Why is the government dithering over implementing compensation levels?

Primrose

After a day of savers withdrawing money from British banks and transferring their savings to Irish banks, I cannot understand why the UK Treasury doesn't announce an immediate £50,000 (or higher) protection limit as they've already signalled that this is under consideration. Can't they understand what damage this is doing to our banking system, our economy and how undermining it is? Won't this will involve a loss of tax revenue from the interest to our government, just making the situation worse? It seems that nobody believes the government any more about savings being protected. If the population believed this, why would they still be rushing to move their money to safer havens?

anthony7777777

Brown's of to ask for permission at the weekend

Geoffo_M

But isn't this typical of this government. For years they've promised much and delivered little. I can't understand Brown. He's got Ireland and other European countries promising full compensation, yet he's been on the tv for what seems weeks saying he's going to increase the package to £50k - yet actually does nothing! The cyncic in me believes he is waiting to see whether the US bailout package goes through - he'll dither until it does and everything settles down when it would be safe for him to implement the increase knowing it won't be needed. He's a lot of hot air - they all are - Blair was just as bad!

Oblivion

Geoffo_M wrote: »

Blair was just as bad!

At least Tony had a bit of charisma even if he was a lying toad. Gordon comes across as a humourless %*$@*, and every bit as toxic as the financial chaos he has created.

Dave.

Primrose

This lack of action makes me so angry. And this is the politician who tells us this is no time for a novice. The problem is that it's not just savers who are having sleepless nights. There are thousands of small businesses and companies who employ people who don't know from one day to the next whether the bank will have enough funds for them to be able pay their employees or to buy materials to keep themselves in business.

dunstonh

The biggest difference is that the FSCS is funded by the financial services industry. Not the taxpayer. The taxpayer has recently loaned money to the FSCS but the financial services industry is going to be hit with the bill.

The Irish system is being funded by the taxpayer.

The UK also has a very favourable protection system at its current level for savings, investments, pensions and life assurance. IIRC, we are around 3rd place in Europe with most of the rest at half our levels (dont know for sure, just saw a couple of slides on screen the other day on the news).

cheerfulcat

Hi, Primrose,

Primrose wrote: »

After a day of savers withdrawing money from British banks and transferring their savings to Irish banks, I cannot understand why the UK Treasury doesn't announce an immediate £50,000 (or higher) protection limit as they've already signalled that this is under consideration.

It's not entirely clear to me what Gordon Brown is suggesting. If it is simply a raising of the existing FSCS scheme limits then - since as dunstonh writes, it is financial institutions which have to finance this scheme - I would expect the responsibility for the decision to lie with the FSA, and the FSA has already indicated a certain reluctance to raise the limit willy-nilly.

If he is planning to make the taxpayer responsible for the extra cover then I would be very concerned to see the Treasury make any sort of announcement without intense Parliamentary scrutiny of the plan and its possible ramifications.

It strikes me that once again ill-thought-out policies are being made up by G Brown on the hoof to suit the political moment.

DavidAC

The govenment reveives huge sums from taxing savings accounts. There is no limit such as interest on your first 50K of savings will be taxed and the rest tax free, so I think it is only just that in return the govenment should protected all savings.

cvd

If the taxpayer guaranteed all deposits, then the banks would be even more reckless.

DavidAC

Then the govenment should regulate them properly. Everyone could see the wreckless lending over the last few years.

1echidna

I am afraid that if economic conditions result in major banks failing there will be many people suffering major financial loss or indeed loss of employment or loss of pension. There just isn't the sources of wealth either from the banks or the taxpayer to prevent everyone from suffering loss of some sort or another. People with large savings are a relatively small part of societisy and not as vulnerable as many other groups and I expect that in practice no amount of special pleadings will wash should very extreme adverse conditions pertain.