The government has bought up the banks at the heart of the economic crisis. But it is refusing to take charge of them, preferring to leave them in the hands of the very bankers responsible for the turmoil in the first place.
The chancellor Alistair Darling announced plans to spend £37 billion on buying majority shares in Royal Bank of Scotland and HBOS.
This comes on top of the buyouts of Northern Rock and Bradford & Bingley earlier this year. Gordon Brown’s government now owns four of the country’s biggest lenders.
Yet despite the token sackings of a few high profile chief executives, existing management teams at the stricken banks will remain in place under this bailout.
Darling declared that the banks “will be run on an arm’s length basis away from government”, adding that “ministers will not be taking day-to-day decisions”.
“Ultimately, we want to return the banks to the private sector because I don’t think the government can run them in the long run,” he said.
We should be asking why this government is buying up Britain’s banks only to hand control back to the corporate chiefs that brought them to the verge of bankruptcy in the first place.
The bank rescue package announced last week has a total exposure of £500 billion. That works out at over £10,000 for every adult in Britain. Yet there is no guarantee that the rescue plan will lead to banks lending money to themselves or anyone else in the near future.
What is certain is that the government will have to borrow huge sums of money in order to cover the costs of this bailout. And we will have to pay that money back through higher taxes and cuts in public services.
It’s worth noting that while the City and big business broadly welcomed the bailout plan, worries were voiced on the right of the political spectrum.
These sections of the ruling class are concerned that any kind of nationalisation – even the tepid version espoused by Brown and Darling – opens the door to far more radical demands.
Sir Martin Jacomb, a former director of the Bank of England, told BBC Radio 4 that he was unhappy with the bailout precisely because it raised the spectre of public control.
He pointed out that people were very angry with the banks and could well raise “appeals to government” to stop the repossessions of their homes.
Derek Simpson, joint general secretary of the Unite union, has already called on the government to secure undertakings by the part-nationalised banks of “no job losses, no repossessions and an end to the bonus culture”.
Matthew Elliott, chief executive of the right wing Tax Payers’ Alliance lobby group, responded with outrage.
“The banks and taxpayers are in trouble as it is, but this would be carte blanche for millions of people just to stop paying their mortgages,” he fumed. “Abolishing the fundamental logic of the housing market and the banking system would be an act of lunacy.”
But the real lunacy is believing in the “fundamental logic” of the market in the first place. If the government is handing over billions to bankers, why shouldn’t it run banks in the interests of the public rather than those of the bosses?
In truth Brown’s measures are less about nationalisation and more about that classic New Labour notion of “public-private partnership”. He is prepared to write a blank cheque to rescue the financiers, leaving us to pay.
We have to be firm in our response. If there’s suddenly £500 billion available to lavish on bankers, why not let working people in Britain decide how to spend such sums – on bankers and war, or on homes, pensions, schools and hospitals? Let’s raise our voices to demand:
- No to New Labour’s top-down nationalisation – take over the banks and other financial institutions, and put them under the democratic control of workers and consumers.
- No to Brown’s pay freeze. Workers in the public and private sectors should receive decent above-inflation pay rises. State pensions and benefits should be raised to keep people out of poverty.
- Safeguard our pensions, homes and services. No repossessions of homes – homes under threat should be taken into public ownership and rented back at an affordable rate.