Socialist Worker

Northern Rock rescue plan is daylight robbery

It has cost £55bn so far – and we’re paying

Issue No. 2085

We are being robbed by speculators of billions of pounds and the Labour government is driving the getaway car.

As the financial markets hit another week of turmoil, Gordon Brown is handing over up to £55 billion of our money to keep Northern Rock in private hands.

If the scam works out, the bosses will pocket 90 percent or more of the profits. If the gamble fails – which is far more likely – we will bear the entire loss.

The plan is basically to sell newly issued bonds – essentially a bunch of IOU notes – to investors. The problem is that the current crisis means nobody is buying debt bonds,

so the government will have to sell them on the cheap.

Brown is so determined to avoid nationalising Northern Rock that he prefers to throw public money at this complicated, costly high-risk scheme.

The Northern Rock saga says a lot about who calls the shots in Brown’s Britain. The financial speculators make a mess of everything, a bank ends up in crisis – and the government bails it out with our money.

Brown then brings in another bank, Goldman Sachs, to arrange a sell-off to other bankers and speculators – using yet more of our money.

We should remember the Northern Rock bailouts next time Brown lectures us about the need for economic “restraint” or claims there is no money for services or public sector pay.

Richard Branson, who is one of 25 business bosses travelling around the world with Brown this week, seems to be the government’s favoured bidder for Northern Rock.

Despite – or perhaps even because of – his anti-union views, Branson is on Brown’s new Business Council.

Branson’s business model is clearly based on using other people’s money to fund his schemes. His Virgin Rail won the West Coast franchise on the basis of a deal in which it received a £77 million subsidy from the government and would then pay back a licence fee to run the line from the anticipated profits.

Instead, the service was run down and we have forked out more money in subsidies.

Other banks and private equity vultures are circling, hoping to make a killing out of our cash. Some of them bought shares in Northern Rock when the bank failed, precisely in the hope that the government would bail it out.

Some, including Virgin and private equity firm SRM Global, use offshore tax havens to avoid paying British tax – but expect workers who do pay tax to subsidise them.

As the government announced the Northern Rock plan, the stock markets were tumbling around the world. Probably the only shares that went up were those in Northern Rock – clear proof that the bosses know this is a good deal for them.

Instead of looting public money, Northern Rock should be nationalised – without a penny going to the speculators.


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News
Tue 22 Jan 2008, 19:02 GMT
Issue No. 2085
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