Has the Government set a precedent?

CluelessJock

Seems to me there is an excessive amount of theorising about the security of funds under the passport scheme.

Surely the Government has set the precedent with Ice Save?

How could Alistair Darling now decline to pay the initial amount covered in the scheme should another foreign bank fail?

Should the UK Government not be in a position to do so is it unreasonable to expect a statement now outling the official position on the matter, irrespective of whether it causes a run on the foreign institutions?

Views please.

baby_boomer

He's gambling, with taxpayers' money, on not having to. It's hard to see how he could distinguish if similar circumstances arose.

I always thought it was a bad precedent, made for political purposes so that Gordon can say "No saver lost money on my watch in a savings account with a protection scheme in which the UK government was involved."

He should have let the £50K+ people lose money, there would have been a very useful repatriation of dosh to UK banks and it would have educated people about the £50K limit better than any advertising campaign.

And the £50K+ people who lost money might still have been grateful because the government raised the limit from £35K at the 11th hour.

However it is unreasonable to expect a statement on a future unfunded commitment.

This would make it a definite liability and the Treasury shouldn't have to tie up taxpayers' money in the event of Armageddon, because that's exactly when taxpayers' money won't be available.

And then there is the moral hazard of giving carte blanche to savers to chase the top rates via sites like MSE without a care in the world. It wouldn't help responsible banks in tough times.

KingL

View:

excessive amount of theorising

...alright

nilrem_2

baby_boomer wrote: »

He should have let the £50K+ people lose money, there would have been a very useful repatriation of dosh to UK banks and it would have educated people about the £50K limit better than any advertising campaign.

Isn't it wonderful how people who did not stand to lose any cash with Icesave can be so uncaring about others,:mad: these people would be the first screaming to the government for help had their savings been at risk!

nicko33

baby_boomer wrote: »

He should have let the £50K+ people lose money, there would have been a very useful repatriation of dosh to UK banks and it would have educated people about the £50K limit better than any advertising campaign.

What about the local councils etc. ?

CluelessJock

baby_boomer wrote: »

However it is unreasonable to expect a statement on a future unfunded commitment.
quote]

My view was more that unless the Government makes a formal statement advising they will not be covering the first 20 000 Euros, or funds in excess of £50 000, then they have made it a definate liability.

baby_boomer

nilrem wrote: »

Isn't it wonderful how people who did not stand to lose any cash with Icesave can be so uncaring about others,:mad: these people would be the first screaming to the government for help had their savings been at risk!

No way would I ever do that. I believe in personal responsibility for investment decisions.

Not a compensation culture where we're all wrapped in cotton wool and it's always someone else's fault.

The exception is when the UK government and regulators mislead us.

evenasus

nilrem wrote: »

Isn't it wonderful how people who did not stand to lose any cash with Icesave can be so uncaring about others,:mad: these people would be the first screaming to the government for help had their savings been at risk!

Only if my savings had been in a British bank and/or if I had under the guaranteed limit.

People knew about the guaranteed limit and the risk of savings with a foreign bank.

CluelessJock

baby_boomer wrote: »

The exception is when the UK government and regulators mislead us.

That's my point, is the Government misleading us if they don't make it clear they will not cover future losses?

Milarky

baby_boomer wrote: »

He should have let the £50K+ people lose money, there would have been a very useful repatriation of dosh to UK banks and it would have educated people about the £50K limit better than any advertising campaign.

That would the surest way to bring about a 'run' on banks again though - you are relying on a model of human nature that is more rational (and self-disciplined) than the true picture.

Look at Northern Rock (maybe not the best example) How many of the people taking money out were seriously affected by the size of their balances? A fair few were 'ordinary' people with either less than £2K or a lot less than £35K (recall the old limited protection between 2001 and 35000)

So I agree that at some point the Chancellor has to say 'enough' but this is not the time and place to say it. Once the dust settles then he should make a statement like

"In six months from now, the current government guarantee in excess of the FSCS limits will be withdrawn - It will be strictly limited to £50,000 per investor, per brand. However the government will continue to underwrite the terms of the FSCS whilst ensuring that it is prudentially funded"

Now I've probably just undermined my main argument above there - since even timed and carefully worded statement intended to responsibly withdraw the rug of unlimited support - and give everyone the time to distribute their own balances as best they can - is still liable to an hysteric interpretation.

But, either way, now is not the time for this....

baby_boomer

CluelessJock wrote: »

That's my point, is the Government misleading us if they don't make it clear they will not cover future losses?

They're not misleading us. What's the problem?

We might think they might not take that [political] risk, but we don't know for certain. It's something that people can use their judgement about if they are of a gambling nature.

Why should government take away the need for personal judgement?

What we all know is that they are covering amounts up to £50K in the FSCS. That's crystal clear and there's no room for doubt.