UK bank 'insurance' scheme will become even more unpopular because it is economically wrong

Unsurprisingly it was the Tories who proposed the new scheme whereby UK bank loans will be insured by the state - a method whereby losses made by the private banks are 'nationalised', that is underwritten by the tax payer, while bank shareholders have share prices propped up by taxpayer guarantees. It is, in short, a system whereby bank shareholders siphon money from the tax payer.

This scheme is wrong from the point of view of economic policy - what is required from an economic point of view, as Socialist Economic Bulletin has pointed out, is bank nationalisation in order to ensure lending to the economy restarts. Under the present scheme bank shareholders will continue to take tax payers money as profits instead of all money being used for counter-cyclical bank lending.

Precisely for that reason the scheme will be deeply damaging politically - people will understand their money as taxpayers is being siphoned off to the bank shareholders and bank managements who took the decisions which are responsible for the present deep economic crisis. The scheme is therefore already unpopular for that reason and it will become more so as the taxpayer begins to pick up the bill.

That the Tories should propose the public is robbed by companies is natural -that is why they proposed the scheme. But Labour should not be supporting it. Nationalisation of the core of the UK banking system is what has been required since last autumn and it should be proceeded to before even more billions of taxpayers money is lost.

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