Tessa Jowell went wildly off message yesterday and said that Britain is facing a recession “deeper than any that we have known”. Another significant admission from Chancellor Darling suggests we are perhaps not best placed to weather the global financial turbulence: “We are going to be affected more substantially in relation to the loss of revenues that we are now experiencing because of the lack of profitability in the financial services sector. London is the major financial services sector in the world… Of course we are more likely to be more severely affected as a result [of] profitability being reduced… We are also affected by the downturn in the housing market because of reduced revenues in relation to stamp duty”.

Steffen Kampeter, is the budget spokesman for Merkel’s CDU, last night he backed Peer Steinbrück (the SPD finance minister), saying he was “exactly expressing” the views of the government. Yesterday Balls and Brown were spinning bullshit saying that this was internal German coalition politics – in fact it is the shared view of both the CDU and the SPD.

Kampeter put the boot into Crash Gordon: “Peer Steinbrück’s comments have nothing whatsoever to do with internal German politics as Prime Minister Brown has suggested. In questioning the British Government’s approach, Peer Steinbrück is exactly expressing the views of the German Grand Coalition. After years of lecturing us on how we need to share in the gains of uncontrolled financial markets, the Labour politicians can’t now expect us to share in it’s losses. The tremendous amount of debt being offered by Britain shows a complete failure of Labour policy.”

Guido is suspicious about this seemingly innocuous amendment in the new Banking Bill:

The 1844 Banking Bill ensured transparency in the operations of the Bank of England. It has been good enough for over 164 years.The section the new Banking Bill seeks to abolish reads as follows:

And be it enacted, That an Account of the Amount of Bank of England Notes issued by the Issue Department of the Bank of England, and of Gold Coin and of Gold and Silver Bullion respectively, and of Securities in the said Issue Department, and also an Account of the Capital Stock, and the Deposits, and of the Money and Securities belonging to the said Governor and Company in the Banking Department of the Bank of England, on some Day in every Week to be fixed by the Commissioners of Stamps and Taxes, shall be transmitted by the said Governor and Company weekly to the said Commissioners in the Form prescribed in the Schedule hereto annexed marked (A.), and shall be published….

As the politicians all start to bash the banks for not passing on the full rate cut, Guido asks how can the recapitalisation of the banking system be successful if they don’t make a profit? This is the danger with quasi-nationalisation – once you start putting political considerations before commercial imperatives, banks will be perpetually loss-making burdens on the taxpayer.

The fact is the banks have to earn a spread from the rate they lend against the rate they borrow, otherwise you get into the Northern Rock position with the cost of borrowing exceeding the return on lending. Politicians will nevertheless huff and puff regardless of reality.

UPDATE : The government is going to force banks to double their holdings of government bonds, supposedly to increase their “liquidity reserves”. Handy when the government is desperate to find buyers for gilts to keep itself afloat. If they have to buy gilts, it will make it even more difficult for banks to extend credit to corporate borrowers… doh!

Yesterday sterling had the biggest drop it has had since it was forced out of the ERM on White Wednesday in 1992. The pound was down 4% at $1.48 and it fell 2.9% against the euro and tumbled 4.8% versus the yen. It just goes to show how bad Britain’s situation is that this isn’t even front page news on every paper.

UPDATE : This just in from a co-conspirator:

Hello Guido,
I’ve been perusing the great work of fiction that is Gordy’s oops, the Chancellor’s growth forecasts, and on page 1 of Annex A: The Economy we have this bullet-pointed gem:

‘UK GDP growth of 3/4 % for 2008 with the economy contracting in the second half of the year’

Now, when the chancellor stood up at the dispatch box, three quarters of 2008 GDP growth were known:

Q1 0.3%
Q2 0%
Q3 -0.5%

In order to hit the forecast 0.75%, the economy has to grow at feisty 1% in the fourth quarter. Has the Chancellor been outside recently?

Is it any wonder that foreign investors have lost confidence in Britain, Gordon has missed his GDP growth forecasts every year since 2006. The Chancellor makes fantasy forecasts that no one believes, least of all HM Treasury, does he really expect GDP to surge this quarter?

UPDATE II : Some querying via email of how the GDP quarterly statistics are precisely computed by someone who seems to know what they are talking about; “There are lies, damned lies and statistics”.

Some people got upset when Guido compared Britain to Zimbabwe, in defence it should be borne in mind that making the comparison does not belittle the suffering of the Zimbabweans. It seems Zimbabweans too are making the comparison; no doubt Gordon (and Vince Cable) will be cheered by this endorsement from the Reserve Bank of Zimbabwe:

As Monetary Authorities, we have been humbled and have taken heart in the realization that some leading Central Banks, including those in the USA and the UK, are now not just talking of, but also actually implementing flexible and pragmatic central bank support programmes where these are deemed necessary in their National interests.

That is precisely the path that we began over 4 years ago in pursuit of our own national interest and we have not wavered on that critical path despite the untold misunderstanding, vilification and demonization we have endured from across the political divide.

….leading central banks in the global economy are bailing out troubled economic sectors to achieve macroeconomic and financial stability….the Bank of England… providing a £50 billion lifeline to the UK’s banking sector.

Here in Zimbabwe we had our near-bank failures a few years ago and we responded by providing the affected Banks with the Troubled Bank Fund (TBF) for which we were heavily criticized even by some multi-lateral institutions who today are silent when the Central Banks of UK and USA are going the same way and doing the same thing under very similar circumstances thereby continuing the unfortunate hypocrisy that what’s good for goose is not good for the gander….

As Monetary Authorities, we commend those of our peers, the world over, who have now seen the light on the need for the adoption of flexible and practical interventions and support to key sectors of the economy when faced with unusual circumstances.

They seem to think that Gordon, far from leading the world, is copying Mugabonomics. They may have a point…

With a load of economic data out this morning the pound is off 1% against the euro, the Purchasing Managers Index is down sharply, mortgage lending is down 70% year on year, credit card borrowing is up, PWC have research out saying Briton’s are now personally £1.5 trillion in debt – yet Gordon wants them to spend, spend, spend more.

It is not all bad news though, Guido is short the FTSE….

Official Stock Exchange announcement that after 100 years of trading it is in administration here. Metaphorical allegory in there somewhere.

It makes Guido choke on his Guinness that Gordon gets over a quid every time he buys a pint. 33% of the cost of a pint is tax – which alone must mean that Guido is a higher rate taxpayer.

This was the scene this morning in Westminster where Jennifer Ellison was pulling pints, Kym Marsh stayed up north in her local. Guido isn’t bitter or at all disappointed that Jennifer took her place…

You can show your support for the Save the Pub campaign by visiting their website and emailing your local MP. If they can cut tax on scotch they can cut tax on a pint.

UPDATE : By popular request, larger picture. It makes you go blind you know…

Labour’s spin line repeated incessantly is that the Tories are a “do nothing” party, Mandelson’s genius with a soundbite for the frontbench to chant shows. Leaving aside whether it is better to do nothing than do the expensive wrong thing, is it really true that the rest of the world is going down the path of massive fiscal stimulus?

Labour’s benches laughed arrogantly when the Tories retorted that little Ireland and Latvia were taking a Cameroon path. However, bigger European right-of-centre governments in Germany and Italy are not, contrary to Gordon’s claims, embarking on massive fiscal stimulus programmes. Poul Nyrup Rasmussen, the Danish Socialist party leader in the European parliament is complaining that “Angela Merkel and other conservative leaders such as Berlusconi may well water down the plan and refuse to make the necessary national investments…”. The “plan” is the European Commission’s €200 billion fiscal splurge proposal. Another top down taxpayer funded folly.

Gordon, in full on Global Saviour delusional mode at PMQs yesterday, claimed that everyone backs fiscal stimulus except the British Tories. If you don’t read the foreign news you might believe him. The fact is that across the world left of centre politicians back that approach, right of centre politicians are more sceptical. The need to be seen to “do something” means that right of centre governments are doing token symbolic gestures. Mandelson knows that philosophically the conservatives are wary and is capitalising on this with the “do nothing” soundbite.

Confidence won’t return until the property market bottoms out first, corporate balance sheets are recapitalised and personal indebtness reduced. Governments can do nothing to force those things to happen. Politicians just can’t accept their impotence.