Monday, September 29, 2008

Borrowing Brown's B&B Botch-Up

The government's decision to buy Bradford and Bingley's dodgy mortgage side of the business, leaves taxpayers saddled with the debt, the country more bankrupt than it was before and Brown's economic policy in tatters. 

The deal adds another staggering amount to the government deficit and busts Brown's own golden rules on borrowing. 

But eleven years of smug arrogance has left the government doing what it wants, when it wants. 

Bush's much-vaunted $700 billion bail-out deal, using taxpayers cash to pay off greedy banks and executives, caused outrage in the US. 

Here, the government ignored the taxpayer's voice. Where was the assurances and checks to make sure it was the right thing to do? 

Taxpayers wouldn't stomach another Northern Rock. So the buy-up was leaked to the BBC as a done deal. 

Government deficit will balloon. The government will need to try to borrow more, which will destroy confidence in the UK economy. 

But will anyone want to continue to lend to the government under such circumstances? Who wants to throw good money after bad? 

Predatory Spanish banker, Santander, takes over B&B's savings business and branch network and £21 billion deposit book for £612m.

However, government control of the bank's £50 billion in mortgages and loans means taxpayers are now more exposed to B&B's mortgage debts.

B&B relied on the buy-to-let market and self-certified mortgages to make fat profits and is just the latest casualty of the false economic boom. The buy-up is the latest in a string of government measures to dig itself out of a hole.

When the cash to prop up the toxic debt side of the business dried up, the bank looked to its pals in government to help it out, leaving the government and the taxpayers with the toxic 'bundled' bad debt side and the defaulters.

Board members are entitled to a pay-off equivalent to their annual salary. And with greedy City slickers and arse lickers - that's a lot of cash. Northern Rock chief executive Adam Applegarth left with more than £1.1m.

Yesterday it was asked here just how far is this government prepared to go, to mask its economic incompetence and keep its pals in the City sweet? 

Government borrowing is at a record high. Official figures showed the budget deficit soared to £24.4 billion in the three months to June, its highest level since records began.

Brown will have to borrowing billions more as the economy faces a housing slump, soaring inflation, record unemployment and recession.

Brown set himself the golden borrowing rules way back in 1997 as a guarantee to the City that he would not overspend and overborrow, preventing its total debt mountain climbing above 40 per cent of gross domestic product (GDP). 

But with crafty PFI deals to mask the true cost of borrowing, public finances are in a mess and, forced to nationalise Northern Rock, those rules are being ditched. 

The B&B fiasco shows time has run out on the UK economy. It is bankrupt. It will need to rely on the charity of the International Monetary Fund (IMF). But the IMF will demand the government cuts expenditure. 

Brown has sat back and allowed both consumers and his own government to borrow much more than they can afford. 

When we face mounting debt, the only answer is to cut back. So too with government. A wind of terrible change will have to blow through the economy. That is the price of reckless borrowing. We can weather the economic storm, but not with borrowing Brown and his New Labour gang at the helm.

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