The UK is China’s new bezzie pal… or is that the other way around? What do we need from China and what do they want in return? Time for some explaining;
This year the UK government signed up for the Asian Infrastructure Investment Bank (AIIB).
This is a proposed investment bank which will focus on developing infrastructure in Asia. Think: roads, railways, airports.
The UK was the first non-Asian country to join the AIIB, followed rapidly by other European countries.
By backing the bank, we won a place in China’s good books.
Now the Chinese President Xi Jinping makes the first state visit to the UK in 10 years. Our prime minister David Cameron says the UK can be “China’s best partner in the west”.
So why are we suddenly being all friendly?
China has the second largest economy in the world, after the USA. Unlike Western countries, China’s economy is growing fast. For the past few years China’s economy has grown at a rate of 10% per year. Compare that to the UK’s economy, which is growing at around 0.7% per year.
Academic Martin Jacques mentions that the last time a Chinese President visited the UK, our economy was bigger than China’s. So there. Now the tables have turned, and some predict China will be bigger than the USA in a few years. So it makes sense for us to cosy up to the world’s new superpower.
Put simply: China’s economic worth is going up and the UK wants in.
The UK wants a slice of the Chinese pie as China’s wealth means it can invest in UK projects. China is interested in backing investing in UK nuclear power, the high-speed HS2 railway and the “Northern Powerhouse”.
FYI the Northern Powerhouse is the Conservatives’ idea to invest in the north of England to boost the economy of the area, focusing on the cities of Manchester, Liverpool, Leeds and Sheffield.
Ummm, not exactly.
Some economists were skeptical when the government started schmoozing China. You see, although China’s economy is still growing, it’s growth rate is slowing down. We explained it for you in a neat video;
This year China’s growth rate slowed to around 6.8%. The Chinese Stock Market suffered some major drops in value. All signs that the country’s economic model may not work in the long-term.
In simple English: China’s economy might be in trouble; UK investment might be a bit of a gamble.
Part of the reason the Chinese economy was doing so well in recent years is because it exports products to other countries.
The downside is that these cheap exports are threatening British jobs. As the Chinese President arrived the Tata Steel company announced that 1,200 UK jobs will be cut in Scotland and the North.
They blame cheap Chinese exports for lowering the price of steel. So much for the Northern powerhouse.
Joining the Asian Investment Bank didn’t do much for UK relations with the USA. The Americans see the new bank as a threat to the International Monetary Fund (IMF), the international organisation set up to ensure the stability of the world’s economy. They also aren’t happy about the Chinese building massive sea bases in the South China Sea.
The Communist Party is China’s single political party and asserts strong control over its people.
Officially the country’s constitution allows freedom of speech, however the government uses media regulations to censor what information is released.
Anti-government bloggers and activists are often jailed and prisoners are reportedly beaten and electrocuted. China has the death penalty and last year China handed out the highest number of death sentences in the world.
Earlier this year students in the Chinese territory of Hong Kong protested against the Chinese government, claiming that new rules made it easy for the Communist party to screen out candidates they don’t approve of.
In the UK protests over human rights abuses are expected throughout President Xi’s visit. Labour leader Jeremy Corbyn was warned by the Chinese ambassador not to make a fuss about China’s human rights.
However, it’s worth saying that life in China today is a whole lot better than it once was. Martin Jacques notes that the country has lifted 600 million people out of poverty, “arguably the single biggest global contribution to human rights over the last three decades.” Fair enough.
The Chinese Ambassador to the UK acknowledges that “China and the UK differ very much because we have different history, different culture, we are in different stage of development”.
He added “it’s natural we have differences, even in regard to human rights. In China we care more about rights to better life, to better jobs, to better housing.”
The UK has been criticised in the past for doing business with countries which have questionable human rights. The excuse often given is – it’s not our country; we shouldn’t interfere. Yet if we’re not doing business with a country, does that mean we’re quicker to point the finger over human rights abuses?
Is teaming up with the Chinese a smart move by the government? Should we ignore China’s human rights record?
Seems like we’re “generation debt”: all we hear is student loans, overdraft and stuff about UK’s budget deficit – which is apparently around £90 billion… but what does this actually mean?
The deficit is the gap between the amount the government spends and what it receives in taxes. It’s different to the national debt which is the total £££ the UK owes to investors from the UK and other countries.* (FYI we owe a lot to America).
Each year the government spends money on things like schools, the NHS, the army and benefits. This money mostly comes from taxes collected by HM Revenue and Customs.
The Chancellor of the Exchequer (currently George Osborne) is in charge of the country’s finances. They set the budget each year which outlines how much we pay in tax, and what gets spent where (we explained how the budget works here).
If one year the government collects £100 in tax but spends £150, then the deficit would be £50.
Alternatively if £100 is collected but only £80 is spent then the government would have £20 left over at the end. This is called running a budget surplus.
In real life we’re talking a lot more money than this. The UK deficit is currently around £90 billion.
Since the global financial crisis of 2008, “deficit” and “borrowing” have become dirty words. Understandably, the public don’t seem to like the idea of irresponsible governments overspending.
How the financial crisis happened;
Financial crisis in a nutshell; the banks ran out of money – the government had to lend them money.
The Conservatives claim that the current deficit is all Labour’s fault, as the previous Labour government was running a deficit at the time of the financial crisis. Expect to hear this a lot around election time.
Considering all this, it may surprise you that running a deficit is the norm for a lot of countries.
Whilst it is true that Labour was running a deficit before the crash, they had previously ran a budget surplus between 1998 and 2001. Before that point the UK (under Conservative rule) had run deficits each year since 1975 (with the exception of three years between 1988 and 1990 where there was a small surplus).
Many well-respected economic experts like former Bank of England governor Mervyn King and senior Treasury official Nicholas Macpherson suggest that the banks are more to blame for the current situation, rather than Labour overspending.
However, increased government borrowing during the crisis (partly to save the banks, partly to pay for benefits as more people lost their jobs) meant the UK deficit shot up from around £34.5 billion to £90 billion and continued to climb. Ouch.
The Conservatives promise to cut the deficit and deliver a budget surplus by 2020.
Chancellor George Osborne’s austerity programme was supposed to bring the deficit down. In simple English: lowering government spending. Some of the austerity measures have proved controversial; such as cutting tax credits.
Rather than making cuts, some argue there are other methods to reduce the deficit. This include closing loopholes so that big businesses and non-doms pay the right amount of tax, and investing in public services.
The economist JM Keynes suggested something similar during the Great Depression of the 1920s. The idea was use unemployed workers to work on public projects. The workers would start spending their wages, which would get the economy moving again.
Is the Conservative 2020 deadline achievable? George Osborne’s original plan was to eliminate the deficit by 2015, but missed this target; managing to reduce the deficit by half.
This means that although public spending is coming down, the UK is still overspending and doing nothing about our national debt. Are you sitting down? The UK national debt is currently around £1.5 trillion. Wowzers.
Don’t panic though – the International Monetary Fund thinks the UK can survive with high levels of debt forever. Phew.
Current Chancellor George Osborne has created the Fiscal Charter. It’s a proposed new law which bans the government from creating a deficit in “normal” circumstances. This is defined as when the economy is growing healthily.
On paper this sounds like a sensible idea, no?
However, if the charter is passed it would make it harder for governments to borrow money for public investment. Why is this bad? Labour List explains in language we can understand:
“No one thinks it is wise to max out the credit card to pay for the weekly grocery bill, but just as families have a mortgage to pay for their home, so it makes sense to borrow for the infrastructure – like broadband, transport, scientific facilities for universities – which will increase our economic productivity and growth.”
However, perhaps it’s not a good idea to compare economics to your household budget;
So, what’s the answer? Suggestions on a postcard, please.
It’s hard to know who to believe. It’s even more confusing when politicians disagree over whether spending more than your income is good or bad.
What we do know: lending and borrowing is risky, so you had better be sure people can pay it back.
Will the Fiscal Charter work? Think we’ve missed something? Let us know in the comments below or email email@example.com
The UK government promised to lower immigration levels to the tens of thousands. They are nowhere near meeting this target; do they really want immigration to drop?
By Bobbie Mills
Immigration is up there with the NHS and the economy as the issue which most worries Britain’s electorate. When politicians start on their immigration spiel, what we hear are numbers, numbers, numbers.
One number in particular keeps coming up: Net migration figures. This is the total number of people coming in to the country minus the total number of people going out.
If 100 people come in and 99 go out, net migration is 1.
If 1 person comes in and 0 go out, net migration is 1.
This figure includes people coming or going for more than a year for reasons of: work, study, joining family and seeking asylum. This means we are counting a very mixed bag of people –including students, children who arrive as dependents, senior managers transferring to their company’s London branch, and asylum seekers who cannot work while they await a decision on their refugee status.
The most recent statistics show net migration in the UK to be at 330,000.
This figure is enormously greater than Cameron’s pledged reduction of net migration to the tens of thousands. The Conservative government have since renewed their commitment to reducing net migration to these levels, but literally no one believes this is possible. Fail!
Why is the government failing so monumentally at meeting this target? Why do we want so badly to reduce immigration in the first place? Is it really such a good idea?
There is one simple answer to these questions: Not everyone wants to reduce immigration – INCLUDING THE GOVERNMENT.
Yes. We’ll say it again – the UK Conservative government, and pretty much any rich democratic state, does NOT want to reduce immigration by anywhere near the amount it says it does.
Cameron’s government could not be clearer in what it says about immigration: the current rate is too much and must be reduced. We know, however, that there is often a difference between what politicians say and what they mean.
Behind the scenes, the government is being pulled in two different directions on the subject of immigration.
This is because there is a great demand for immigration (both high-skilled and low-skilled) from the business sector. Rich economies like the UK rely on immigration to function properly. This not only goes for the National Health Service but also for processing plants, hotel cleaning, public transport and food processing, the list goes on.
The government has great interest both in keeping the economy moving and keeping the business sector happy. Therefore, it has great interest in allowing immigration at a reasonable level.
Why does the business sector favour higher levels of immigration? Business leaders tend to favour the free movement of highly-skilled workers because this allows them to take their pick from a wider pool of talented people. No surprises there.
Business leaders also tend to favour the freer movement of low-skilled workers because these people are more likely to take the jobs that British nationals simply do not want to do.
There are certain jobs that most Brits will not do because the education and aspirations that come with living in a rich economy mean they tend to want well-paid and fulfilling jobs which are seen as better than manual jobs. Even if we don’t want jobs from the top of the pile, we still have an idea of acceptable working hours, acceptable pay, and an idea of our rights.
Migrants, like everyone else, also have education and aspirations for decent jobs and a decent life – and this is why they decide to leave their country where they see few opportunities to come to work in a rich economy. Those who come to Britain, rather than another country, do so because they speak English (which all politicians agree they should do) or because they already have friends or family living there.
Not only are migrants more likely to take jobs that Brits do not want; migrants are also much more easily exploited than British nationals. This is because their visas are conditional on them remaining with a particular employer. If they quit their job because, say, their wages are being withheld, they automatically become illegal immigrants. Therefore, even if there were plenty of British nationals who wanted to do the hard and poorly-paid work typically done by migrants – like picking vegetables and cleaning toilets – employers would still prefer to employ migrants because they are cannot quit. They are a captive and exploited workforce, unlikely to complain.
This is the harsh reality of why the business sector prefers higher levels of immigration. Because the government needs to keep the economy growing and to keep business happy, it has great interest in allowing immigration at a reasonable level. This is why the government does not want to reduce immigration as much as it says it does, and why in many ways it does not want to meet its net migration target.
On top of this, there are reasons why the UK government cannot meet its target. All liberal democratic governments (who are committed to freedom, equality and human rights) are under a number of obligations under international law to guarantee human rights.
The UK is bound by the UN Convention on Refugees which requires it to provide shelter to people fleeing war and persecution.
The UK has passed the Human Rights Act, which brings its law into line with the European Convention on Human Rights, Article 8 of which guarantees the right to a family life.
This means that the government cannot really control the number of people who settle in Britain as refugees or through family reunification. Neither can it control the number of people arriving, settling or leaving from within the European Union, owing to the terms of its membership of the EU.
Let’s combine the business stuff with the human rights stuff. There are big reasons why the government cannot meet its target on reducing net migration – because this would be going against a whole bunch of human rights conventions. Then there are equally important reasons why the government does not want to meet its target. Not only would this displease powerful business leaders, it would also be a very bad move for the British economy, which relies on migrants workers both highly- and low- skilled.
Again, there is a simple answer to this: the government wants your vote, and it thinks that what you want are fewer immigrants in the country. So long as the government believes that the electorate is opposed to immigration, it will do all it can to at least appear to be reducing immigration by any means possible, regardless of how many it actually wants to let in.
This is where the targets come in – nothing sends a strong message of a government’s intentions like a solid target for reducing immigration.
Everything this article has explained so far is what fancy-pants people call the ‘liberal constraint theory’. Governments tend to have good reason to want to keep immigration at a good level, but because public opinion tends to be anti-immigration, they have to keep up a tough-on-immigration rhetoric to win votes. Any government who wants to win votes, keep the business sector happy, and uphold international obligations finds itself in this tricky situation. So that goes for basically any liberal democratic government ever, it’s not just a UK thing, it’s not even a left- or right-wing thing.
There’s a loose end to this theory. Does public opinion always tend to be anti-immigration?
It’s not even that clear what the British public actually think about immigration – and we seem to be obsessed with talking about it!
The British Social Attitudes Survey found in 2011 that 77% of the public wish to see immigration reduced, whilst research from think tank British Future found in 2014 that the majority of the public have much more pragmatic and nuanced views, and do not necessarily wish to see it reduced. Is our government pandering to an anti-immigrant public opinion that doesn’t exist?
To be fair – the arguments surrounding the immigration debate are pretty hard to stay on top of. Every argument has a counter-argument, and it’s hard to get our thoughts straight.
Scenes of Reason have put together a graphic that shows why the immigration debate cannot be won.
Politicians know that immigration is ultimately what our economy needs to keep ticking over.
Conversely, every politician feels the need to take seriously people’s legitimate worries about how their towns are changing and how their local services are faring. That makes a lot of sense: people do have genuine worries and problems. Whether these problems are genuinely caused by immigration is an important and complex part of the debate.
What should politicians make of the fact that a lot of people see immigration as a problem not so much for their local area but for Britain as a whole? This trend was found by an Ipsos Mori study:
What should we make of the fact that a lot of the anti-immigration feeling in Britain comes from places which have next to no immigrants living in them? This is the case in Clacton-on-Sea where UKIP member Douglas Carswell won his seat. According to the last census, less than 1 in 20 residents of Clacton were born abroad.
What makes people anti-immigrant?
Local level tactics. It has been proposed that rather than shouting at the government for or against the crisis, members of the public need to contact their local MP and work up rather than down. How immigration affects your town should be more of a concern than how immigration affects the entire of the UK. Whatever you think about these issues, you can contact your MP using the WriteToThem service. Now you’re decoded, there might not be an excuse.
Immigration in the UK explained: The UK government does not want to reduce immigration as much as it says it does because it knows how important immigration is for the UK economy. However, all political parties maintain tough rhetoric on reducing immigration because this is what they believe the UK electorate want to hear. Is this what you want to hear?
How do we form our views on migration? Do we care how immigration impacts the economy? Is it more about how it affects our local area? How can we know what kind of impact immigration is really having? If we have no direct experience with UK immigration, where do our views come from? Are these fears about immigration coming from the press?
Bobbie has just finished an MSc in Migration Studies at the University of Oxford. She writes on politics, the media and migration and lives in North London @MsBobbieMills
When did the European migration crisis turn into a refugee crisis? What’s the difference, and what does it have to do with immigration?
By Bobbie Mills
Whatever you think about migration, chances are you will agree that what has been happening across Europe over the past few months is a shocking mess. Over 2,500 are estimated to have died in the Mediterranean Sea since the start of 2015. Sadly, this is nothing new. The conflict in Syria mean that thousands more have judged it time to leave, adding to the 11 million already displaced in and around Syria and adding to the thousands making the journey to Europe. It would be fair to say that the situation has stepped up a bit.
If this has been going on for a while, why are we taking notice now?
In late July, a lorry strike brought Britain’s attention to a “swarm” of so-called “marauding migrants” attempting to cross through the Channel Tunnel from Calais to England.
It could be argued that calls to send in the army were a little hysterical considering that the number of migrants trying enter Britain are a fraction of those in Europe. News also came of thousands of people in Hungary demanding to get on trains to Germany. Images of bodies washed up on beaches in Turkey, especially one of a toddler, caused moral outrage and European leaders came under pressure to take in refugees.
David Cameron announced on Monday that Britain will take 20,000 Syrian refugees over the next 5 years.
Not compared with Germany. The German Vice Chancellor has said it can handle up to 500,000 asylum seekers every year for the next few years!
The cheeky twist to Britain’s response is that the people it will host will be transferred directly from the refugee camps established in Syria and the surrounding area.
What about all those migrants already in Europe? The upshot is Britain won’t be taking them.
The British government reckons that taking in people already in Europe will encourage yet more to pay smugglers and to make the dangerous journey. How will residents of Kent and Calais feel about this? The situation isn’t going away on its own.
Another reason given for not taking in people who are already in Europe is, basically, that not all of them deserve Britain’s help.
Responding to claims that Britain is a “fucking disgrace” for not taking its share of Europe’s asylum seekers, Boris Johnson makes one point plain and simple: not all of these people are genuine refugees – many are “migrants”.
Hold up. What’s the difference between a “refugee” and a “migrant”?
Whether someone is considered a migrant or a refugee has massive and immediate impact on their life, and also on the countries and towns we live in.
A refugee is a specific legal category, defined by the United Nations 1951 Refugee Convention as someone who:
“owing to a well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality, and is unable to, or owing to such fear, is unwilling to avail himself of the protection of that country.”
A person is a refugee if they have been awarded refugee status by a state, or registered by the United Nations High Commissioner for Refugees (UNHCR). Refugees are legally entitled to a set of protections and cannot be sent back to the country they have sought refuge from. Whilst awaiting a decision on their asylum application, asylum seekers are not permitted to work in the UK and may be detained to make sure they don’t disappear. Charming.
‘Migrant’ is a much more wishy-washy word with no universally accepted meaning. If we go with the United Nations definition like we did for our refugee definition, their recommendations on migration statistics define an international migrant as “any person who changes his or her country of usual residence.” Simples.
Yet this is not what most people think of when they hear the word “migrants”. We tend to picture a specific type of migrant – an economic migrant. Economic migrants change their country of residence for economic reasons like work and better wages.
Britain, like most rich countries, has a never-ending debate about whether this kind of immigration is good for the country.
Some reckon that letting people come is an important part of Britain. After all migrants do jobs that most UK nationals just won’t do, like fruit and flower picking bent double for long hours. They bring skills that Britain is short of, like nursing and construction. There are also people who really value diversity. These people may also reckon that the world would be better if we were able to share its resources more evenly.
Opposing these views are people who feel that, given high levels of youth employment, if the UK is lacking skills then Brits should be being trained rather than foreigners being hired in. As well as worries about migrants taking British jobs, people also fret about non-Brits living off unemployment and housing benefit. You can’t have it both ways.
Also, some people feel that the rate of UK immigration is ‘too much, too fast’ as they feel neighbourhoods have changed rapidly.
A sideline to this debate is fears over “illegal immigrants”. These are considered to be economic migrants who have entered the country without a proper visa. People who do not have permission to reside in the UK can be detained and deported.
A debate on the language we use to talk about people who move from country to country has blown up out of the current migrant crisis… I mean refugee crisis… or do I mean migrant and refugee crisis?
Let’s go back to the start. All the jibber-jabber began when Al Jazeera announced it would no longer use the term ‘migrants’ to describe what was going on in the Mediterranean. ‘Migrant’ – it argued – had become a dehumanising, inaccurate term, undermining the value of the lives lost at sea:
“It is not hundreds of people who drown when a boat goes down in the Mediterranean, nor even hundreds of refugees. It is hundreds of migrants. It is not a person – like you, filled with thoughts and history and hopes – who is on the tracks delaying a train. It is a migrant. A nuisance.”
‘Refugee’ became the choice replacement – because the majority of the people at the borders are escaping war and persecution.
This was received really, really well. The United Nations High Commission for Refugees (UNHCR) circulated the graphic pictured above and a change.org petition requesting the BBC to use the “correct” term for the refugee crisis gained nearly 75,000 signatures.
Here is how these groups are distinguishing migrants from refugees:
“All the prominent English language dictionaries define a migrant as someone who moves from one country to another in search of work and better living standards. A refugee, on the other hand, is defined as someone who is forced to leave their country in order to escape war and persecution.”
The difference rides on people choosing to move, and people being forced to move.
The problem: the difference between the two is not as straightforward as all these articles suggest. It’s the total opposite of straightforward. We had better do some explaining;
The million dollar question: who can really tell the difference between force and choice?
Research tells us there is little difference between the people who apply for asylum and those who do not. When someone leaves their home, is it because of corruption and violence or because they’ve been unable to find work? Aren’t the two connected? If it were you would you feel you had any choice in the matter?
No one wants to undermine the troubles of people leaving Syria; some would argue we shouldn’t undermine the problems of other migrants, either.
The petitions have got one thing right, the word ‘migrant’ certainly is dehumanising. However, insisting on calling them ‘refugees’ instead does not solve the problem. This is because it accepts the worthlessness attached to the lives of ‘migrants’, arguing that ‘refugees’ are a fundamentally different kind of people who are more worthy of help and compassion.
As Professor Jørgen Carling argues:
“When people drown at sea or suffocate in lorries, our first question should not be ‘so, which kind were they, refugees or migrants?’”
At Scenes of Reason, we reckon there is one thing missing from this debate: how do these people who are moving actually want to be seen? Who do they think they are, and who do they want to be?
Our media has given us the idea that everyone arriving in Europe would like to qualify as a refugee. But there are accounts (read page 66) of the shame that some people feel on becoming refugees. This is understandable – no one likes to be a burden on anyone else. Rather than the protection afforded by refugee status, some people would prefer a work permit and the opportunity to make their own way. What do you think? Beggars can’t be choosers?
Neither ‘migrant’ or ‘refugee’ are perfect as labels. The resounding message from people interviewed in camps is that they are people too. So, why not just call them people?
Explore: Why are these refugees all hench lads with iPads? What should a refugee look like?
This is a bit like the question ‘Nicolas Cage, good or bad?’ No one knows the answer because there isn’t one!!!
The debate on immigration has been going on pretty much the same way since forever. Have a read of Enoch Powell’s famous ‘Rivers of Blood’ speech – delivered to a Conservative Association meeting in 1968 – to get an idea of just how much the debate in Britain has changed since then (hint: it hasn’t changed much).
It can always be argued that migration is good in some ways, bad in others. It may seem like a cop-out not to be getting down and dirty with the evidence for and against. Yet there is so much contradictory evidence out there that we begin to wonder: are we asking the wrong question?
Migration is neither fundamentally good nor fundamentally bad. It is normal and is not going to go away. The question that needs asking is how it is managed. This involves a lot of difficulties, like concerns about integration.
However, the bottom line is: the current ‘keep-them-out’ tactic is causing deaths.
Issuing key guidelines for dealing with what is happening in Europe right now, UNHCR chief António Guterres encouraged a common strategy but ultimately warned that “none of these efforts will be effective without opening up more opportunities for people to come legally to Europe”.
This involves expanding visa programmes, scholarships and all other ways to migrate legally outside of the refugee system. This, he says, will “reduce the number of those who are forced to risk their lives at sea for lack of alternative options.”
Who is right?
Boris Johnson, who says that “the first step to finding a constructive way forward” is “recognising that not all migrants are refugees”, or UNHCR chief Guterres, who reckons that solving the current crisis cannot be done without opening up borders to more legal migrants?
We’re now analysing the language we use to describe people who move from country to country. Should we have started doing that a long time ago? Should we think of the current refugee crisis as part of a much bigger, longer conversation on migration?
Bobbie has just finished an MSc in Migration Studies at the University of Oxford. She writes on politics, the media and migration and lives in North London @MsBobbieMills
RBS Sale Explained; Why is the government selling Royal Bank of Scotland?
Bankers like risk.
Financial Crisis in a Nutshell: The US market had lent BIG amounts of dollar to people in risky subprime mortgages (given to people with bad credit ratings). Basically, they shouldn’t have risked so much.
When people started defaulting (failing to pay back money owed) on their mortgages, the banks, like Royal Bank of Scotland, should have been able to cover the losses with their capital (AKA savings). But they didn’t have enough saved. Bummer.
The Labour government decided to save Royal Bank of Scotland by buying up shares in the bank. This meant RBS was declared solvent (able to pay your own way) and was able to get emergency funding from the Bank of England to keep going.
RBS was now essentially publicly owned; the UK government owns around 80% of RBS shares. By pouring money into a bank bailout, they hoped to prevent the bank from failing; which would have led to job losses and depositors losing money. In total around £107.6 billion of taxpayer’s money was spent on sorting the banks out.
The government spent £46 billion buying shares in Royal Bank of Scotland. Now a report by independent financial advisers, Rothschild, states that now is the best time to have an RBS sale to start selling the shares.
The small print: because the values of the RBS shares have dropped since they were bought, the government is set to make a loss of £7 billion on the RBS sale.
But because the other banks the government have bailed out have done better; the government is actually set to make a profit of £14 billion. Eventually.
Even though the government is making a profit, they will still be £7 billion down after the RBS sale. So they’ve lost money from bailing out a bank which didn’t do the best job of keeping our money safe. That’s £7 billion which could have been spent on other things.
But as we said, the government is estimated to make a profit overall. So it could be a lot worse.
People have blamed the bankers for the financial crash, others have blamed the government for not putting enough regulation in place to stop this from happening.
Change is coming; we explored how the new rules mean HSBC is separating its high street branches from the investment side of the bank.