Despite the evidence of the last year of endless partiality towards the banks and deepening hardhsip for everyone else, the Government still has the capacity to shock by its partisanship in favour of the financial sector. The latest news that the Government is considering giving Lloyds another £5bn, on top of the £17bn bail-out they’ve already had, does just that. It is almost incredible that a New Labour Government (but of course it isn’t Labour) should be intending to cut the budget deficit by half (i.e. to cut public services by up to £80bn) within the next 4 years, yet at the same time is proposing to give Lloyds another $5bn in order that (1) Lloyds can avoid having to pay the multi-£bn cost of using the Government’s asset protection scheme to safeguard itself from collapse under the weight of its enormous overhang of toxic assets, and (2) so that Lloyds can escape having the Government’s economic stake in the bank rise to over 50%. In other words, the taxpayer not only provided £17bn to protect Lloyds from the consequences of their own folly, but is now being expected to hand over a further £5bn so that Lloyds doesn’t even have to pay the cost set down by the Government for that protection, without which the bank would have gone bust.

If this proposal were put to the British people at this time, it would be howled down. But even this is not the end of this scam at public expense. Whilst the Government is determined to hand over this $5bn to Lloyds, it is equally determined not to take public control of the bank and not to take up the rights which ownership of over half the equity entitles them to. Already in the case of RBS, Lloyds, Northern Rock and Bradford & Bingley, the Government has foresworn using public control funded by the taxpayer to (i) force them to ratchet up lending to businesses as the banks promised to do but haven’t done, and (ii) to require the banks to focus heavily on industrial and commercial investment rather than speculation, financial froth and tax avoidance. Instead the Government has set up UK Financial Investments as a financial quango run by an American banker with a mandate to manage the assets at commercial arm’s length, i.e. business as usual as though market collapse hadn’t happened.
It gets worse. The Treasury is colluding with Lloyds to find another synthetic device by which it can be pretended that the Government does not have a majority share. If the present scheme were simply extended, then Lloyds would have to issue B shares to the Glovernment which would take the Government’s stake above 60%, even though they would not carry voting rights. No other organisation putting enormous sums of money into an enterprise would dream of curtailing its corresponding rights of control – indeed they would strive to exercise control with a stake well below 50%. But in this case so far from taking their due rights, the Government is keen to pile artifice upon artifice to conceal what is glaringly obvious – that Lloyds, like other banks, is broken and owes its very existence and survival to colossal taxpayer support, yet no condition for this support will be enforced and endless sums of taxpayer subsidy will continue to be rolled out without any quid pro quo. The rotten state of New Labour market fundamentalism could not be more nakedly exposed.

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