I've just heard Prime Minister's Questions. What a waste of time.
For the second week running, Dave focused exclusively on the Crock. And for the second week running the only response he got was a series of jibes and questions about his own proposals.
Now of course, the Tories are seeking to make political mischief with the Crock bail-out. And of course they want it to be Labour's Black Wednesday competence issue. But despite that, we taxpaying voters still deserve some answers (see this blog):
- Just how big is the subsidy we're giving to Branson in the form of the loan and deposit guarantees? Bottler keeps repeating that everything is secured against the Crock's wonderful assets, but as he knows full well, Crock debt without the HMG guarantee is junk. No private sector insurer would take the risk. Our fag packet estimate is that the loan guarantee is worth £0.5bn pa (see last blog), and the deposit guarantee might easily be worth the same again (further investigation underway).
- How long does Bottler intend leaving the subsidies in place? Five years, at a prospective cost of say £5bn? And what happens then if the Crock still can't survive without them? Would Bottler ever have the spinal rectitude to pull the plug?
- How do the costs compare to the alternative of FDIC-style administration? A responsible government should not dish out £5bn of taxpayers funds without costing the alternatives.
None of these vital questions has been answered. That may be because, as per, sly deceitful Bottler doesn't want to own up to the bad news. But just as likely, on the don't-ask-don't-tell principle, he simply doesn't know.
Let's just make sure we understand what's going on here.
Bottler's prime concern is to get someone to tow the Crock away. Ideally, that would have been a straight private sector buyer, but as the original Lloyds TSB "offer" highlighted, that's never been a runner. So, given that nationalisation has been effectively ruled out, that means either taxpayer loans, or loan guarantees.
Now, as we know, loans would go onto the public sector balance sheet. But guarantees almost certainly will not (the "independent" ONS will decide).
And there's another aspect of guarantees. In Bottler's Enron-style public accounts, the cost of providing them doesn't register. Cost? Yes, taxpayers are writing credit insurance, and just as with house insurance, there is a cost associated with that- we are on risk. A private sector company providing such guarantees would have to recognise it in the accounts. But somehow that doen't seem to apply to the government. Indeed, judging from today's PMQ performance, Brown even thinks he might be able to book some "profits" (and any "profits" will most assuredly appear on the books).
Following that logic, Bottler could transform the public accounts by turning HMG into a credit insurer. Post credit crunch, fees for such services have gone throught the roof, and private sector capacity has collapsed. If HMG entered the market, it could clean up. The fiscal deficit problem would disappear overnight. Magic.
I'm wondering if Bottler would give me a free HMG loan guarantee. I've already exchanged several emails with the Major's friend Herr Doktor Professor Franz Kuntz (currently en route to the Davos egofest), and we've assembled a whole raft of
finance scams innovative financial solutions. With a freebie open-ended AAA guarantee we could get weaving straightaway.
You know it makes sense.
PS The reason why the Tories can't get the Crock to resonate like Black Wednesday, of course, is because it isn't accompanied by economic pain. But boy, is that about to change.