Blog 2023 Malcolm Blair-Robinson

The Vickers Report spells it out. Action is a must. Osborne accepts that it must happen. All the country is behind him, save for the Tory banking lobby, the Daily Telegraph and a few others who either cannot follow the numbers or refuse to do so. The U.K. Banks are potentially at risk from a similar collapse to the one which threatened every household in the crash. They are a bit better capitalised and a bit better regulated than there were but they are structurally still flawed. There is trouble ahead. This time it will be sovereign debt defaults which will act as the trigger. It is now certain that Greece will default. It appears certain that Europe cannot or will not find the political will to organise central control of the Euro and anyway Germany will refuse to pay the bill.

The Euro, as now constituted, cannot continue. Whether there will be a hard and a soft Euro, or whether there will be various soft and variable Euros linked to the Franco German hard euro at the centre, like the multitude of dollars to that of the U.S., remains to be seen. What is clear is that the crisis is not over, it is just beginning. It is both political and economic. It is going to be long. The dream is over.

Britain cannot be just a bystander to mayhem in the street outside its door, more especially as things are far from good in the next street, America. What it can do and is doing, is to get its house in the best possible shape to weather the storm soon to break. It has a plan for deficit reduction, it has new regulators and regulations in force, it has additional tools of economic management and it has decided to strengthen its banks. It is the stark opposite of everything happening in Europe and the United States. Nevertheless this does not stop the bankers, currently led by the most bombastic, incompetent, greedy and muddle  headed leaders in all the industry’s history, from putting out some spin which says, in effect, that sound banks are incompatible with economic growth. Someone equated the revenue stream as equivalent to North Sea Oil.

Here are the figures. The total revenue stream from the banking industry for 2010/11 was £21 billion. The total annual interest bill paid on government debt arising from the bail out of the banks and the consequent economic car crash is £50 billion. That means these city slickers are costing us some £30 billion per year net. Their case does not stand. Given that the figures includes the PAYE receipts of everyone who works in the industry, this is truly shocking. If you strip out the PAYE, we are left with a mere £3.5 billion of corporation tax. If we take the total banking revenue stream over the last five years, it covers only two years debt interest. It is not just that the banks are in permanent net deficit to the U.K taxpayer; it is the fact they were the engine of an economic boom based on unsustainable debt, from which it may take even more than one generation to recover.

The only modification worth considering to the Vickers plan is to speed it up.

This entry was posted on Tuesday, September 13th, 2011 at 3:16 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.