have done better.

  • Comment number 71.

    This is a grand notion, that if the Tories were voted into power we would see a big change in stategy! I believe that even a politician with best intentions will succumb to the agenda of the 'real' powers that be, once voted into power. We have seen it time after time. The big promise of sweeping changes to 'improve' things and it is rarely ever achieved!

    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 72.

    Onward-ho ~ you are living in the past. Come into the 21st Century, this is the age of lies and spin.

    Falklands - well at least it wasn't an illegal war - unlike Iraq, or an unplanned war, like Afghanistan, or an unled war like Kosovo.

    I'm sure you're much happier cosying up to Dubya - a man of outstanding principles and undoubted sanity. At least Reagan could read a speech.

    Tories smashed our industries - that would be Labour-speak for made them competitive I suppose.

    10 years of negative equity ? Dis you have a 125% mortgage back then - I don't think so, that is aNu-Labour phenonenom, back then you had to prove your income and the value of your house.

    Poll Tax - I would have thought you'd have been in favour of everyone paying their way, as against the new policy of everybody being taxed to pay for the government's stupidity.

    Uncaring policies - like taxing pensions - oh no that was Gordon. Like putting the NHS into a mountain of debt - oh no that was Gordon. About making hospitals so target driven their patients die ? No - that was another for the Blair legacy.

    You're giving rose-tinted a bad name.

  • Comment number 73.


    I recall perfectly thet comments made by Osbourne - but would contend that they had absolutely nothing to do with the weakening pound other than being spun by Labour as such.

    I remember power cuts, 3 day weeks etc in the 70's and feel that the Tories lifted us from that. Thatcher's policies were painful to many but ultimately necessary.

    I was there also for the early 90's and yes, there was a recession, but nothing I feel that will be as severe as this. 17% mortgages now would wipe almost everone away Labour let the housing bubble get so far out of control. Better see where we are when inflation starts working back into the system.

    Falklands and Reagan? Iraq and Bush ring a bell?

    FYI I have in the past voted both Tory and Labour in the past. In my view the Tories seem to have proved to be the only ones capable of taking tough UNPOPULAR decisions for the greater good.

    I have no faith that Brown and Labour put the good of the country above the good of Brown and Labour.

    My history is fine. Perhaps GCSE Economics is something you should make time for?

    Best regards

  • Comment number 74.

    #61 Sterling63

    Makes you wonder doesn't it?

    Could it perhaps be that GB wants a solution to the Banking fiasco and is using 'us' as his sounding board.

  • Comment number 75.

    Before deciding that breaking up the big banks will solve the future problems, we have to decide what caused this problem. Was it the size of the banks or the fact that house prices rise and fall in unison, probably across the world. If it was the latter all of what happened is that that the problems now concentrated in a few big banks would be spread over many small ones.

    If a whole bunch of small banks really behaved in the diversified manner, which remains to be demonstrated, breaking them up might actually help. However, the herd instinct is strong in capitalist societies and to me at any rate this might actually make the problem worse instead of better because smaller banks may be even less able to withstand shocks. In other societies, there is no hope of diversity, so that may not be a solution either.

    House prices, the prices of other assets, unemployment levels, international trade and economic activity are all correlated. They rise and fall together. What society needs to do is to develop mechanisms that operate in the opposite direction, dampening economic activity when it is too strong and strengthening economic activity when it is weak. Social programs such as unemployment insurance do have this characteristic, but it is evidently not enough. What governments need to do is to have preplanned stimulus programs ready to go when circumstances dictate. Shortening the leadtime to implement major infrastructure programs is a prerequisite for ensuring that stimulus can be applied when it is needed and that the stimulus is directed towards projects that are the most useful for long-term economic health of the economy.

    Instead of reinforcing the economic cycles by spending when revenues are strong they should be building their financial strength during these times and making use of this financial strength when the economy is weak to implement infrastructure programs that are needed and contribute to sustainable economic development. There is no indication, yet anyway, I governments will behave in this manner given that their term in office is generally for years and this is not conducive to longer-term thinking.

  • Comment number 76.

    Overlooking one very obvious problem. Smaller, locally based branches may, at a first glance, be good for the customer in terns of increased competition but there realatively small size is likely to make them attractive targets to their larger international competitors.

    Break RBS and LBG up and we could well see a rash of takeovers by the likes of Santander that coulsd, potentially, reduce competition even more.

  • Comment number 77.

    #51,#61 and Mr Pirate #62 (which I read before it was pulled by Moderator).

    There is no hope of Mr Peston doing an article on anything other than Banks and the City - he does not seem able. The clue is in a quote in this latest blog:-

    'In the City, where I am tapping out this blog, this is big stuff.'

    He lives and works in the City and like many people who do that has ceased to realise that another world exists where people make things and work hard just to get by - he is blinkered by his environment and the company he keeps. Unfortunately this also seems true of all our politicians.

    Soon, very soon, the Non City Class are going to revolt - the seesaw has become too tilted.

  • Comment number 78.

    "In fact, it only rescued battered HBOS because the deal offered a once-in-a-generation opportunity to become the unchallenged market leader in British retail banking."

    This is all very nice but 100% of nothing is still nothing !! Being the market leader in Britain does not confer bragging rights on the International stage !! It's only when you have a significant share of the International market that bragging rights are conferred. Think HSBC !! Think Standard Chartered !! So, what price the "rescue" of HBOS when it beggared the loyal shareholders of Lloyds TSB ??

  • Comment number 79.

    An american banker pleading it wasn't all their fault.

  • Comment number 80.

    Secret Love

    You read my mind!


  • Comment number 81.

    #66 Eddixon

    LOL!! The emphasis is yours, not mine. I was merely referring to the 'tim nice but dim' aspect of our LOTO and shadow chancellor.

    I have nothing against being public school educated. What I do object to is the ignorance of Batman and Robin, who appear to have got where they are because the rank and file of the Tory party seem to like well-spoken choirboy types. (and, before you say it, I have nothing against batman and robin, either)

  • Comment number 82.

    The problem is that Global corporations want/need global banks. If the British Banks can't provide for this, they will simply go elsewhere. This may therefore force banks such as HSBC or Barclays to simply relocate - with a massive loss of tax income and employment.

    What is really required is to separate retail banking from commercial banking - retail banking is national, commercial banking international. Effectively return to the difference between normal and merchant banks.

    How come we set up all these systems in the past, then gently dismantled them?

  • Comment number 83.

    If one has smaller banks, what would prevent oversaeas banks taking one or more over? After all that happened with Abbey and, of course, Santander now owns several former banks or building societies and is very big indeed. Are our banks not to be free to compete with such large overseas entities? Given our opennness to other markets I don't see why breaking up our banks can be regarded as a such a sensible move. Where is the flaw in my logic?

  • Comment number 84.

    Should it not be pointed out that the Thatcherite revolution was to make British commerce global (i.e. BIG). The privatisation of the utility companies, the withdrawl from ownership of BP was purported to enable these organisations to operate succesfully in an increasingly globalised market. Yet here is George Osborne saying small is beautiful, or is it rather their arte profits for chummies in the dismantling what was created for the greater reward of especially (Sir?) Goodwin. Was it not a director of BP who was involved (as non-exucitive) in the framing of (Sir?) Goodwin's exit from RBS and his hardship pension.

    Do the Tories really believe that selling off "profitable" parts of these banking insitutions will not leave the taxpayer with an even greater burden for "toxic debt". Thanks again (Sir?) Goodwin and croanies for another fine mess that Britain will be left in.

  • Comment number 85.

    With the exception of the money that went into genuine wealth creation or went into projects that did not create net wealth the banks were engaged in a zero-sum game with the losses by the losers being matched by the gains made by the winners.

    Naïvely, it would seem to me that the government really 'only' has to inject the amount of money that was put into assets that turned out to be worth less than was spent on them. Even houses in default of their mortgages have a value greater than zero. Someone can live in them and someone can pay for the privilege of doing that.

    I am not sure that I understand what this means, but how can we exploit that fact? And if that is true, does the government really have to make up for all liabilities of banks like RBS to bail the system out, as opposed to the banks that placed losing bets on financially engineered products by swapping with a counterparty? The money made by the winners does not disappear from the system. It still exists and is still able to be channeled into areas that create economic growth.

    Our objective is to bail the economy out, not bail the banks out.

  • Comment number 86.

    #45 "With friends like the Tories, the UK Economy does not need enemies."

    With friends like the NuLabour, the UK will soon have no Economy to need enemies.

    Over to you, Vince Cable !!

  • Comment number 87.

    #64 Sutara
    " U.K. 'will not recover until 2012' ..."


    The Institute for Fiscal Studies have a graph which shows the recovery to be 2031.

  • Comment number 88.


    You are the person that got me on my soap box as from reading your posts we are in the same boat.

    So what we need now is the other 5 people left manufacturing things in the UK to join us in the revolt!

    I hope you are a weighty guy as that seesaw is going to take some tilting.

    Keep up the good work!

  • Comment number 89.

    #41 "Are they in fact creationists? "

    Yes they are !! They keep creating money out of thin air !! How much more creationist do you need to be ??

  • Comment number 90.

    #61 - your experiences are similar to mine except fortunately for me the manufacturing part of our business is only one part. I would be interested in some idea of your drop in sales since October last year.

    All articles you read, eg recent BBC one re drop in Manufacturing decline eases, suggest small monthly falls eg 0.9% in Feb following 3% in Jan.

    My experience is that we are currently operating in our manufacturing division at less than 10% of September output levels (all staff currently laid off)- I simply do not know what manaufacturing sector is holding up the numbers - everyone i talk to is experiencing much larger drops and the car industry output must be experiencing way higher drops than this.

  • Comment number 91.

    'Royal Bank's balance sheet is considerably bigger than the total output of the British economy'

    Meaningless comparison. Output presumably means one year's output, but a year is an arbitrary measure of time, whereas the size of a company's balance sheet is nothing to do with the time period over which it is measured (e.g. a day versus a year versus a century).

    It's like comparing the height of your house against the speed your car travels at.


  • Comment number 92.

    #37 "On the contrary. I sell in my store many items cheaper than supermarkets yet I don't get the footfall. Who's robbing who?

    Additionaly we have become obsessed with excessive house prices, hi-tech gadgets and other meaningless non-essentials. At the same time putting less value on what we eat, what it contains, where it came from and more importantly it's true cost to produce. So on the one hand your argueing for lower cost of products (and using supermarkets who aren't aways the cheapest option) at the checkout and end up paying more tax to pay producers (around the world) subsidies instead of paying a right price at the till and you buying what you want and not subsidising products you don't use!"

    I think the answer is in there somewhere. If you sell products that others do not want, then, regardless of the price, you will not get the footfall !! Your perception of what others want and what they perceive that they want may not coincide, resulting in you not getting their custom !! Have you tried asking your customers what they really want instead of trying to sell them what you think they should want ??

  • Comment number 93.

    #92 People do not go to supermarkets solely because they are cheap - this may be one reason but IMO the main reason is convenience - Tescos/Asda are truly one stop shops and not only that but you can park right outside too and for free.

  • Comment number 94.

    90. At 4:14pm on 08 Apr 2009, GRIMUPNORTH77 wrote:
    #61 - your experiences are similar to mine except fortunately for me the manufacturing part of our business is only one part. I would be interested in some idea of your drop in sales since October last year.

    All articles you read, eg recent BBC one re drop in Manufacturing decline eases, suggest small monthly falls eg 0.9% in Feb following 3% in Jan.

    My experience is that we are currently operating in our manufacturing division at less than 10% of September output levels (all staff currently laid off)-
    I can confirm that the manufacturing sector I work in has seen orders fall off a cliff since the beginning of the year, with corresponding reductions in our workforce. It can't continue this way way for much longer.

  • Comment number 95.

    It makes sense and is something I've mentioned before.
    Decent competition policy, properly enforced (and not ignored whenever its convenient) would seem to make this practical in key markets.

    Its a case of looking at what operations carry what risks and which require scale to operate in the international arena.

    Allowing something to be "too big to fail" and having an entire economy based on 1 sector is awful risk management.

    Of course politicians saying things and delivering them are completely different propositions.

  • Comment number 96.

    # 83. MandDEPSOM

    "If one has smaller banks, what would prevent overseas banks taking one or more over?"

    Well, doesn't that depend upon how these smaller banks, or whatever, are set up. I mean Santander didn't take over Abbey National Building Society, it took over Abbey Plc, after it had become a bank and had shares which Santander could buy.

    Some organisations in the banking field do not have shares but are owned by their customers - e.g the Co-op Bank.

    I don't think Ozzie's idea has any merit, if you take it too literally, but it could be adapted, e.g. some sort of "Son of Girobank" / Girobank II organisation available to people locally, perhaps in post-offices, or even GP surgeries, basically acting as a retail bank and perhaps even made up from the retail divisions of certain banks but "re-branded" into something new.

    It just might be quite a good idea if you apply a bit of lateral thinking to it.

  • Comment number 97.

    #90-If you want some comparison on sales, my manufacturing operation is running at about 20% of last Septembers numbers. From October last year sales were clearly sliding, by February this year they'd fallen of a cliff.

    I still have all my staff, we're currently burning through the money put aside for this years capital expenditure projects.

    My expectation is for my customers to again start to want product by September, but only at very low levels and only because they have used up all buffer stock.

    So by the end of the year we may only be back to about 40% of last Septembers values.

  • Comment number 98.

    A good idea from the Tories, there is an optimum size for any business organisation, even if real business talents are available in abundance, and we have learned they are certainly not in banking, go for it !

  • Comment number 99.

    Whilst I can't wait to get rid of Darling (and the rest of them!) I have serious doubts about Osborne's ability to offer us anything substantially different! To my mind Cameron is a Blair Mk.11 and Osborne is his pal.
    I say bring on Ken Clarke, what we really need is a saviour!

  • Comment number 100.

    Before people condemn out of hand what young George is saying they should pause to reflect that after the thirties debacle the US Administration realised quite clearly that breaking up the banks into investment banks and commercial banks was essential if a repeat performance were to be avoided, and such legislation was indeed passed. Then in the free-for-all of the eighties that law was repealed. And look at what it has done!

    Osborne is absolutely right. Breaking up the banks is essential. Moreover. his realisation that the banks are too big to fail and too big to bail is a refreshing new wind to blow through Westminster. He is beginning to tell it as it is, and it may even set some of the bloggers thinking. The man realises how bad the situation is. Three cheers for George.


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