UK News

Insights from the UK and beyond

The “shotgun wedding” of Lloyds and HBOS

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“If you think you want to advance on this, we will deal with the competition issues” — so said Gordon Brown to Lloyds Chairman Sir Victor Blank last September, sweeping away the one big problem to a merger between Lloyds and HBOS.

At the time, Brown said the government had acted quickly and decisively in removing competition concerns and prodding the merger forward, despite concerns about the risk that Lloyds was taking.

Now the full scale of HBOS’ losses — 10 billion pounds in 2008 – has become known and the share price of the merged bank has taken a dive. Fears are growing that increasing fears that the government will have to pour in more money on top of the 17 billion pounds it has already spent to acquire 43 percent stake — or even nationalise it altogether.

Opposition parties have been quick to claim that Brown pushed through the “shotgun wedding” of a healthy, prudent Lloyds with the toxic HBOS to avoid the embarrassment of having to nationalise the Edinburgh bank.

Sorry Darling, Davos is for Mandy

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If there were any questions over who is number two in British Prime Minister Gordon Brown’s cabinet, Davos might have helped clear them up.

While Chancellor of the Exchequer Alistair Darling is giving the annual gathering of global big wigs a miss, business minister Lord Peter Mandelson has found the time to go.

from Global Investing:

Wish I hadn’t said that…

As sterling sinks to a 7-1/2 year low against the dollar, traders and investors are wondering who was the established political figure that made the following comments when Britain was kicked out of the Exchange Rate Mechanism in 1992.

"A weak currency arises from a weak economy which in turn is the result of a weak government."

Global problem or self-inflicted wound?

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The government has unveiled a second package of measures aimed at getting the banks to start lending again and helping the economy off its knees.

The new package follows last October’s 37 billion pound bank bailout which ministers have reluctantly had to concede was not enough. It may have shored up their capital positions but it did not prompt them to start lending again. The latest plan aims to give them a hefty nudge in that direction by offering them insurance against losses and guaranteeing their debt.

Easing the pain for small businesses

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The government has unveiled a plan to guarantee up to 20 billion pounds of loans to help small businesses survive the credit crunch.

But there are concerns that will not be enough to get the banks lending sufficient funds to help businesses get access to cash.

Labour’s jobs summit

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The government is to offer firms a “golden handshake” of up to 2,500 pounds for every person they recruit who has been unemployed for more than six months. Total cost of the initiative is expected to be around 500 million pounds.

Unemployment in Britain rose to 1.86 million people in the three months to October, equal to six percent of the workforce and the highest rate since the three months to June 1999.

Brown’s see-saw poll recovery

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A ComRes/Independent poll this week says Gordon Brown has staged a stunning political recovery and that the Labour party is now just one point behind David Cameron and the Conservatives.

Yet only four days ago an ICM/Guardian survey said Conservative popularity had returned to its summer peak with 45 percent of voter support and a lead of 15 points.

The arrest of Damian Green, MP

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The furore over the arrest of Conservative shadow immigration secretary   Damian Green for leaking government documents has reached such a pitch that there is talk of MPs disrupting Wednesday’s state opening of parliament.

Editorials over the weekend were full of reminders that Winston Churchill had leaked evidence that Britain was not prepared for the Nazi threat and that Gordon Brown himself has been happy in the past to disclose confidential information. It is part of an opposition MP’s job to hold the government to account, they argued, and no part of the police’s job to act in such a heavy handed way.

Drawing up the Battle Lines

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Newspapers were in no doubt of the significance of the pre-budget report – this was a defining moment in British politics.

New Labour is no more, they announced, and prudence has been blown away by a massive gamble for the hearts and minds of the electorate before the next election.

A profound shift in party politics

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David Cameron’s decision to ditch a major Conservative pledge to match Labour spending plans pound for pound was hailed by commentators as an important step in the politics of the recession, opening up a clear gulf between the two main parties’ economic policies but exposing the Tories to considerable risk.

Labour is expected to cut taxes, accelerate public spending and announce more borrowing in Monday’s pre-budget report. Now their supporters can revive the spectre of “Tory cuts” to funding for schools and hospitals which helped the Conservatives lose the last two elections.

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