Now we have a situation where £100 billion of taxpayer’s money has been bet on the UK property market as it goes south. Gordon Brown and Alastair Darling repeat the mantra that the public’s money is secured against the bank’s assets. The bank’s assets are what exactly? The equity in mortgagor’s homes belongs not to the bank, it belongs to the homeowners. The only properties Northern Rock has an interest in are it’s own branches and offices. The only homes it owns are those where it forecloses, usually and increasingly at a loss due to negative equity (remember all those 125% offers).
Northern Rock is selling off any assets of value to pay down the government debt. Essentially the government is asset stripping what it can and like many an asset stripper before it is sacking staff. Unlike capitalist vultures it will not make a profit, the government will be left with billions of bad debts. This half-year’s losses are £585 million, £20 per taxpayer. Mortgage arrears have doubled, repossessions are up another 50% on already bad figures – and the worst is yet to come. The Rock’s bad debts will be borne by taxpayers.
UPDATE :A co-conspirator emails to point out that adding the debt for equity swap (which the taxpayer will never see back) to the losses gives £3,585,000,000. Divide that by 28 million taxpayers and you get £128 per taxpayer, or some 70 pence per day so far. What would you rather spend the 70 pence a day on?
Darling says “tax is complicated”. Who complicated it? Simplify it by raising thresholds dramatically. Why should people on earnings of less than £10,000 pay any tax? They only have to fill out endless forms to get it back in welfare payments. Crazy. Raising the threshold on the low paid will incentivise people to come off benefits and work. It will reduce the cost of collection which is disproportionately higher on low incomes.
The Tories are too timid, the mood of the public has changed. New Labour has always referred to “unfunded tax cuts” and demanded to know how many hospitals and schools would correspondingly be cut. The Tories should be pointing to Labour’s “unfunded spending commitments” which have given Britain the highest budget deficit in the Western world. We can’t afford Labour’s reckless spending commitments – they are literally mortgaging our children’s taxes to pay for current spending. It is the economics of the “never, never”.
26 Labour MPs have signed a motion calling on the government ot reverse the budget tax hike on low income earners. The wording could have been written by George Osborne:
ABOLITION OF THE TEN PENCE TAX RATE02.04.2008
That this House notes that, despite assurances to the contrary, many people are being made worse off by the abolition of the 10 pence tax rate; notes with concern that this is having a disproportionate impact on people who can ill afford to be made worse off; accepts that this was not the intention of the Government but is dismayed at the response to the plight of those adversely affected; and calls on the Chancellor of the Exchequer to bring forward measures to correct this damaging change to the taxation system.
UPDATE :Just noticed that Ben Brogan has posted almost the exact same thought.
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Picture via John Trenchard.
Guido will give a prize of a copy of John McCain’s new book Hard Call: Courageous Decisions by Inspiring People to anyone who comes up with a decent campaign sing along in a pub song. Entries in the comments…
When Brown and Darling try to present themselves as the safe pairs of hands in this coming time of economic crisis, remember that Brown was the financial whizz who sold Britain’s gold reserves at the historic low for dollars. Now as the dollar goes into freefall the total loss from that idiotic decision (he even told the market to get short before he sold off the reserves) will dwarf the few billion lost by the Bank of England on White Wednesday. Brown’s judgement is neither good or timely.
We have yet to have the final reckoning for Northern Rock, where some estimate that over 20% of the loans are to mortgagees with negative equity. The Fed arranged the sale of Bear Stearns in comparable circumstances over this weekend. It took dithering Brown months to make the wrong decision on Northern Rock. Remember how Lloyds TSB was interested in buying Northern Rock in much the same way Morgan Chase has just bought Bear Stearns?
UPDATE : Curly points out that taxing a Nissan Micra will cost £40 more!
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Eddie Izzard, in his thirteenth year involved in politics, says he’s not cursed because it took Sir Alex Ferguson “seven years to win the premiership so it doesn’t really matter.”