Tuesday, 23 December 2008

Fisking John Prescott

Labourhome published an article by John Prescott berating Barclays Bank. I like John, he was always annoying, but you could sense he believed in what he said, but there was much empty rhetoric and flawed argument in his article, I decided to reply line by line to him.

This Christmas 340 people face losing their jobs in my Hull constituency. Whilst this sadly isn’t uncommon across the country at the moment, what’s made me very angry is that is was entirely preventable and the result of a bank’s greed.

Or it could be something to do with the massive recession caused by Labour's borrowing and spending.

Atlas Holiday Homes has a long and proud history – a successful firm that for 30 years had a credit facility with Barclays.
That was until the bank decided to take it away even though the company had a full order book way into March next year.

Order books mean nothing in the present climate. It is whether customers can pay or still intend to purchase. A bank will not remove credit unless it has a good reason. Barclays have increased lending as a whole to small businesses. I cannot comment on this particular case, but the whole sector is in a bad way. Only today BA slashed the prices of flights and Thomas Cook decreased places for next year's holidays.

Which is why I was furious to hear Barclays Chief Executive John Varley tell the BBC that firms and households will have to wait another two years before bank lending goes back to normal.

Great response anger at a man who tells the truth.

Well it's a damn good thing we didn't wait up to two years to bail out the banking sector to the tune of £37b, isn’t it?

Barclays did not accept a penny of that money. It is deliberately misleading to mention it.

That’s why I started my Facebook campaign ‘No Ifs No Buts – Pass on the Cut’ to pressure the banks to pass on the interest rate cuts in full for customers and businesses.
Many of these banks were bailed out by this Government but Barclays preferred to sort out their own refinancing package with Abu Dhabi and Qatari investors.
Mr Varley said at the time: “Our ability to do what our shareholders would expect of us would be compromised if Barclays was nationalized.”
Which means they wanted to carry on giving out healthy dividends and wallet-busting bonuses. Last year, they posted profits of £7 billion.

I am a Barclays shareholder and got a total dividend of £84 last year. Real fat cat territory. Dividends are small amounts of cash to people like me and enough money to the institutional investors to fund pensions.

But on 30 August 2007, Barclays was forced to borrow £1.6bn from the Bank of England sterling standby facility, which is made available as a last-resort when banks are unable to settle their debts to other banks at the end of daily trading.

This was caused by a technical error in the interbank computing system. When it was fixed at 11:30 that night Barclays had to react quickly. It was repaid the next day.

Yes we bailed out Barclays by giving them a credit facility! And what did Mr Varley get last year? A bonus of £1.45 million whilst Barclay’s President got ten times as much - £14.8m
Atlas Holiday Homes can’t wait two years for banks to recapitalize, Mr Varley. They’ll go under if you uphold this ridiculous and shortsighted decision.

This decision is not short sighted. We need to decrease our debt. Careless lending by banks helped caused this crisis. It would be ridiculous to be lending at that rate now!

And you wonder why banks are facing a PR crisis? It’s not a case of saying sorry and admitting to the sins of the past. It’s about doing what is morally and economically right and passing on the interest cuts in full and increasing lending.

No. It is about what is doing in the interest of their shareholders. PR means people are more likely to bank with them, which is in my interest. I cannot give a fig who they end to as long as they act in my interest. That is what is right and this misunderstanding is what is wrong with John Prescott and all the other Old Labourites who view the crisis as an excuse for nationalisation.

This Monday, Atlas will meet with the administrators and the council to see what can be done. All three Hull MPs have also written to Peter Mandelson to make him aware of the situation and ask him for help.
So in the spirit of Xmas I call on you Mr Varley and Barclays to do the decent thing and save Atlas, give them back their credit facility and make 340 Hull families very happy.
So No Ifs, No Buts – get lending!

You can join our No Ifs, No Buts, Pass on the Cut facebook group here -

Stop lending! That was the problem. You do not cure an addict by giving them unlimited access to their addiction. Until we as the populace accept we are in too much debt we will never get out of it. Acceptance is the first step to recovery.


Anonymous said...

"massive recession caused by Labour's borrowing and spending..."
Well we can see where this is going. A half-hearted defence of the casino economy by a wanna-be gambler "order books mean nothing" there's a self-fulfilling prophesy for you! Funny how there is no defence of the bonuses paid out of the rescue package that permitted anybody being there to recieve the bonuses - a carping with little evidence apart from the error-bailout story. Therefore there is no defence and no evidence and no need for the government to be tarred with the blame.

Chris said...

To Anonymous -

Sorry for taking so long to reply, I have focussed on other things, but that is no excuse for leaving you hanging in cyberspace for so long.

I am glad you saw my point so quickly , a few lines of text would have sufficed when I took the trouble to fisk the whole article, that is the sort of efficiency saving I need to strive for.

I like the phrase "casino economy", it exposes people's ignorance of business. You view the economy as gambling, which is why you lose.

I am not a "wanna be gambler", but (in an extension to your delightful metaphor) a full blown addict.

My point about order books is that the same about Enron, it does not matter if someone promises to buy from you if they cannot pay you in the end. Order books mean nothing unless you have the money to back it up. As they famous saying goes :

Turnover is vanity,
Profit is sanity,
but cash is king

There was no defence of bonuses as when my post was writen it had no become an issue, but I support contract law, when someone is legally entitled to a bonus they must receive it, taking away someones legal rights as an act of petty vindicitiveness to cover the governments failings is a dangerous path.

If you seriously belive that after the government's conduct in the last 12 years it has no case to answer, I admire your determination to ignore the facts.