The EU is not for turning

Incoming president of the EU Joseph Muscat (Malta) has declared that the EU will not be prepared to allow the UK to be part of the single market when it leaves. 

This will put more pressure on the supporters of Brexit who are implying that single market access is achievable after leaving the EU.
Muscat takes the position that there are a great deal of details to be negotiated, not least of which will be the 'bill' the UK will have to pay - this is something that I was not previously aware of, but looking into it has been a bit of an 'eye-opener'.
There are talks of a £350m-a-week 'divorce' settlement to cover UK obligations, which is exactly the amount that the BREXIT campaign said could be channeled from the EU into the NHS. On the other hand, it is just for the 12 months after we cut ties, but I don't recall ANYONE mentioning this is any debate?
The more we learn about the cost of leaving the EU, the more I wonder whether our government (all sides) has seriously mis-informed us regarding BREXIT, and then I am left wondering why they would do that??
I am never one to be impressed by conspiracy theories, but I am starting to seriously doubt the real drivers behind the so-called 'Remain' campaign.

So how will this affect us?

Well, we are still so much in the dark, and there are so many unknowns that we can't be definite. One thing I am becoming more certain of is that the negotiations are almost bound to fail, and we will find ourselves outside the EU on EU terms, and not our own terms. That is certainly the message we are hearing from the incoming president. Muscat will be president from January for 6 months, so will be in charge when Theresa May plans to trigger article 50 in March

and to cap it all.....Trump wins..

As if there was not enough turmoil in the world...He's only gone and done it, the Don has taken the Whitehouse, the most powerful seat (arguably) in the world.

As might be expected, there has been mixed reactions to this, but the fact stands that he has played a clever game, and won. I am one of those who believes that we may see a different Trump now that the electioneering is over - a more statesman like figure.

But of course, if I am writing about this here, the question has to be 'How will this impact on the UK economy?'. First off, in response to Theresa May, President-elect Trump has already spoken about the 'special relationship' and of course a UK out of Europe could be the type of economy that Trump will favour when he begins to look outwards. He has firmly stated that initially the US will be looking to trade internally, and cut all agreements with other nations. Of course it remains to be seen how much of what he has said can actually be achieved.

There are real parallels with the BREXIT vote, the feeling of rebellion, the populace disengaging from the establishment.Time will tell where all this will lead us. If anyone had told us four or five years ago that all these things would come to pass, we would have not believed it.

Economy Update

The latest news is that the UK economy is managing to steer a course around the rocks of a double-dip recession. Standard & Poors have endorsed the UK by retaining their triple A rating, having previously reduced both the USA and France to double A ratings.
Although we are some way from being able to state that the economy is firmly in recovery mode, there are a few green shoots showing through. There are still going to be bouts of closures and redundancies to be endured, but the overall picture is tentatively positive.

Of course, the UK is also still 'enjoying' the extended base-rate 'holiday' as the 0.5% rate is retained for the foreseeable future. Keeping this lower rate as a long-term policy helps to reinforce the 'steady as you go' feeling that has been a feature of the UK economic recovery. Admittedly, it is not great for net investors, but I suspect that there are very few of those around at the moment..!

'Tame' budget forecast

There is unlikley to be any surprises from George Osbornes budget as he delivers his 'budget for growth'. There is talk of raising the tax threshold by £600, which is worth about £45 per year... Slightly more interesting is the speculation that the government may push for National Insurance to be integrated into income tax. The difficulty here though, is that there are significant numbers of people paying NI who don't pay tax, the NI payments entitle them to benefits and state pension should they need them.

There will be small movements on fuel duty, first reports coming out of Westminster suggest a cut of 1p in duty from this evening, most of the rest of the budget has been aimed at encouraging investment - or maybe just not discouraging investment... some changes to gift aid to encourage giving, more money to be spent tackling tax-avoidence.

No doubt a fuller picture will emerge soon...

Project Merlin

The idea of Project Merlin held some hope of holding the banks to account for the misery they have spread through the economy, although in reality the measures could never be as punitive as the larger population would like.
We rely too much on our financial trading to make it unprofitable, it is one of the few remaining sectors that the modern UK now excels at...

What concessions have been drawn out of Project Merlin?

• To lend more money in 2011
• To lend more to small businesses
• To pay less in bonuses than they did last year
• To be more transparent about their pay packages
• To make a greater contribution to regional economies and society.
  

Who has signed up?

• HSBC
• Barclays
• Royal Bank of Scotland
• Lloyds Banking Group

Santander have also been involved in the project

To add in some specifics, the banks that have signed up will commit to making £190bn of credit available to businesses in 2011, up by £11bn, £76bn will be made available specifically to smaller businesses.

The banks will also provide £200m capital to David Cameron's Big Society Bank, which is supposed to finance community projects, and they will provide an extra £1bn over three years to the Business Growth Fund, which aims to help small business in hard-pressed parts of the UK.

And bonuses?

To be fair the banks have agreed some realistic controls, but there is not going to be a huge reversal of the bonus culture. Millions will still be earned by the few in salaries and bonuses

Was it worth the effort?

The agreement is a realistic 'moral victory', something was required politically, and this was the result. It will not make tremendous waves through the financial sector, and as one of the leading 'industries' of the UK, it makes little sense to 'hamstring' the banks. The banks have been in the spotlight, they created much of the mess, they have been the first to see a turn-around in fortunes. It would make little economic sense to stamp on the growth that is now starting to show. On the other hand, the banks have been caught out, and made to publicly acknowledge their part in the financial crisis - it's time to move on.

Interest rates set to rise

It looks like the Bank Of England is trying to prepare the public for a rise in interest rates back up to what it feels is a normal level - which will mean the rates returning to a level of about 5% from the current 0.5%...

BoE official Paul Fisher is quoted as saying:

"...what we need to do is to trigger the mindset in people that that's where rates will eventually go back to,"

As if 'people' were stupid enough to think that this artificially low figure is the norm... I would have thought that the message would have been loud and clear if the BoE simply raised the level by 0.25% or 0.5% rather than just talked about it... If they were worried about 'people' panicking, they could have always stated that their 'target' figure is 5% at the same time as announcing an actual raise.

The way this has been done makes it sound like they are unsure of the impact of raising the rate and want to get an idea of what the reaction will be before they do it. The likelihood is that the raise will be implemented in small steps, but no indication whatsoever is given over how long this will take.

The background to policy changes are a relatively static economy showing little growth, a low sterling market value and creeping inflation - with the VAT hike about to strike, one must question the impact this statement by Paul Fisher will have on the householder. There is not much in the economic climate that is going to encourage householders to part with their cash (other than Christmas, which as far as I am aware is not as a result of Government policy..)

Personally, I think we are still in uncertain territory here in economic terms with the threat of the dreaded 'double-dip' still a possibility. I am making the most of the low interest rates by overpaying my mortgage, not by consuming more goods - any change in the interest rate for me will just mean an adjustment to my overpayment.

£7bn from UK to bail out Ireland

Chancellor George Osborne has said that Britain was prepared to commit seven billion to the Irish bail-out plan. The EU and IMF agreed on Sunday to help bail out Ireland with loans to tackle its banking and budget crisis in a bid to protect Europe's financial stability.

"What we have committed to do is to obviously be partners as shareholders in the IMF in an international rescue of the Irish economy,"

Osborne told BBC Radio 4....

"But we have also made a commitment to consider a bilateral loan that reflects the fact we are not part of the Euro ... but Ireland is our very closest economic neighbour."

Osborne was questioned about reports that Britain was going to contribute around seven billion pounds to Ireland, he replied:

"It's around that (figure), it's in the order of billions not tens of billions but the details of the entire package, not just the UK contribution, but the euro zone and IMF contribution, that is all being worked out as we speak and we should by the end of the month have the details on that."

Osborne was keen to stress that Britain should not have to provide further help to Ireland or any other Euro zone countries that got into trouble. However this contribution by Britain is causing trouble at home amid an atmosphere of spending cuts - there are claims that this bail out makes a mockery of the hardships Britain will endure as a result self-imposed austerity measures. The criticism is heightened by claims that this is a problem that arguably should be resolved primarily by the Euro-currency countries.

Base Rate holds at 0.5%

The record low rate of 0.5% is set to stay for another 12 months or so according to best estimates. It is felt that 2011 could see a rise, but it is far too early to make a realistic prediction.

This is good news for variable rate mortgage owners, but I guess a bit of a sickener for those with a fixed rate, as it looks unlikely that they will get any benefit from their fixed rate for quite a while. Of course, most new mortgages are fixed rate as the bank have no wish to pass on the benefits of the Bank of England base rate. This in itself is a topic worthy of a great deal of debate....

For those who are benefiting from a variable rate, my advice is to overpay your mortgage (subject to advice from your properly qualified advisor of course!!) if you can. I switched to a variable rate mortgage shortly before the financial crisis took hold, so my repayments are extremely low. However I have taken the step of deliberately paying a similar rate to what I was paying before the crisis in an effort to pay off more of the principal debt.

The uncertainty around what will happen to the rate is heightened by the uncertainty about the knock-on effects of Government cutbacks which must be made by this new administration.

The mood for now seems to be 'steady as she goes' as we launch our economic ship into uncharted and potentially stormy seas...

Our 'shallow' economy

I don't really want to come across all left wing and anti-capitalist, but there is a worrying element to the drivers behind the Western economy that may indicate that it is becoming unsustainable.

In thinking about what drives us to earn and consume, it is becoming clear that it is 'unsustainable' consumer behaviour that drives larger and larger sections of our economy. These can be illustrated by the clamour to posess the latest 'Apple' product whether it be a phone (never knowingly advertised as a device for making phone calls of course..) computer, or media player. It is also illustrated by our taste in transport, ever faster, slicker, uber-designed capsules for transporting us around the globe - in reality used for dropping the kids off at school and getting in the shopping. Do we need to spend between £10,000 and £20,000 for a main vehicle let alone a 'second' car that will be the kids taxi and motorised shopping cart?
Have you also noticed that a TV used to cost a little over £100, yet now you can get a 'bargain' widescreen HD-ready TV for just £500?

Don't get me wrong, I am not knocking consumerism, I am a 'victim' and active participant... I am trying to point out that one day we might wake up to the reality, and stop buying these luxuries, at which point, our entire economy is in danger. The additional point to make is that the products themselves are contributing to the demise of the species. I don't have figures for the damage done to the environment by cars alone, but you don't have to be a greenpeace protester to be aware of these facts:

• We have too many cars
• Cars are bad for the environment
• Any 'convenience' factor of having access to a motor vehicle is now surely seriously outweighed by the damage it does to our planet.

The problem is that the voices of reason will not be heard above the clamour for the latest gizmo or gadget that is going to make one individuals life so much better at the expense of everyone else. This is where democracy fails us, no politician can speak up against the manufacturers that fuel the economy. The battle can only be won, one consumer at a time...if we all stopped doing it tomorrow, the economy would stall catastrophically - every great 'empire' has it's weakness in the end - I believe that this is the major weakness in the Western World, our rapidly increasing desire for bigger, better, faster, more advanced 'stuff' will end up with consumers eventually questioning their own sanity.

UK budget revealed today

VAT to rise by 2.5% to 20% next January - a rise in VAT makes far more sense than Gordon Brown's cut in VAT. Please note that life essentials are not VATable, basic foodstuffs and kids clothes are not taxed - this means that the revenue generated is not made off the backs of the poorest tax-payers. Gordon's cut in tax made absolutley no impression on the poor - it was surely only done to massage inflation figures.

Tax threshold to go up by £1000 - (but this won't come in for another 12 months ) Adding to the tax threshold is to be welcomed, but maybe indicates a less than iron grip (a token gesture which will need recouping elsewhere), and while he was at it, why not take the chance to screw more taxes out of drinkers, gamblers and smokers as well as taking a pot shot at the bankers. (levy to be made on bankers, expected to raise a couple of billion)
(no change to tax on the tobacco and alcohol)

Rising capital gains for higher rate-payers with immediate effect - this should raise a bit of revenue, and no-one is going to defend the rich who are getting their hands on yet more capital... nice move, but a risk of alienating some in the Conservative party...
There will be some capping of housing benefit, and some changes to Child Tax Credit which will affect those earning more than £40,000.

I think this gets the 'well done, but could do better' from me - so early in this governments tenure, it would have been easy to come in hard with an awsome budget that would make a real dent in the deficit, I believe what we have been given maybe a budget that will make a tiny dent in the deficit, meaning that a few more austere budgets will be needed. Every new budget is a step closer to re-election and obviously no-one is going to want to deliver a Mr Nasty budget when there is an election around the corner...

Related Posts
Dec 2009 budget

Home Information Packs (HIPs) scrapped

In May, the UK government scrapped the scheme that obliged house sellers to have a costly 'Home Information Pack' produced to give to prospective purchasers. The scheme had some good principles behind it, but it has long been the aim of a campaign by estate agents to have the scheme scrapped, however the EPC (Energy Performance Certificate) will be retained. In the meantime the housing market seems buoyant - average prices seem to be rising and instructions to sell are also on the increase, it is widely felt that HIPs was getting in the way of prospective sales, and removal of this obstacle could free the market up a little.
In an economy that is so closely linked to the financial markets, it is hoped that measured stimulation of the housing market could help to stabilise the conomy as a whole - it is difficult to see what 'industries' will get us out of the current doldrums as the UK is desperately short of any industry of any type...

A Con-Lib Alliance is is then...probably

With fine details yet to be thrashed out, a Conservative - Liberal Coalition is undoubtedly going to be the UK's next government. Gordon Brown resigned (again) yesterday after saying he would resign in September anyway. I must say I feel a little sorry for Gordon as I feel that his resignation yesterday was his own decision, the one the day before was I am sure foisted on him as a last-ditch attempt at attracting the Liberals. No doubt a scheme dreamt up by arch-idiots Mandy and Campbell.. Only a few days ago, Campbell was trying to claim that Gordon had the 'perfect right to be Prime Minister'. Only the great unelected (Such as Mandy & Campbell) could believe a man twice unlected could legitimately hold the right to an elected position. At least that should be the last we see of them in the corridors of power for a while (unless you include the House of Lords of course).
I have long believed that the House of Lords holds a valuable place in UK politics, and that's probably because I don't have the great faith in 'Democracy' that the majority seem to have. However, since they put Mandy in there (what to do with a man you have sacked, reinstated and sacked again?... make him a Lord!!), I am that much more in favour of it's abolition.

So what does the future hold for the UK? Presuming that the EEC survives the growing economic volcano, it will be a period of cuts and protest, Cameron has acknowledged this right at the start. The real trouble starts if we are plunged into a second recession in the EEC bankruptcy fallout. If Greece and other teetering nations cannot be bailed out, there is no knowing what will happen. Looking at this purely politically, the labour party did not lose as many seats as they might have, and the liberals did not gain as many seats as they might have, so the door is still open for a reversal of fortunes if the coalition does not deliver what the electorate want. Economically, we are in for a tough time and that could also unsettle the electorate especially when the government clashes with the unions as it will inevitably do. The unions would do well to bear in mind that we are in the midst of hard times. The attitude of 'Unite' over the British Airways dispute is not likley to draw much sympathy. True, some privileges have been withdrawn, but in the light of dwindling revenue in the travel industry particularly, further pressure by the unions is unwelcome and unwarranted. Public service unions are going to clash with the goverment over cuts in services, but at the end of the day, we have to get the national debt back on to a manageable footing before we build up public services again. This next two or three-year period is not the time to cry over losing your increments and priveleges if you have managed to retain your job. Pay will be down, revenues will be down, employees that can't accept that, and still feel that their pay must be comparable with someone else's, run the risk of comparing someone else's pay with their dole money...
There is still a very real danger that this coalition may prove unsustainable when real pressure is applied, we wait to see what will happen.

A new direction?

UK General Election 2010
As new power axis begins to emerge, this election has delivered a hung parliament necessitating an unholy alliance to bring in measures that will require a strong and resolute governorship.
There are a number of observations we can make at this point, namely that this hung parliament does not look good for a time during which some unpopular policies will have to be endured in order to rectify the financial crisis. The financial crisis that we now face is a massive national debt, and a global economy facing uncertainty following the problems in Greece and the possible effects on the Euro - some commentators are even predicting a new recession following on immediately after the one we have just left behind us. Let's state for the record - anything can happen in a free economy - another recession is not as unlikely as it might seem, and this time...who will bail us out?
Domestically, we are hamstrung without strong Government. To be quite frank, right now my advice to David Cameron would be to make it look like you were trying to make a fist of it...then step back and let a Lib-Lab alliance actually take the parliamentary reins. A totally unsustainable government would then have a disastrous six months after which you could come back with a massive majority. I am very much bearing in mind the warning issued by the governor of the Bank of England that the next party to come to power will be so unpopular as to be unelectable for a generation.
This would be a costly and risky strategy, and I am banking that no politician can resist power even when it is likely to be hamstrung and short-lived.
There is no real danger of a Lib-Lab alliance however, I am personally of the opinion that the two losers of an election have NOT earned the right to rule. Like it or not, the fate of the country currently rests with the Conservatives having won the election without managing to 'win' a majority of seats. I use the term 'won the election' very deliberately - there is no doubt in my mind that the Tories have won, at least in the sense that they got the most votes and surely no-one else thinks there is another party that has won?
We will no doubt see a Tory/Lid Dem alliance take the reins, and maybe the labour party should prepare themselves to return to power when this alliance falls on it's face? I don't know how this can possibly work, however economically all three leading parties recognise there is a hard road ahead and spending must be reined in. In fact, when you think of it further belt-tightening domestically, coupled with the threat of national bankruptcy in European countries sounds like a certain recipe for a second recession close on the heels of the one we are just recovering from.
The period that is to come was always going to be hard.. a weak government (as a hung parliament surely is) will not have the backbone to administer the unpalatable medicine, and could well end up just offering a placebo.

Related posts:
Economic Fix?
Slow Recovery
End of Recession

Job market changes

Where are the jobs in 2010?

Figures were recently released indicating that 1 in 5 mainland UK workers actually worked for the Government in some capacity or other, and this is the area that shows the most growth. Jobs in the Environment Agency and the National Health Service, and local government planning and social services have risen over the past decade.
In contrast, as might be expected, traditional skills are on the decline. Also, competition in the electronics industry has seen manufacturers moving out of the UK. The knock-on effects have impacted many different job roles from Machinists to Quality Control inspectors. The shift in jobs has seen some de-skilling of the work-force with many employers now complaining that their employees are not sufficiently skilled to carry out their allotted tasks.
The percentage of state employed workers in Ireland has been reported as closer to 1 in 4, which I guess means that for the moment, jobs there are more stable. Government employment is a good thing when it comes to stability, and generally the State is a good employer. However the UK government has declared a pay-freeze as a result of the financial crisis, and this will have a profound effect on the economy.
A time of decline can often be a breeding ground for new small businesses to emerge, government needs to ensure that it creates an environment that encourages these new businesses to flourish.

Who will fix the economy?

With elections looming in the UK, the underlying theme remains 'How are we going to get the economy back on track?' and politicians are in an uncomfortable position.
The road to recovery requires expenditure which means that the electrorate will have to pay through taxes. Over recent decades we have become used to our standard of living steadily increasing year on year, the truth is, that if we want to repair our economy, we will have to make sacrifices. This is not a popular election cry and this is why no-one is willing to proclaim it publicly. The three major parties will try and sneak a victory (The Liberals are looking like a force to be reckoned with after the first live televised debate), and then bring in the taxes when they are settled into office. This tactic will needlessly delay the recovery, and all done in the name of democracy... Another way in which the agony will be prolonged is the increased likelihood of a hung parliament and Gordon Brown was visibly 'cosying up' to Nick Clegg on the live TV debate seemingly preparing to pal up when there is no outright winner in May...
My primary concern as ever with this 'democracy' that we enjoy.. is that the first objective of the political party is to get itself elected, any real decisions that are going to help the economy (as opposed to policies that will placate the voters) get booted to the back of the room.
We wait to see what promises will be made and broken whilst the economy gets on with with fixing itself...

Bank distances itself from Government

I believe that it was during the Thatcher reign that the Bank of England formally became independent from Government, yet the BoE and Treasury have naturally continued to seek unified responses to the economy. As we enter the run up to an election in a few months time, the BoE is caught between whether to prepare for a continuance of current policies or a new broom sweeping through. The only sensible approach to take is to keep a watching brief, hence interest rates remain unchanged, and it is widely expected that the government-inspired asset-buying program will be put on hold.
Analysts agree that it is likely that interest rates will remain low for at least until the end of this year, as it is likely that the bank will want to establish a convincing upward trend in the economy before allowing interest rates to rise.
The opposition are promising their own fiscal package if they gain control after the election, and the government will probably present a budget in March, either measure is likely to tighten policy after some of the 'loosest' fisacl policy ever seen... The general outlook, despite the statistically positive rise in GDP, is cautious if not downright glum. GDP did not rise anything like as much as was hoped and inflation has taken a hike over Christmas - this will not be helped by ceasing of the VAT 'holiday'. There are still tough times ahead despite the encouraging signs.

Popular Questions:
How long will the credit crunch last?
UK bank rate drops to 1%
Economic meltdown
Are we in recession?

Here comes the tax...

It is no surprise that there has to be a reckoning for the vast amount of money spent during the recent financial crisis, and the Government's Pre-Budget Report indicates that this time has just arrived.
VAT is already set to rise again in January, and we are still wondering what effect this was ever supposed to have on the economy... After all, the really essential items such as food and children's clothing are not taxed anyway. The costly step of temporarily lowering VAT appears not only to have been an encouragement to buy luxuries in the depths of a recession, but a slap in the face to those who have struggled to buy essentials for whom the tax drop has had no benefit whatsoever.
National Insurance is also set to rise by 0.5%, and the temporary stamp duty 'holiday' is to cease, and bizarrely, duty on bingo is to be reduced - Great that the government is giving a little tax relief to those who spend their money on frivolous gaming...
This Government is not adverse to making sweeping popularist gestures and maybe they believe there is a bed-rock of labour support in the Castle Bingo houses or the growing online bingo sites such as Wink Bingo? Either that or they think more people should actually be encouraged to play Bingo. Is this a well-considered, well-thought-out policy thrashed out in Whitehall offices or simply a random policy picked out of a tombola - with Camelot looking on just to ensure that the taxes changes are in fact entirely random and not part of any kind of intelligent thought patterns?
Of course, the most popularist tax that this Government are using to effectively cover up the more subtle taxes, is the tax on banking bonuses. The Government propose to tax bank bonuses that exceed £25,000 by 50% - there will be very few people who will be taking issue with this measure, however I can't help but believe that these frankly less-than-straight individuals will find a sleight of hand way around the proposed tax.
There are two measures which indicate the Governments thinking when it comes to paying for it's support of the banking sector during the crisis:

1. The plan to restrict public sector wages and pensions
2. 'Middle-earners' to pay more tax

The combination of these two policies guarantee that the public sector will bear the burden of raising revenue for the Government - they are going to take money from their own employees pockets... The 1% pay cap imposed on the public sector for the next two years is certain to keep wages rises below inflation, therefore effectively lowering income considerably across the board especially when combined with the planned VAT increase.
This sounds like the perfect recipe for a year of industrial action if ever there was one - try explaining to these workers that we are actually emerging from a recession as they count their pennies for the next two years. I happily admit that they are maybe fortunate to have reasonably secure jobs, but when the chips are down and the trade unions start to move, and a general election is looming... I think Gordon may well end up scrambling for that tax tombola again...

Where is the recovery?

The recovery is in the financial markets, in the banks and maybe even in the property market, but where it is NOT, is the more telling news.
The recovery HAS NOT and WILL NOT hit unemployment figures, GDP and the general population for a while yet - maybe in 12 months time we can talk about the economy being on the mend for those other than in the privileged banking sector.
There is merit in 'talking up' the economy to help build up confidence, but we mustn't behave like the problem is over, as for many families, the problems are very real or may even be yet to come.
The UK and the US are bracing themselves for record unemployment figures which can only lead to misery, poverty and financial ruin for many. This crisis is being freely described as the worst since the Great Depression, but the situation we find ourselves in is very different from the 1930's. For a start, the abject poverty of those days was characterised by ill-health, death and homelessness. The lack of material goods suffered included clothing and the basic needs that today we take for granted. Without a complete collapse of the Western economy, we will always be in a position to prevent a repeat of the poverty of the Great Depression simply because even our poverty is wealth compared to the genuinely under-privileged.
We in the West are outrageously wealthy in world-terms and we would do well to remember that when we complain about how badly things are going for us. Similarly, we would do well to remember that when we have a chance to voice our opinion on the way bankers are paid, and the general growth of greed throughout our society. So no, the crisis is not over, but even the poorest of us is still better off than the majority of the world's population. There is a slim chance that the financial crisis has enabled some people to re-evaluate their priorities and put money into perspective - if not brace yourselves for another crash in a few years time.

New Banking rules to be phased in...

The FSA (financial services authority) is to give banks time to phase in alignment with the new rules on liquidity. The upshot of the new rules is that banks will be required to hold a better equity-to-risk ratio, however time is being given so that banks are not prevented from lending to aid the long-awaited economic recovery. After the concerns following the Icelandic banks collapse, the new rules will apply to foreign banks that have branches in Britain.
In tandem with the new rulings, the Bank of England will be expanding deposit facilities to smaller banks, thus preventing the need for smaller banks to keep deposits with larger commercial banks who themselves may suffer at the hands of a future financial breakdown. The smaller banks have been dependent on commercial banks for liquidity, in future they will be able to access funds directly from the BoE.

All talk and no action?

The G20 Pittsburgh summit winds up and it is a struggle to work out exactly what the point of such a meeting is... Over the last few years, the G7 grew through G8 and ended up as the G20. The truth is we are now looking at something like the 'G20 and friends', nobody is counting any more. The talking shop is now even bigger on talking, and naturally, with so many more points of view, decisions are harder to come by.
Imagine an ever-growing jury which must deliver a unanimous verdict. You may get a verdict from twelve good men, but twenty, twenty three?, twenty four??
So what has been achieved in Pittsburgh? Plenty of talk about reining-in the banking community, plenty of resoultions to 'do something about it', nothing in terms of concrete limitations forthcoming.
In the meantime, jobless figures continue to rise, bankers seem set on fleecing the markets again and the environment, arguably a far more important issue, remains the time-bomb that no-one wants to de-fuse.