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Monday, 19 January 2009

Gordon Brown is a bit upset

It appears that he has found out that 80% of the assets on RBS’ commercial loan book are loans to non-UK borrowers. In order to get lending to UK borrowers moving again, Mr Brown’s government will have to share the risk in assets that they don’t understand or know about. Mr Brown feigns suyrprise, but given that he was responsible for regulating the banks and understanding how the economy worked he can hardly blame anybody but himself.

Some facts for you Mr Brown.

1. London is the centre of the European capital markets and since the 1980s when the Japanese banks turned up in a big way, the British banks have lost market share, particularly in the large corporate sector to Japanese, US, French and German banks.

2. Large scale capital investment in British industry has been virtually non-existent since 1997. Your pro-globalisation policies and your increasing burden of taxation have driven investment to other parts of the world. Don’t give me any guff about dropping the rate of corporation tax. The last drop was funded (your words) by reducing the standard rate of capital allowances from 25% to 20%, which hit capital intensive businesses disproportionately. The one before that was funded by bringing forward the timing of tax payments. Paying tax at 30% 10 months after the end of the accounting period has the same economic cost as paying a lower rate of tax on estimated payments through out the year. It also gave you an extra years corporation tax revenue. Equally disastrous was the auction of 3G spectrum which sucked capital out of British firms that were expanding rapidly in foreign markets and killed off a lot of British overseas interest in the strongest growth industry in the last 10 years.

3. NatWest, RBS, Barclays, Lloyds and Abbey used to fund a large percentage of the fixed plant and machinery in this country through long term finance leasing, which gave British banks a pricing advantage over foreign lenders and provided certain long term finance to UK companies. For the sake of short term revenue gains you killed this industry with many pieces of legislation in successive Finance Bills. It was your decision, so don’t act surprised if RBS has very few UK customers.

1 comment:

MrDavies said...

"Don’t give me any guff about dropping the rate of corporation tax. The last drop was funded (your words) by reducing..."

He hasn't reduced it all for small business, he has increased it from 19% to 21% with further rises in the pipleline being temporarily postponed (from November 24th 2008 Pre-Budget Report ).

And he has the cheek to witter on about helping small businesses.