The governer of the Bank of England has said that we might be entering into recession which is don’t panic the plebs code for “shit, how am I going to keep up the payments on my yacht”.  Of course we’re in a recession, we’ve known for months that it was starting and that things were only going to get worse.

All of which means we need to tighten our belts and when I say “we” I’m including the state.  We can’t afford to throw billions at banks but Alistair Darling has done it anyway.  But it might not end there – El Gordo told the world that they’d look at letting banks that have had taxpayers money paying dividends after 12 months after investors told him what a crap investment a bank that can’t pay dividends for a couple of years is.  But then Federal Europe poked its nose in and said that the banks can’t pay a dividend for 5 years otherwise they’ll class the money the banks have had as state aid and then the British government will get fined and the banks will have to pay the money back as a penalty for having been given the money before Federal Europe decided to move the goalposts.

But it’s not just bailing out banks by the Treasury that has got to stop – local authorities spend billions collectively and they need to do their bit to save cash as well.  There was a story in the Shropshire Star last night, next to the story about Daisy the cow going missing (don’t worry, she was later found in farmer Jones’ field), was a piece on Telford & Wrekin council’s accountants warning the council that they’re facing a funding gap fo a couple of big projects.

Telford & Wrekin have committed to part funding a rail freight terminal to the tune of £3.6m.  They intend to fund this by selling council-owned property.  It’s a lot of money but they can comfortably dispose of £3.6m worth of property, even though the property market has fallen on its arse.  But they’re also ploughing ahead with a massive “regeneration” programme from the Borough Towns Initiative which requires an investment from the council of £21.4m to be funded almost entirely from selling property and topped up with a load for about one and a half million.

You can see where this going can’t you?  Shame the council doesn’t seem to be able to.

There are several large house building projects under way in Telford and they’ve all scaled back building to almost nothing.  The council owns lots of land and property that’s ripe for housing or commercial development but the housing market has dried up and companies aren’t splashing out on new buildings because nobody has got any money.  To raise that kind of money through property and land disposal is going to mean selling a damn sight more than they would have done as little as three months ago and in doing so they will have sold assets at a cut down price that will, in all likelihood, return to their previous value in a year or two.

I’m all for regeneration and god knows some parts of Telford desperately need it.  I expect the promised regeneration of the estate I live on is all hanging on this Borough Towns Initiative money but we simply can’t afford it.  The previous Labour administration pioneered the scorched earth policy they seem to have adopted nationally increasing spending, cutting council tax and spending a third of the council’s cash reserves once they realised they were going to lose the next election.  There is very little money in the kitty, the economy is on its knees, the cost of borrowing is high and committing the council taxpayers of a borough with a mere 160,000 residents to £25m of spending on the day the governer of the Bank of England admits we’ve entered into recession is bordering on criminally irresponsible.

Technorati Tags: Recession, Economy, Telford, Bank of England

Alistair McDarling has announced details of his master plan to save the banking sector.  He’s going to loan them 50% of the GDP of the UK.

I kid you not.  The taxpayer is stumping up £50bn now for the eight biggest banks and building societies and another £200bn is being given to the Bank of England for short term loans.  That’s a quarter of a trillion pounds in cash now.  Then a company is going to be set up – presumably along the lines of the DTI’s Small Firms Guarantee – to offer guarantees on £250bn of loans to banks and building societies.

Half a trillion pounds.  In 2006, the purchasing power parity GDP of the UK was $1.93 trillion – just under a trillion pounds at todays prices.  The Chancellor is loaning 50% of the Gross Domestic Product of the whole country to the banking sector.

Official national debt is £512bn.  The Centre for Policy Studies says that if Northern Rock liabilities and state pension liabilities (they’re taking money to pay into the state pension, it should be reasonable to expect it to be paid out) are added to the official figure then it’s more like £1.3 trillion or 103.5% of GDP.  Add this half a trillion on top and national debt is more like £1.8 trillion.  Count the zeroes – 1,800,000,000,000.  That’s 180% of GDP, 22% higher than Japan at the height of recession when banks were failing every few days and they were knocking zeroes off the Yen every couple of months.

What was it El Gordo said about not magicking money out of thin air?

But you know, when it comes to public spending you can’t just wave a magic wand to conjure up the money – not even with help from Harry Potter.

Quite.  So where the fuck did you find half a trillion pounds to give to the banks, eh?  Just to put a piggy bank-raiding session into perspective – half a trillion £1 coins weighs 2,090,000,000lbs.  That’s a seriously big piggy bank.

Technorati Tags: Economy, Recession, Alistair Darling, WTF