The New Worker

The Weekly paper of the New Communist Party of Britain

Week commencing 6th November 2009


by Daphne Liddle

THE FIRST intimations emerged last week that the banking crisis — in Britain at least — far from being over is actually getting a lot worse as the Government agreed a new £39 billion package of support to the part-nationalised banks Lloyds and the Royal Bank of Scotland.

This is a larger sum than the support given about a year ago when the global banking crisis was making the headlines and is the biggest banking bailout in history — so far.

Taxpayers have already lost £10 billion on the shares it bought in RBS after a 20 per cent drop in the bank’s share price earlier this week.

The new bailout was agreed during negotiations around the Government’s insurance scheme to protect banks from the effects of bad debts at taxpayers’ expense.

Lloyds is now leaving the Government’s protection scheme (APS) through a £13.5 billion cash call and complex debt swap operations to raise over £21 billion from shareholders. It needs the Government to buy £5.7 billion of new shares to maintain its stake in Lloyds at 43 per cent. But it will repay the £2.5 billion it has already had.

At the same time European Union rules on “fair competition” means these big banks will have to be broken up into smaller units, in theory to provide the public with more choice.

Effectively this is trying to reverse the monopolisation process that set in with a vengeance during the height of the crisis last summer and saw banks swallowing each other to create super giants.


Any Marxist knows this will not work. The tendency to monopolisation will set in again at every crisis and it is a process that Lenin predicted will centralise control and administration of financial affairs, leaving them ripe for popular takeover in a future workers’ revolution.

But nothing could highlight more the difference between real working class ownership control of the economy and the ownership that taxpayers now have of large parts of the banking system under a bourgeois states, which gives us no control whatever.

The new bailout does include new curbs on bonuses at the banks — they are barred from awarding cash bonuses this financial year to any staff earning more than £39,000-a-year and board members must defer their bonuses until after 2012. Needless to say there will be any number of ways around these rules, if they are paid any attention at all.

Northern Rock, the bank that is now wholly owned by the Government and the first to face collapse from irresponsibly lending money to people who could not pay it back, must also be broken up.

Last week the European Union gave its approval to the break-up of Northern Rock into a “good bank”, which could be sold to a new entrant in the banking sector, and a “bad bank”, which will manage its legacy assets and will remain the responsibility of the Government.

Northern Rock claimed on Wednesday that its financial performance is improving despite another rise in the number of customers failing to repay their mortgages.

It announced that trading since the start of July was considerably better than in the first half of the year — when it suffered a £724m pre-tax loss.

Northern Rock has increased its mortgage lending by £1 billion in the last three months, following the government’s decision to allow it to increase its mortgage book again.

The bank is still suffering from the economic slowdown. The percentage of customers who are more than three months behind with their mortgage payments had risen to 4.11 per cent by 30th September 2009, up from 3.92 per cent three months earlier.

The company said it has now helped more than 1,000 families stay in their homes after they fell behind with their repayments. It has also repossessed thousands of homes since being taken over by the state, although its stock of unsold repossessed properties has now almost halved to 2,193, from 4,201 a year ago.

Lloyds and RSB now face selling off 900 branches to meet EU competition regulations. And of course jobs are at risk.

The giant union Unite warned that 25,000 branch jobs are threatened by the sales. The news came at the same time that HSBC announced a further 1,700 job cuts.

Chancellor Alistair Darling is trying to paint the new bailout as a good deal for taxpayers.

“It is better in the long run to get private money because at the end of the day, the Government does not want to be in the business of running banks,” he added. The Labour leadership could not be further from the ideals expressed in Clause Four of its original constitution!

And nothing could more clearly demonstrate that socialism cannot be achieved through a bourgeois parliament.