On Thursday, the Treasury announced that it had used the government’s COVID loan scheme to increase its debt total of £4.62 billion over the past month.
The figures include £2.18 billion added by a 100% government-guaranteed “bounceback” loan, but only goes up as authorities push new areas to more stringent restrictions each day.
The latest figures show a worrying trend, as highlighted by the nonprofit research group Positive Money. Banks are provided with a fully supported means of profit from the backs of hopeless people (ironically, there’s nothing too unusual about that). But what’s extraordinary is that many typical healthy businesses are currently struggling. This is because they followed the rules and closed the doors for blockade.
Speaking about this issue, Franboite, executive director of Positive Money, said:
“Borrowing companies with unsustainable levels of debt is not the right way to support them at this point. Many of these companies struggle to pay back, and the growing mountain of private debt risks lowering the economic recovery and even the financial crisis.”
“The government’s support for bank loans has socialized the risk of lending while privatizing compensation. Banks earn more than £1 billion a year from interest payments on loans that are fully guaranteed by the state.”
“In this next phase of this lockdown, support for small and medium-sized businesses should be provided more in the form of grants and other means, rather than more debt. The government must also follow Switzerland to ensure that banks do not benefit from interest payments on state-guaranteed loans.”
In Switzerland, where the “bounceback loan scheme” has been developed, banks are not permitted to claim interest on fully guaranteed loans. However, in the UK, lenders can claim 2.5% interest on these types of loans, and banks can receive more than £1 billion a year from debt-based companies. An investigation by the National Audit Office added that through the bounceback loan scheme, the government could hand over a total of £26 billion to lenders.
The bank’s payday results are not an additional burden on companies looking to re-grow, but also a potential second bank bailout in more than a decade. The struggle of British citizens will compensate for the lender’s balance sheets in the coming years, as they carried the costs of lender’s mistakes following the 2008 crash. Again, many people seem to be the reincarnation of “a sturdy individualism for ordinary people, bank socialism.”
In fact, that’s probably worse than that. It’s like, “Abide by government leadership and pay large businesses for the privilege of doing so.” Certainly, as Ms. Boait stated:
“The fact that these loans are fully supported by the government means that the public can pay billions of pounds to cover the losses of the bank and protect the balance sheet, and walk to another unspoken relief in the banking sector when it fails.”
“This represents yet another transfer of wealth from the people to banks. The government must learn the lessons of 2008 and confirm that relief, implicit or other relief, accompanied by conditions that will rebuild the UK’s broken banking system and serve the public interest.”
