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Government sells Northern Rock to Virgin Money

(Update) The Treasury will sell 100% of its share capital in the bailed-out bank, but hold onto the bad bank.

 
Government sells Northern Rock to Virgin Money

The government has sold its holding in Northern Rock to Virgin Money for £747 million in what chancellor George Osborne described as a 'first step in getting the British taxpayer out of the business of owning banks'.

The deal is only for Northern Rock's 'good bank', the mortgage and savings provider, not the toxic asset-holding 'bad bank' which remains entirely in government hands.

Northern Rock was nationalised in 2008, to the dismay of shareholders, after a run on the bank. The government put £1.4 billion into the business. It put the business up for sale in June this year, attracting a proposal from Richard Branson's Virgin Money along with a number of other parties.

Virgin Money plans to phase out the Northern Rock brand by 2012. But Osborne sought to reassure existing Northern Rock customers that they would not be affected by the deal. 'Customers don't have to do anything. Their bank accounts will be taken over by Virgin Money'.

Virgin Money has promised to make no compulsory redundancies beyond those already announced by the company for at least three years from completion, while the total number of Northern Rock branches will be retained.

The deal, which is expected to be completed in January, involves an initial payment to the Treasury of £747 million cash on completion, but could eventually yield £1 billion for the government. Around £50 million more cash will be paid within six months. Then Virgin Money will issue the Treasury with Tier 1 Capital Notes with a par value of £150 million and an annual coupon of 10.5%. The Treasury expects to receive an additional cash consideration of £50 to £80 million after a stock market listing or sale in the next five years, dependent on market conditions.

Keith Morgan of UK Financial Investments (UKFI), the body that manages the government's stakes in the country's bailed-out-banks, said today: ‘The deal returns Northern Rock to the private sector and maximises value for taxpayers.’

Impact on Lloyds branches sale

Simon Willis, analyst at Daniel Stuart, said it was ‘good news’ that the government had completed the deal.

‘It’s good for Virgin Money as it gives it a major leg-up in market presence, and it shouldn’t have much impact on the sale of the Lloyds branches as Virgin Money was not a front-runner,’ he added.

Branson said earlier this year that he wanted to take control of the hundreds branches that Lloyds (LLOY.L) has been told to sell by European authorities.

But so far, NBNK (NBNK.L) – the new banking venture formed by former Lloyd’s of London chairman Lord Levene – has been the only prospective buyer to make a formal offer for the 632 branches. The Co-operative group is another potential bidder for the business.

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56 comments so far. Why not have your say?

Anthony Robson

Nov 17, 2011 at 12:58

£747 million now, £50 sometime and more blaa blaa blaa pie. Paid £1.5 billion good value for taxpayers? Where did you lot go to school?

That's a 50% loss plus interest at my school.

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Adam Eve

Nov 17, 2011 at 13:15

I agree, as a former shareholder I feel doubley cheated.

VIRGIN always put themselves FIRST so you can see the conversation with the government, "IF we buy Rock will that put us in a better position to buy the Lloyd branches? CERTAINLY! Right done deal then..... F**K the Taxpayer..."

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Anthony Tinslay

Nov 17, 2011 at 13:20

It is a good deal for taxpayers only to the extent that it avoids the risk of further losses with Northern Rock apart from the 'Bad Bank' which the taxpayer still owns and is likely to involve further losses. The real question is why was Northern Rock not simply allowed to fail when the crisis developed. It was not too big to fail and its market strategy of lending 125% or more mortgages for long term with the liability side all short term was always likely to lead to tears. Shareholders and Savers alike were aware of the risks at the time and invested with that knowledge. Shareholders should always have lost all and savers would have been protected under the normal guarantee rules. Why not ask Gordon Brown for an explanation?

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David Harvey

Nov 17, 2011 at 13:44

Interesting point Anthony T, I often ask myself if Thatcher would have just let them go as a part of her Lame Duck Policies. There is an argument that says the money spent on banks would have been better just spread to the masses. At least it would have given industry a boost and sent a deserved message to greedy bankers. Austerity seems to be doing just the opposite.

They are just flogging it off however they can. They are breaking not just the country but industry along with it so they can butter up the figures for election time. Like Thatcher they don't care who or how many suffer or how bad unemployment is. It's always the same with Tories we own it, they flog it for a song. Transport, power, Water, Social Care and soon health nothing has ever improved or got cheaper as a result.

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dr ray

Nov 17, 2011 at 13:45

This is a terrible deal for the taxpayer and a gift to "The Bearded One"

The bank has had its liabilities taken on by the taxpayer with only the profitable side sold on at still less than the Government paid for it. The taxpayer is left nursing a £1/2 billion loss and still has all the toxic assets.

Its like buying up an old car, paying someone to dismantle it and selling off the only bits worth anything for less than you paid for it and then paying someone to take what is left for scrap. Great business

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Hotrod

Nov 17, 2011 at 13:49

You could compare this deal to someone who has a clapped out car.

Owner of the car asks the dealer to make an offer for it. Dealer says: Well I can't really, it requires to much work doing to it, but what I could do is give you a courtesy payment of fifty quid to take it off your hands.

The owner takes offense at what he sees as a derisory offer and declines. He then resolves to buy some replacement parts and restores the car to good working order.

When the car is fixed he goes back to the dealer and says; what will you give me now? The dealer says: £747 Owner says: £747? but its cost me £1500 for spare parts, I shall lose money if I sell it to you for that price. Dealer says: Fair enough,take it or leave it, its up to you, because that is all the vehicle is worth. I offered to take it off your hands in 2008 but you refused, if you had took me up on my offer when I made it, you could have saved yourself a shed load money, not to mention all the hassle between times.

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Adam Nealis

Nov 17, 2011 at 13:52

‘The deal returns Northern Rock to the private sector and maximises value for taxpayers.’

What? If a 50% haircut is good value, then why the fuss over Greek sovereign debt?

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Alan Tonks

Nov 17, 2011 at 14:02

Well Virgin has got a bargain and yet again the taxpayer has been ripped off by the Government.

I can only say the Government negotiators really did a splendid job, of giving the taxpayers rights away and leaving us with the debt.

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Martin Drew

Nov 17, 2011 at 14:05

OK, now let's all be sensible. Northern Rock was put up for sale in anticipation of an upturn in the economy that never happened, instead it finished up being sold when unemployment is rising and consumers are worried and not spending. Pulling the sale or selling at a lower rate were the only two options, so the question was which was the least bad option. I guess that they thought pulling the sale could have spooked the markets more than they are already; selling at a knockdown price would annoy some tax payers, but was probably the best way to go. The interview I heard certainly gave me the impression that they were talking up all the advantages of having more competition in the High Street etc. with a subtext of it was the best deal in the circumstances.

Of course they shouldn't have invited offers this early, waited for the recovery to be real rather than predicted - but whoever heard of the Treasury or a Government ever getting anything like this right?

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nickle

Nov 17, 2011 at 14:47

Annual deficit - 150 billion

Daily deficit - 411 million

Sale price - 747 million

Deal announced at 9.00 am Today.

When the money runs out - Midnight Friday.

What to sell off next?

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Anthony Robson

Nov 17, 2011 at 15:01

Who got the the back handers?

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Stew

Nov 17, 2011 at 15:09

I'm sure there are some dirty dealings and private fortunes involved but the price for the side of Rock being sold looks fine. No it isn't £1.4B and that's because it isn't the whole company!

The sold called Toxic Assets are only toxic in so far as the liability is impossible to quantify. Most people do however continue to pay their mortgages so there is a significant but difficult to quantify asset value.

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georges

Nov 17, 2011 at 15:09

If it It was the "good bank" part why sell it? Surely here was the bedrock of the new competitor for the other banks? It has been sold too soon to the wrong man. When still in govt ownership, profits could be used to offset the "bad bank". Now it is full tax payer exposure.

But like others, i fail to see how a 50% haircut is good. If so, then we can al go to sleep - there is no financial crisis! wish it were that simple.

Think our mortgage providers would accept a full debt settlement of 50%?

Must be something funny in the water in Westminster!

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Anonymous 1 needed this 'off the record'

Nov 17, 2011 at 16:10

Invested £1.4bn received £747m plus potential £250m plus £1.2bn in fees & Interest - not bad in current climate when RBS/Lloyds are trading at 40-50% of NBV.

Key thing is if your debt is as high as the Uk's you have to sell what you can (even at a loss) - especially when it costs you money to keep it.

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Michael Brooks

Nov 17, 2011 at 16:32

Of course the taxpayer is losing on this. The truth is that Osborne`s policies mean that rather than pay off our debts, we will soon be borrowing more, so this is just the start of a massive fire sale to bring in money from wherever they can. This is truly the economics of the madhouse.

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nickle

Nov 17, 2011 at 16:39

So what policies lead to reducing debts?

There is only one, and its 30% (at a minimum) cuts across the board in government spending.

So Michael, what would you cut and how?

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Gongalagousta

Nov 17, 2011 at 17:19

We are all sheep being led by Donkeys. It seems as though no-one ever has a good word to say for Government negotiators and if what we hear and read about - such as this so called deal - is correct then unless we remove such 'officials' we get what we deserve. Branson is a smart guy and has built up vast personal wealth. Does anybody really think he cares about fair competition? Come on, get real. Branon's modus operandi is to have his research into strong sectors then ease into them to take a slice which is precisely what our HMG officials have bequeathed us all here within the Banking sector.

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ballsbridge

Nov 17, 2011 at 20:05

Forget about all that crap. Buy lloyds now and treble your money as soon as

angela sorts out the euro zone. sarcozie will be gone soon and europe will improve.

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Stew

Nov 17, 2011 at 20:20

Why sell it? Because the government's business isn't banking. Or financial investment.

Where it went wrong was not declaring it effectively insolvent when it was bailed out, washing out all investor capital and the pension fund for all employee pensions over £24k p/a

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David Harvey

Nov 17, 2011 at 20:30

Interesting the way some people see the cuts as a saving when there are no jobs for the people to go to. It is essentially just another cheap sell off like this bank. In fact it is the flogging off of human beings who have been made unpopular via their terms and conditions in order to do so with out displeasing the masses. Many of whom will believe that services will improve as a result.

Why do we still believe these people? Why will intelligent working people vote for Cameron again? yet another Tory flogg it off cheap and put them out of work

Government.

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nickle

Nov 17, 2011 at 20:45

Interesting the way some people see the cuts as a saving when there are no jobs for the people to go to

===========

There are. 150,000 new migrants got jobs last year.

If we take civil servants there are massive savings. It costs 3 times salary to employ someone. If we get rid of a skilled civil servant on 33K, that's 100K saved. If they are on the dole, its 5K. 95K saved. If that skilled person gets a job, we get their tax on top.

So come on David, fess up. 7 trillion of debts. 225,000 per tax payer when you include pensions. [Enron'ed off the books].

What's your strategy for paying you debt off?

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David Harvey

Nov 17, 2011 at 21:48

Fair enough nickle but there is more damage done to a country by mass unemployment. As I have said before they always throw out the baby with the bathwater. The services which we are loosing are, in the main, essential and you will continue to pay for them even though they are gone private doesn't mean cheaper either even though it might mean lower staff pay. Remember nickle that the removal of just a few tax loopholes could bring in £200 billion a year. Companies only need to get an office in Switzerland and they trade here almost tax free. That amounts to £120 billion just for that one.

I still feel that the cuts are a sell off of people. We are all conned into a way of thinking and it isn't until we start investing in people and new technology and rewarding success rather than greed that we will have a better life. So many are too used to making money from money we are stuck in a rut. Yes these sell offs are bringing in a few days instalments on the debt but when they are gone they are gone, it will create poverty on top of the poverty we are importing at an astonishing rate. That has now given us two huge problems. Now we have the debt and the rebuilding of our country at the same time which is way behind at this time.

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nickle

Nov 17, 2011 at 22:43

There isn't. You need to do the sums to show it.

If we get one person back to work on min wage, that saves about 15K a year. Assuming it costs you nothing to get them working.

So for a million, that's 15 bn.

The overspend is 150 bn a year. Do we have 10 million we can find jobs for, at no cost, just to close the gap? That's why milliband is a fool.

* The services which we are loosing are, in the main, essential *

Quite likely. They have run out of money. Most of that 7,000 bn of debt is to pensioners, current and future. The government has no assets to back them up. Are you going to hit people for working, because the government is running a Ponzi?

* and you will continue to pay for them even *

Exactly. You will pay a very high price for what little government services there are, because of the debt. The state will use violence or the threat of violence to make sure you carry on paying over the odds, and won't allow you to go private.

* Remember nickle that the removal of just a few tax loopholes could bring in £200 billion a year. *

Not at all.

1. EU law says there is freedom of movement of capital. This money is now is Swiss companies, and it is now for the Swiss to tax it. It's gone. Tax rates have been raise, and the money has moved. Politicians have come out with statements like yours, and people are worked out that the plan is to take their money, likewise companies. They have decided, lets get out.

2. What you think is trading here, is in fact international trade. Other countries are thinking the same. For example, why don't you propose taxing Google on their world wide income, because they operate in the UK? Ah yes, you can't, they went to Switzerland.

Think of it this way. The Sale of NR to Branson. Money will have been spent midnight tomorrow. All gone. So why not confiscate all of Branson's assets. Assuming he has no debts, that will last 5 days. Who is next?

The problem isn't the sale, the problem is the debt and the overspending. Government carrying on spending like mad.

Too much debt and spending caused the problems. More debt and spending won't solve it. That is financial voodoo.

What is needed is more saving. Paradoxically, that means higher interest rates. It makes it more attractive to save. That money is then available for investment in things that produce a postive return. If taxes on risk taking it cut massively, it changes the risk/reward ratio enabling people to start more businesses. The winners then pay for the losers. In order to make those cuts in taxation, government needs to shrink massively.

It won't. It will carry on like the charge of the light brigade. It's going all Greek.

You need to protect yourself against this.

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Michael Brooks

Nov 18, 2011 at 00:34

Unfortunately, the Labour Party doesn`t have a leader with enough chutspah to put the case properly. Tony Blair would have made mincemeat of Dave, but it is currently beyond the pale to do anything but vilify him. We sleepwalked into the last election, and we are now sleepwalking into financial and social disaster. I appreciate that most of the people on this forum couldn`t care less about youth unemployment, old age poverty, or the the housing crisis we are in, but we will all be losers in the end.

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nickle

Nov 18, 2011 at 01:10

I think you will find its the opposite. People care very dearly about all those things. It's is because of the government debt, hidden off the books, that its going to be a disaster.

Consider this. If you invested your money in a private pension scheme, and the scheme administrators spent all the money, would you be angry?

What is the difference when the government does the same?

The result is the same outcome.

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David Harvey

Nov 18, 2011 at 08:25

Sorry nickle but this has no substance in the reality I live in. Many of the arguments put in this way are simply justification for a bad job and for leaving the wealthy out of the equation . You cannot and should not use human beings as ballast in the governments hot air balloon, to be dumped at will whenever it suits the Tories.

I can only agree about Mr Milliband Michael he has good ideas but I doubt they will be heard.

I would be a good thing if we weren't so party oriented and could take on good idea regardless of which wing it games from. I wish there was more awareness of the brutality of the cuts, the way it's being done. Each department that closes takes numerous private hangers on with it. Government cuts of say 500,000 will cause 15000000 real job losses. A lot more of what you pay for services goes to private concerns than you think. The creating of even more poverty flogging everything off won't save us.

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Martin Drew

Nov 18, 2011 at 10:57

Unfortutunately since the war this country has slowly but surely become a nation that has grown to expect Rolls Royce public services whilst only earning enough to pay taxes for a Ford Fiesta. Over the 21st century public services will slowly but inexorably have to be cut back; first dental care will fall outwith the NHS, then other desirable but not death postponing operations etc. etc. Financial allowances will be replaced with food stamps or their equivalent. This is all invevitable unless we collectively, as a country, start to generate enough income to pay the taxes needed to keep services at, or as most people seem to want, better than they are now. Our politicians just seem to focus on how to divide the cake - none of them have the nerve to read the riot act to us all and tell us that unless we all get more productive so we have a bigger cake we will end up with the level of public services of most of sub- Saharan Africa.

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nickle

Nov 18, 2011 at 11:28

Are the cuts brutal? Not yet. Spending over the last two years by government is up in real terms. ie. Above inflation.

* ents put in this way are simply justification for a bad job and for leaving the wealthy out of the equation . You cannot and should not use human beings as ballast in the governments hot air balloon, to be dumped at will whenever it suits the Tories. *

Sadly irrelevant. Look at your attitude. First, the rich should pay, get nothing in return, and be grateful for that. Could you ever swallow your bile and thank them for the money they pay, so that you can get what little the government supplies you? I suspect not. Hence the rich are going to leave.

* I wish there was more awareness of the brutality of the cuts, the way it's being done. *

It's not even started. Cuts of 30% at a minimum are required just to avoid a melt down. Greece is melting down on cuts of 8%. So its going tits up.

I'll reissue the challenge. How much does the government owe people for their accrued state pensions, and what assets does it have to back these up that can be sold (or generate an income) to back them up? Now I suspect you can't provide the number, but I suspect your answer on the asset side is that we can treat people as slaves. However, you've pointed out there are no jobs, so that means no income.

* Our politicians just seem to focus on how to divide the cake - none of them have the nerve to read the riot act to us all and tell us that unless we all get more productive so we have a bigger cake we will end up with the level of public services of most of sub- Saharan Africa.*

Yep, That's why I making the points I'm making. It's the way things are going. Now to get people more productive we have to have less government spending and less government borrowing. When you look at the size of the government debt it is 100 times larger than the cost of the bank bailout. No doubt you think the banks were wrong, I do too. RBS, NR etc should have been sent to the wall. However, if 1% of the government debt causes a mess, think what happens when the 99% goes bad.

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David Harvey

Nov 18, 2011 at 14:27

There are other sources of money rather than selling people off. But this government goes on about the hard choices. The hard choices would be to make the likes of Osbourne to pay his tax, the removal of loopholes I mentioned earlier, those are the people who need to have the riot act read to them.

No, to them, the hard choices are to hit those most vulnerable in which they have no interest.

It's not just those effected by the cuts it's us when we get old or sick. Many of the services are essential and will have to be bought from the private sector anyway and it won't be cheaper or better that is for sure. Greece's problems were made the same way as ours. I spent a lot of time with people I know there and watched the banks giving money to anyone who would take to build yet another hotel that wasn't needed. The financial advisors were just like the rest of the world, advising everyone that they could have all this money and to someone living in poverty in Greece it sounded possible. Look at how the wealthy there pay almost no tax at all, just like here.

The money wasted on the banks was our money, Why aren't the wealthy being made to pay their taxes. Most of this could be avoided and there would be money in the economy to help industry renew itself.

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Hotrod

Nov 18, 2011 at 15:08

I have come to realise that politics is very different from business. Business has a clear and unequivical mandate to make a profit. (If you don't make a profit your out, or should be unless someone bends the rules) Politicians on the other hand have to deliver policies which are popular. If memory serves, it was Jose Manuel Barroso who said: "We know what we have to do, but we don't know how to get elected afterwards.

Thinking along these lines suggests to me that Nigel Farage, and to some extent Nick Griffen have important points to make. Problem is; the truth hurts, and no matter how right their thinking is, any reforms inline with their manifesto's would be deeply unpopular with the electorate and offensive to those with diametrically apposed views.

The present coalition Govt. are between a rock and a hard place. No matter what they decide, it will be derided by the opposition. Personally I think the present occupiers of Number 10 & 11 are far more realistic than the previous encumbents. Not so long ago Gordon Brown was going round the world giving speeches where he said he had a plan to end world child poverty. He also astonished his counterparts when he pledged to donate more than them to the Asian tsunami disaster relief fund.

Politicians, of every political persuasion have to stop kidding themselves. They have generate more tax revenue from somewhere. My decision would be to target the top 5%. Also Ian Duncan-Smith is doing a good job by scrutinising the absurd benefits system.

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Michael Brooks

Nov 18, 2011 at 15:13

If the rich were to leave wouldn`t we then have a meritocracy?

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nickle

Nov 18, 2011 at 15:55

The money wasted on the banks was our money, Why aren't the wealthy being made to pay their taxes. Most of this could be avoided and there would be money in the economy to help industry renew itself.

==========

Yep, and whose choice was it to bail them out and buy at a high price? Gordon Brown Politician. They should have been bankrupted.

If the rich are evading their taxes, they should be prosecuted. If the rich are avoiding tax, change the tax law. That's legal.

However, it comes back to the basic problem, and its nothing to do with the banks. The government has run up debts of 7,000 bn. The bank bailout costs are 70 bn, most of which is Brown's share trading. Just like his gold trading. Awful.

The banks didn't force the government to run up these debts. That was a political choice. They choose to take people's retirement money and spend it rather than invest it. The end result is a problem that is 100 times larger than the banking crisis.

* Politicians on the other hand have to deliver policies which are popular. *

Massive debts and the massive consequencial cuts. Really popular - not.

The problem was that they lied and hid the debts, like Bernie Maddoff.

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David Harvey

Nov 18, 2011 at 16:35

Yes it is legal but during these times shouldn't be that's my point. Yes of course Brown this and that blah blah he was awful etc etc I agree stole the pensions sold the gold. This lot are no better. It looks like the entire planet was run by Brown but it wasn't!!!! So many countries are in the same mess and Brown had nothing to do with them.

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nickle

Nov 18, 2011 at 16:43

* If the rich were to leave wouldn`t we then have a meritocracy? *

Same debts, less money to pay it.

50% of nothing is worse than 40% of a lot.

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nickle

Nov 18, 2011 at 16:59

* So many countries are in the same mess and Brown had nothing to do with them. *

Sounds like a defence for the Yorkshire ripper. You can't prosecute me because you didn't catch Jack the ripper.

It's irrelevant. The mess is caused by politicians. Even the banking mess has their fingerprints all over the crime scene. ie. Brown's share purchases. Brown was the chief banking regulator. Brown set up the tripartite banking regulation structure that failed.

Brown and others had everything to do with the ponzi state pensions. That includes the civil service pension, state pension, state second pension (serps), PFI, nuclear decommissioning, Guarantees to old state industry pension funds such as British Telecoms. That has nothing to do with other countries.

Similarly with the deficit. Spending too much. That's everything to do with government decisions. Even the banking bailout was a choice made by politicians.

What other countries' governments do is their choice. Their choices don't impact the choices made here. [Unlike Greece, Italy and Ireland which is now run by Bonn]

This lot can't solve it. The debts are too large.

How for example are you going to pay your share? It's 225,000 pounds going up with inflation? 5+%

Can you afford it?

Can the median tax payer on 26K a year afford it? 10 times their earnings

No.

So the consequences aren't down to the current government. They have no choice. The decisions were made by the people who ran up the debts.

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David Harvey

Nov 19, 2011 at 14:25

Who said I was defending Brown?Believe me, I have equal contempt for them all. I am saying that the world wide problems were caused by the people who enjoyed lavish billion pound lifestyle from making money from money and ignoring regulation etc. Those people have not been asked to make one jot of sacrifice to save the global economy and, still can't stop doing it.

You attribute a share of a debt to me. This debt is not of my doing, I have no debt nor have I ever had debt nor has my wife. All of this debt belongs to the speculators who brought the world to it's knees.

As I said before, they do indeed have a choice. They can make the tax avoiders pay and enjoy some austerity themselves. But with them and their sponsors being among the greatest beneficiaries of the loopholes, it is likely that the working population will be squeezed even harder to protect them and we will all enjoy the Dickensian society you seem to think will save us.

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nickle

Nov 19, 2011 at 15:57

But you still insist in not looking at the scale.

If I rack up debt, you don't have to bail me out. That's the banks problems. If banks cannot rent seek, and force other people to bail them out, they are bust. Notice here that it needs politicians to make it your loss. Likewise, if politicians ignore regulations, its the fault of politicians.

* You attribute a share of a debt to me. This debt is not of my doing, I have no debt nor have I ever had debt nor has my wife. All of this debt belongs to the speculators who brought the world to it's knees.*

No it doesn't. You haven't taken that on board. It does belong to you. I presume you either have a state pension in the UK, or accrued some years for a state pension. Isn't that owed to you? Nothing to do with speculators, but poltiicians have spent all your contributions.

Likewise for civil service pensions.

Likewise for state second pensions.

NOTHING TO DO WITH SPECULATORS.

Your share of that debt, 450,000 between you and your wife. Nothing to do with speculators.

If you have a private pension and its an annuity, that is also owed to you. No assets to back it up, and nothing to do with speculators. Add that on top.

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Hotrod

Nov 19, 2011 at 17:27

Some good points made by Nickle as to the causes of the country's present predicament, but it doesn't add anything constructive as regards finding a solution.

The fact is that the UK is populated by millionaires, and billionaires, who could collectively solve the financial crisis, if they were they were minded to be benevolent, and philanthropic. Unfortunately that is two conditions which they will only subscribe to if they can see an even greater pay-off for themselves.

I live in the North East, which, statistically, is suffering the most. If you tot up the figures: (House prices, job opportunities, etc) you cannot escape the fact that this region is living through depression.

And yet, very rich people live here, and have generated their wealth here. It may surprise some to be told that the descendants of the coal owning families of yesteryear still own vast tracts of land in this region. Coal is still being mined, but opencast operations only employ hundreds, wereas underground extraction, provided jobs for thousands. Today energy from coal is being superseded by electricity from windfarms. Hundreds of turbines have already mushroomed and still more are due to be errected. The planning process is a joke. People who get their houses blighted are ignored, and in the meantime the land owners are making millions from wayleaves for doing virtually nothing. On this point I must agree with David Harvey; making money from money is perverse, unless it is progressively taxed. 50% tax is not unreasonable in my book, if you take into consideration the enormous disproportionate gulf between the top 10% and the rest of the working population.

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David Harvey

Nov 19, 2011 at 18:14

I recall the days when we heard of the Young Upwardly Mobile crowd. We had at that point dumped the mines and in fact we had dumped much manufacturing altogether in favour of what was seen as a perpetual money machine that we now see as money from money. The situation over the years has worsened, with the huge amounts of money being made from money giving the impression that we are successful. But we weren't making a penny in the real sense. For every millionaire speculator there are many thousands of people somewhere making the money that they are getting by going to work and making something . I think Nickle we must be gentlemen and agree to disagree. I will never see the debt in the way you do. I do not deny it is there I do not deny that politicians have sat back and let it happen like a train heading to the end of the track, they watched on. I believe it was banks that ignored regulation. I believe the debt is the result of the money from money train going of the track and now with so much doubt being cast on Osbourne's plans we need to understand that as a nation we haven't actually had a job for years and need one badly.

Any debt is relative to income. I we owe £500.000 on a house we don't have to pay it all at once ( like pensions ) so provided we have a job that will cover it we have no problem. The world has had it's head in the sand for decades politicians have let us believe we are fine, go ahead, borrow! My kids even got credit card forms when they were 16 that the banks suggested I sign to give them ..... Freedom....??? Until the money from money people people users get their faces out of the trough, get up on all fours and start producing goods in one of those old fashioned places you know ... factories... they used to have them every where before Thatcher ... this will worsen.

It's not my debt. But it is a handy destruction for some to label it as such.

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nickle

Nov 19, 2011 at 19:53

The fact is that the UK is populated by millionaires, and billionaires, who could collectively solve the financial crisis, if they were they were minded to be benevolent, and philanthropic.

==============

They can't. Lets just look at the deficit. 150 bn a year.

So we take one billionaire, Richard Branson. We don't give him a choice, we take all his assets. 2 billion. At current rates of overspend, that 2 billion plugs the gap between spending and tax for just 5 days.

Now, who is going to buy the assets? If we sell it to Brits, that just moves money around, and for those that think spending needs to go up to get growth, that means we have to sell it to overseas investors.

So after 5 days, the debt (7,000 bn) starts increasing yet again.

Now, who are you going to go after next? Which billionaire do you hit next? Will there be any here or did they get the midnight flight to Geneva?

Now for David's point.

* I we owe £500.000 on a house we don't have to pay it all at once ( like pensions ) so provided we have a job that will cover it we have no problem. *

So, lets take the government. 7,000 bn of debts. 550 bn of income. Those debts do not have assets to back them up. No shares. No property. [Not that can be sold when the debts fall due. e.g. What price do you get for a hospital when you sell it off. Where are you going to supply hospital services if you have sold it off? Ah rent it. Yes, but you've just lost the money for rentals to those that want their debts paid]

Unfortunately it is your debt. You weren't told about it. You're clearly having a problem taking on board that government debt is your debt, and that the government will use force to get it from you. You're not alone in this. The reason being the state keeps it secret, and even the BBC goes along with this. It will admit in private when you complain that they aren't telling the truth however, but they carry on.

Now I think that is wrong. I also think it wrong that children have be bonded into debt slavery in the UK just as much as in the third world.

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David Harvey

Nov 19, 2011 at 20:26

I believe Boots is one of the companies that pays much less tax than it should by having an office in Switzerland. There is a tax loss to the tune of £130 bn each and every year via this one loophole. The people that brought this on us have money stuffed away through loopholes that should now be used to undo their mess. It is not my debt, it is not the peoples debt. It has just been dumped on us to protect the wealthy the greed. It won't change because this route won't upset the wealthy and those with interests, so of course the poor will once again be the ballast in the governments hot air balloon all over again. Unemployment is the way the right wing always solve their problems.

I am finished with this now it's gone on to long. I can say I remain un convinced that this is the debt of the working man rather once again he will be used to pay it off.

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Hotrod

Nov 19, 2011 at 21:02

@Nickle

I am not advocating confiscating assets from anyone. That proposal would be ridiculous. What I am pointing out is that there are some people who receive a perpetual income stream from owning assets. In some cases money received in this way is so large in proportion to the average that in a short space of time the recipients would be in a position to buy everything of value, turning the rest of the population into slaves.

The said people know this, but it doesn't change their attitude to accumulating wealth. Because these circumstances prevail, human nature being what it is, a responsible government should progressively tax and redistribute (pay down some of the debt if you like) to prevent this imbalance deteriorating further.

A stumbling block to achieving this in the past has been, the old school tie; cronyism is rife in the upper echelons of society. You only have to look at recent parliamentary scandals to understand that. Also as I have tried to explain in my previous post. Politicians can only do what the electorate will tolerate. Trouble is not all the electorate understand the issues and consequences involved. Persuading them what is considered to be the best options is going to be a monumental task.

Nickle, you keep harping on about the debts cannot be repaid. We all know that the debts cannot be repaid, but we are where we are. Some way out of the morass has to be found.

Therefore I stand by my belief that the people who could make the difference are the very wealthiest in the country, but as soon as anyone turns their attention on them, they all say. If you want it that way will up sticks and move elsewhere. There just bluffing. Where would they go? Switzerland certainly wouldn't want them. Their banks are so deluged in cash which has not been generated in the country that they are refusing to open new accounts, and are imposing charges as apposed to paying interest.

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David Harvey

Nov 19, 2011 at 22:15

Sorry I have to just leave this one more. I agree with Hotrod and would add that doing this would leave money in the economy to regenerate industry which needs our support and our High Streets. I also think they would get their money back in time as we buy goods. As we are going, our country is becoming a waste land. Our high streets abandoned even now pre Christmas. The shops I mentioned are closing branches and reducing choice simply buy the on going creation of poverty, anyway. Pretty soon it may not matter if they leave.

It was our arch enemy Gordon who kept saying "don't take too much out of the economy!!" could it be that the man we love to hate was right?

I am 57, my wife and I will be out of work soon. We will be unlikely to find anything as the town we live near has become a slum in 2 years. We do not hear English spoken. No one, including the immigrants have work. And those in work on minimum wage have no surplus income and probably are on benefits to pay ridiculous rents for hovels because all the council houses have been flogged off. We will spend what savings we had put aside to live over the coming years and then when we retire we will be told we should have saved for our old age. All this after a life time of work. there are millions like me. When you put people out of work and they are over 55 it is not just the money to keep them now it is likely to be for a long time, they only need so many supermarket greeters. Better to keep people in there jobs and not destroy the moral and fabric of the country than to dump them for short term gain. Like the flogging off cheap of this bank to pay 2 days instalments.

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nickle

Nov 20, 2011 at 12:51

* I am not advocating confiscating assets from anyone. That proposal would be ridiculous. What I am pointing out is that there are some people who receive a perpetual income stream from owning assets. In some cases money received in this way is so large in proportion to the average that in a short space of time the recipients would be in a position to buy everything of value, turning the rest of the population into slaves. *

Various people have said hit the rich, they can pay.

This is wrong, and the Branson example shows why.

1. Government debt is so large, that even the rich can't pay it. Add in the middle class, and its still not affordable. Not even putting the poor on the hook can pay it. So it won't be paid. Since the debts are owed to the citizen, its the citizen who is hit.

2. Robbing Peter to pay Paul does not make the country richer, it makes it poorer because it wastes money. The government extracts a fee for doing this. For example, 2,700 a day is the cost of one Peer.

3. * Politicians can only do what the electorate will tolerate *

I disagree, they will do whatever the buggers want to do. They won't ask us. Plebs? Ignorant - we're not going to ask them. That's not the way WE ARE GOVERNED, to quote them.

4. Will people move? I have done in the past. I'd had enough and went to Switzerland, and I'm middle class. End result 5 people ended up without a job that was on offer. Now I've moved back to look after my parents. Will I move again? Probably.

Now look at the solutions.

First is default. The debts are so big, that a partial default is inevitable.

Now look at what people are saying. The banks aren't lending to businesses, we must force them to lend so companies can grow. Next sentence is, we must punish the banks and tax them. Take all their assets. Notice the contradiction?

Same with the rich. We must take their money. That means they can't invest it. So no growth. They move to Switzerland. Bugger off we don't want you is the first one, then they are evil, they aren't paying tax here. Well you told them to bugger off. They weren't made welcome, and like any party where the host is abusing you, then people will leave. You can't have it both ways,.

That shows the solution. Cut taxes on investment to zero. Make sure that investment is the priority.

Stop accruing any more debts. Cut the deficit to zero. Overnight. Stop the state pension, state second pension, civil service pension from any more accruals. Existing rights preserved. Then force everyone to save for their retirement. The result is lots of money is available for investment. That creates lots of jobs.

Stop migration of anyone who doesn't pay more than the government spends on average per person. (11K in tax, 40K in earnings). No need to subsidise migration at the low skilled end.

Remove illegal migrants. Offer a bounty of 5K per illegal reported who is then successfully removed. Similarly clamp down on the no paper's scam. If necessary, they can sit on a Scottish island in tents until they say where they come from, sign the papers, and get shipped out. The reason is that it frees up housing and jobs.

David, on your point about getting into debt to keep people in jobs, you left off the debt bit. So what happens in a years time when the same thing happens, but the debts are bigger?

You still haven't registered that the government owes you a state pension and can't afford to pay it.

Let me also irate you with one more thing. If you are a median wage earner, 26K a year, and you had put your NI into the FTSE, your pension would be 21K a year. Instead you have 5K. They've stolen 16K a year (going up with inflation) off your retirement. More is to come.

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Hotrod

Nov 22, 2011 at 07:10

Readers of this column may be interested to read a report published on the London Stock Exchange website today.

Here are the salient points:

"Top pay out of control"

"A year long study by the high pay commission has revealed that the pay of top executives had soared by more than 4,000% in the last thirty years, undermining productivity and damaging trust in British business. The report criticised "stratospheric" pay increases which have seen wealth flow upwards to the top 0.1% of people in the UK.

Average wages in the UK now are modest £25,900 - up from £6,474 in 1980 - a three fold increase.

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nickle

Nov 22, 2011 at 08:51

And what does that mean?

Top earners pay more to bail out the government.

Ungrateful sods complain.

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David Harvey

Nov 22, 2011 at 09:27

Thanks Hotrod.

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nickle

Nov 22, 2011 at 09:37

And the same report also means. Top earners tax payments out of control.

Tax payments from top earners rocketed to help the government out of its financial mess.

Top earners now pay tens of thousands of times more tax than low earners.

Low earners complain that this is not enough and they want more to fund their sky subscriptions.

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Stew

Nov 22, 2011 at 16:51

Yeah mostly this moaning about wages is about unsuccessful jealous peoples' inability to credit those who are more successful.

Which is not to say that comparative in-company pay and benefits shouldn't be much more level.

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nickle

Nov 22, 2011 at 17:44

Quite right, and stupid too.

You can test this by asking them, would you be happy if they left and took their tax money with them? No they are scum is the invariable reply.

Next, ask them about relative poverty. If the rich leave, the relative poverty line drops. Do the people who are now out of poverty feel richer on the same money? Answer no

Now ask them, are you up for the cuts to compensate for the tax that has left because you pissed off the wealthy? No, the wealthy - they are scum.

My view, the more rich paying tax, the less I have to pay.

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Stew

Nov 22, 2011 at 18:35

You forgot the other charade.

"So we don't want inequality and this will mean YOU not inheriting your parents house, it will be used to repay their healthcare costs".

Ah well of course there are 10 reasons why that shouldn't happen.

It's only ever those people a bit better off than they can imagine achieving.

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Hotrod

Nov 22, 2011 at 19:19

Thanks for the responses, quite revealing.

You may be interested to note that the investigators who worked on the report were also concerned by how top executive remuneration is calculated.

They were able to break the figures down to:

Basic Salary, pension contributions, bonuses, share options, company car, expenses re-enbursement, etc. They also took into account tax status, such as domiciled, non-domiciled etc.

What they found was that there was a wide ratio between total gross emoluments and actual tax paid.

If memory serves one of reasons for conducting this report was the revelation by a hedge fund manager that he paid less tax than his office cleaner when he testified before a parliamentary committee.

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nickle

Nov 22, 2011 at 19:38

Then there is the obvious Marxist question. Should the workers get the fruits of their labour?

If so what its it 10% to the capital owner, 90% to the worker, to 90% to the owner of the capital, 10% to the worker? The later being the bank bonus set up .

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nickle

Nov 22, 2011 at 19:39

If memory serves one of reasons for conducting this report was the revelation by a hedge fund manager that he paid less tax than his office cleaner when he testified before a parliamentary committee.

=============

In the US. It was Warren Buffet. Nothing stopping him making a voluntarily tax contribution, like all the other whingers. That they don't shows them to be hypocrites.

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Michael Brooks

Nov 23, 2011 at 01:29

What workers are you talking about nickle? Presumably the office cleaner. It can`t be the factory worker, as we don`t make things any more. Thatcher saw to that.

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nickle

Nov 23, 2011 at 10:50

Any worker.

You should only employ someone who creates more value than they cost to employ. Either by saving more, or generating more profit that the cost of employing them.

If you think that's wrong, I've a couple of chavs that you can employ, no matter what. Of course you will have to pay their wages, and all the other costs.

So isn't the Marxist view that the profits should go to the worker, and not the owner of capital? Doesn't that apply to both the trader and to the office cleaner?

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