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Irresponsibility and the Bank of Scotland - for The Inverness Courier
THE collapse of Bank of Scotland, and its takeover by Lloyds, has put thousands of jobs on the line and pushed the damaging impact of the credit crunch to the top of the headlines.
HBOS was one of many banks whose irresponsible lending practices have come back to hit them — but while bosses made millions in the process, it is rest of us who are being made to suffer in the end.
Over the last 10 years, unsustainable levels of debt have been created through a combination of reckless banks, complacent regulators and incompetent politicians. Gordon has placed great emphasis on his "competence" during the years of plenty when he was chancellor of the exchequer. Today, we are seeing the consequences of many of those policies.
This is not just hindsight. Liberal Democrat MPs — and especially Vince Cable — have been lone voices over the last few years, warning that the unsustainable debt bubble would burst eventually. The ideas we put forward then would have made the current crisis a good deal less severe. Now we all have to work out how to get the country out of the mess it is in.
There are four steps that we should take. First, we need to put an end to unjust home repossessions. With mortgages rising steeply, especially as people come to the end of fixed rates, the costs of home-ownership are getting too much for some. As unemployment rises, this is likely to get worse.
Some banks have a tendency to rush to repossession. They should not be allowed to do so. There should be clear requirements to get help from a financial adviser, such as the Citizens Advice Bureau, an obligation on the bank to reschedule the loan and even to look at the bank taking ownership of part of the house before a repossession takes place.
We also need to put in place the building blocks for future economic stability. It is absurd that changes in house prices are not taken into account when interest rates are set.
When higher interest rates were needed to counter the housing boom, it was not allowed, which has made today's problems worse. We also need to stop the government marking its own economic report card — all the figures and judgements should be independently checked.
Thirdly, we need to bring an end to the free-wheeling, bonus-driven, short-termism of the city. We need new regulation to make sure that banks are made to look to the long-term, and set more money aside when times are good. The whole of the financial system needs to be given more of a moral compass — it is, after all, the savings and homes of most people that are at stake.
Finally, the government needs to take action now to put money back into the pockets of the millions of people who are struggling financially.
The financial problems are joining up with high food, fuel, and energy prices to create a perfect storm for household budgets. Too many people are now being faced with decisions between heating and eating, forced to get into debt to pay basic household costs.
The most useful thing that the government could do for most people on low and average incomes would be to cut taxes. I was delighted that the Liberal Democrat conference last week approved a plan that I proposed to reduce the tax burden on people who are struggling. I believe that at a time when so many people are tightening their belts, the government should tighten its belt too.
It is scandalous that the rich pay so little tax today. We want to take more money from the wealthiest, and use it to cut basic income tax to get some money back into people's pockets. There is also a huge amount of wasteful or unnecessary government spending. Do we really need ID cards, more failed IT projects, or armies of officials in Whitehall monitoring local government?
Of course, there are many areas that need more public spending. But once those areas are covered, I would rather put any money left over back into people's pockets. In both the Scottish and UK parliament, Liberal Democrats will be taking a cold, hard look to find unnecessary spending that we would want to stop.
In these tough times, we need a government — not a bunch of Labour politicians fighting like ferrets in a sack. And we need a government that will actually do something now to help people through the crisis.
Posted on: 23/09/2008
