Team GB RIP?

Last Friday a tourniquet was tied round the worlds economy and a sticking plaster was applied to it's wounds. On Monday that plaster was torn off and the wound was found to be healing nicely.

On Tuesday, in the UK, the Chancellor of the Exchequer, the Prime Minister and the head of the Bank on England, being a little behind the times met to draw up a plan to calm the UK financial system. This morning they announced they had come up with a £450bn ($900bn) plan, the main points of which are;

• An extra £150bn to be injected into the markets.
• An extra £250bn for a scheme which insures the value of banks debts
• A minimum of £50bn to buy high priority shares in UK banks.

Although the first two points are the most expensive together exceeding the value of the US rescue package they are simply injecting capital into the markets without addressing why the markets are short of capital in the first place. This is something Bank of England and other central banks have done over a dozen times over the course of the financial crisis and is sadly necessary.

The third point however is the most dangerous element of the plan because it will see the UK Government become part owner of eight of the UK's private, high street banks. Not only will this part nationalisation of the entire UK banking industry see the Government as the most powerful shareholder in the banks it will also impose some draconian controls on those banks activities including a cap on executives pay, putting the government first in line for any dividend payouts, a limit on the dividends that will be paid to other shareholders and an undertaking to issue mortgages and loans that make little economic sense.

The UK is the only government in the world that is following this path of seizing control over private enterprise and these restrictions make no commercial or economic sense. Instead they have been drawn up for political reasons to centralize control of the UK economy around the Treasury and allow politicians to pretend they are "protecting the interests of UK taxpayers" when in fact they are doing completely the opposite.

When the global economy recovers Britain will find itself out of step with the rest of the world and in control of economy which is expected to shrink at least 4% in the next year alone. This idiocy should come as no surprise from a Prime Minister who seems to believe that guaranteed failure is a less risky option then a possible success.