British Bailout Hits the ONE TRILLION Mark.

[Big Orange]

thisismoney

Bank of England: Bailout bill hits £1trillion

26 June 2009, 7:40am

The Bank of England has issued a dire warning about the crippling taxpayer costs of the financial crisis.

Just two days after its governor Mervyn King's lacerating attack on the Treasury, the Bank warns a further, even more radical overhaul of the stricken banking system may be needed.
In its bi-annual Financial Stability Report, the Bank calculates a breathtaking £1.26 trillion of public funding has already been pledged to support the City.

But it warns that banks remain too financially feeble to bolster lending to normal levels. And any additional infusions of public money could impose dangerous pressures on governments' finances.

In a blow to Gordon Brown, the report also found that the debt and housing bubble that preceded Britain's crash was even worse than in earlier banking crises in other countries.

It also criticises City institutions that it sees as being too big and complex - putting it at odds with Treasury policy. Mr King has expressed concerns about firms that combine high street retail operations with higher-risk investment banking, arguing such activities should be separated.

The report suggests 'limiting the scope of banks' businesses to a narrower range of relatively low-risk activities'.

The Bank finds there have been improvements in the 'resilience' of City lenders but says UK banks 'inevitably remain vulnerable' and face a possible £500bn black hole in their finances between now and 2013.

One obvious response might be to pump more public money into banks. Yet the Bank of England warned there are limits to the Government's ability to prop up the banking system, because its own finances are under such intense pressure.

The analysis suggested that market worries about the scale of the national debt could drive up the Government's cost of borrowing and adversely affect the entire financial sector.

Underlining that point, the Bank released a survey of City investors and dealers showing that fears of a Government debt default are dogging the markets for the first time. Some 26% are worried about this occurring, yet no one said this in last year's survey.

The Bank also warned rising unemployment could push yet more homeowners over the brink. The number of people in arrears on their mortgage is likely to double to 333,000, the report predicted.

Don't let Michael Jackson popping his cogs distract us from more pressing problems out in the wider world.

[The Duchess of Zeon]

Christ, it almost sounds like you need to have the Queen dismiss the government and call new elections to get those incompetent money-grubbing bastards away from the printing presses.

[Big Orange]

The British politicians have been increasingly awful since the 1980s with Westminster and the constituencies almost entirely populated by a hard core of career politicians from the early 1990s onwards. You can say a lot about Thatcher, but at least she was a trained chemist, unlike Blair and Brown.

[Force Lord]

I seriously doubt new elections can alleviate Britain's woes. None of the politicians from all parties exactly fill me with confidence.

EDIT: What the hell made Whitehall so incompetent? It's almost as if the smart people avoided joining the British Government for some reason.

[Force Lord]

Sorry for the double post, but do Whitehall and Westminster mean the same thing, or are they different?

[The Duchess of Zeon]

Sorry for the double post, but do Whitehall and Westminster mean the same thing, or are they different?

They do not. Whitehall is the Civil Service, Westminster is the Parliament.

[Force Lord]

Gah, should have meant Westminster.

[Straha]

What the hell made Westminster so incompetent? It's almost as if the smart people avoided joining the British Government for some reason.

The lack of any decent opposition until David Cameron took over as leader of the conservatives, and the fact that Blair, Brown and Mandelson castrated all other potential labour leaders. The lack of a decent opposition meant that Blair and Brown didn't have to justify themselves for the first nine years of the Labour government, allowing them to essentially run the country by Fiat. The Labour party now acts like it is entitled to run the country and seemingly dismisses out of hand anyone who claims different (look at Brown's performance in last weeks PMQs for proof.) Meanwhile, inside the Labour party nobody has the cajones to stand up to Brown. Instead they run around like headless chickens following dear Farmer Brown because nobody has a better damn idea.

An election would definitely help shake things up and bring new blood into Parliament, which is what's so desperately needed right now.

[Vendetta]

Christ, it almost sounds like you need to have the Queen dismiss the government and call new elections to get those incompetent money-grubbing bastards away from the printing presses.

Except all we'd get then is the Tories in power, who are the same shit painted blue.

[Big Orange]

BBC

Sharp contraction for UK economy
Page last updated at 14:35 GMT, Tuesday, 30 June 2009 15:35 UK

The UK economy contracted 2.4% in the first quarter of 2009, its biggest quarterly decline in 51 years, according to the latest official data.

The decline was more severe than the earlier estimate of a 1.9% fall, and worse than analyst expectations.

The Office for National Statistics (ONS) blamed the sharp revision primarily on weaker output in the construction and manufacturing sectors.

It also said the recession started earlier than first thought last year.

The ONS now says the recession began during the second quarter of 2008 rather than during July to September, so that the recession has now been running for a whole year.

The ONS said economic output shrank 4.9% during the first quarter of 2009 compared with the first quarter of 2008, the biggest year-on-year fall on record.

The figures will make it more difficult for the Treasury to reach its forecast of a 3.5% decline in the UK economy for the year, made in the April Budget.

But the Chief Secretary to the Treasury, Liam Byrne, said it would not be revising its forecast.

"There have been some tentative signs that the fall in output is moderating and I remain confident but cautious about the prospects for the economy," he added.

Lower incomes

January to March's quarterly 2.4% decline was the sharpest contraction since the second quarter of 1958. Analysts had only expected a 2.1% fall.

Construction output decreased between January and March by 6.9%, while the service sector contracted by 1.6% - led by the banking and financial industries, which saw output slip 2.5%.

Quarterly manufacturing output fell by 5.5%.

Meanwhile, real household disposable income fell by 2.4%, while the savings rate dropped from 4% to 3%.

Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club, said the figures were much worse than expected.

"We had expected a downward revision to GDP, given the plunge in construction output since the last quarter, but the scale of revision comes as a real shock, and highlights the extreme weakness of the economy in the early months of the year," he said.

Fellow analyst, Ross Walker, economist at RBS Financial Markets, said the latest figures were "disappointing".

"We knew about the construction revisions in advance and the fall wasn't quite as big as the ONS had indicated," said Mr Walker. "But we've got a much bigger fall in services output."

Getting better?

Shadow chancellor George Osborne said the GDP figures showed that the recession had "been longer and deeper than we had thought".

"This also means that in the future, unemployment will be higher and Labour's debt crisis will be even worse," he said.

Meanwhile, Liberal Democrat Treasury spokesman Vince Cable said the figures put more pressure on the public finances.

"Rather than making promises on public spending that nobody believes, the Government must start taking tough choices on whether it is going to cut spending or raise taxes to bring the economy out of the red," he said.

Despite the economy's big downward revision for the first quarter of 2009, the expectation is that the official figures for April to June will be nowhere near as bad when the first estimates are published at the end of July.

Earlier this month, the ONS said industrial production rose in April, its first month-on-month climb since February of last year.

A growing number of reports from business organisations such as the CBI have also predicted that the worst of the recession is over.

The CBI said earlier this month that the economy was now stabilising, and would begin a "slow and gradual" recovery from early next year.

Separately, a key service sector survey reported a growth in business in May for the first time since April 2008.

The PMI service index from the Chartered Institute of Purchasing and Supply rose to 51.7 in May, up from 48.7 in April, with a measure above 50 indicating growth.

Martin Weale, director of the National Institute for Economic and Social Research, whose organisation estimates GDP on a monthly basis, recently told the BBC that he expected second quarter GDP to be flat.

It's not looking good...