Taxpayers to subsidise wage costs?

Far cheaper than letting people go onto dole and wouldnt reverberate around economy so much. But would government make the right decisions? Take Woolies, its demise has very little to do with economy and far more to do with huge debt built up over many years when owners took money out of the business and sold its assets to satisfy big stakeholding shareholders who were only interested in dividends and value of shares.

You still seem to favour a short recession despite all the evidence to the contrary. Clearly proof if ever needed of the maxim that logic is not persuasive.

Capitalism : The end is nigh!

Incidentally there is no reason why anyone should be out of work in the first place, the only reason unemployment exists is because the rich have enslaved those which have employment...........

I look forward to inflation wiping out the banks bonuses, if wage inflation does not follow suit then you're looking at a revolution!

Employment subsidy??


Not the worst idea for strategic industries!


The problem is always HOW LONG FOR??

THIS COULD BE NEEDED FOR 4 years plus.

1,

I thought wollies problem were related to credit insurance for their suppliers?

So redundancies in the banking sector are ok but in the steel indusrty they are not. Another way of looking at it is one group predominately vote Tory, the other Labour.

The owner of Tata was one if not the richest person in the world - where his wallet?

I planned for a 30% drop in production

last year for 4th quarter 2008 through

2009/2010 from our 2007 levels.


Some natural wastage, no wage cuts

no subsidy, no handouts, no job losses.

This has been funded by saving for a rainy

day and NO BORROWED MONEY.


GOT THAT NEW LABOUR????????????????

So long as in the 'good times' the difference is paid back to make it tax neutral then it's a good idea.

This is better than Browns current plans

£100 million to halt around 9,000 mortgages up to a value of £400,000.

A VAT cut which just hasn't worked as essential items are either not charged at full VAT or have seen the duty component increased.

Brown is adding more borrowing and prolonging house price corrections.

The market has corrected itself before and it will whatever Brown does as banks can no longer borrow large sums to lend to householders to out bid each other for houses.

The Dutch idea is a good one and it should focus on large scale company.

The government needs to stop banks for pulling overdrafts and raising interest rates on loans to smaller businesses at the same time so they can see themselves through as well.

If our labour government have got money for this kind of thing sloshing around doing nothing, then they should be cutting taxes.

If the government cut income taxes, maybe more companies could cut pay without changing employees 'take home' pay.

Everyones a winner.

Although that in itself would be a problem for brown - he is committed to the twised left wing dogma that under no circumstances should anyone considered 'rich' ever get any benefit (whether direct or indirect) from anything he does - so 'everyone being a winner' would be an anathema to him.


ps. Any update on mandleson/olge/eu-tarriffs ?

Frankly, no. All attempts to keep anything (banks, companies, governments) afloat during this correction are simply more fingers in the dyke, which frankly has had a hole a mile wide blown into it by outstanding amounts of greed in the last decade.

As a PAYE "schmoe" I'm starting to get a bit miffed (to say the least) with paying taxes to keep the whole ridiculous house of cards standing. Let it fall. From the rubble, something perhaps a little more sustainable may rise.

Then again, this would take a complete clearing of our CBI and government decks - their holy alliance has caused much of this mess (and other alliances like it in the US).

Could we be teetering on the brink of something apocalyptic? I doubt it. It's nice to think that the utterly engulfing greed of the last 10 years has "done to itself" what Tyler Durden managed to do. The only thing that's making me angry about this is it's me and all the prudent people like me who are bailing out the banks: the companies: the mortgage holders (yep, I got priced out): the big screen TV idiots, and all the other greedy morons who couldn't think long term.

This is not a nice way to run a society.

The good ideas seem to be coming in from abroad these days.

There seems to be an assumption that companies are failing because the market has lost confidence. If the Government can prop up the company during the uncertainty then, once confidence returns, it will be fine.

However experience tends to suggest that the hard hearted city traders are just being realistic as there are sufficient facts to justify their judgement namely the levels of debt and overvaluation of assets (as Robert continuously points out).

If I borrowed 100k 2 years ago and lived life on the hog without working then it is real that I would now be destitute and unworthy of further credit or investment.

Unfortunately the imperatives of power dictate that Brown has to believe that the situation is purely down to lack of confidence and prop up the ailing companies.

The economic illiterate view the state as a vast unlimited source of succour whereas in reality it still has to obey the laws of economics.

To pay for this support money will be printed and inflation will take off. It will be a repear of the 1970's.

Eventually a 'Maggie' figure will arise within the Tory Party and there will be bad medicine for the nation as we stomach our debt.

Then once everything is all sorted along will come another Smiling Chancer and the cycle will repeat once more...

How many steelworkers will still be around to take up their old jobs in six months? Just about all.

How many SME’s will be able to start up again in six months? Very few.

I should think the answer for government ministers is easy, except you do not get big headlines for saving an SME compared with a steelworks

Stop the subsidizing madness!

At some point we need to just take the pain.

All we seem to be doing is subsidizing Gordon Brown's political popularity.

Lets go through a short, painful recession, get rid of the man who helped steer us there, and then start recovering in around 2010.

I dont own a house, and I hate the idea I have to pay other peoples mortgage payments, thereby stopping the housing market from going down and making it more difficult for me to buy a house.

This government has to go soon

Get rid of all current tax allowances, unemployment benefits and tax credits etc, and instead just give everyone (working or not) a flat rate state benefit. And do that on a permanent basis. That's the only way that the interests of the employer can be made to exactly match the interests of the Nation when deciding whether to make people redundant or to hire them (and how do we expect a market economy to function correctly if those interests are not made to coincide?).

Rather drastic, and I guess it would require a significant rise in the rate of income tax, but it would mean that workers would benefit significantly from taking on work at even very low wages . Poverty traps would no longer exist and effectively you could remove the threat of unemployment while making the economy function more efficiently.

Just a thought....

tax payers already subsidise wages, what do you think tax credits are? my employer made 3 billion pounds for share holders last year, meanwhile workers are paid such low wages that we are all on tax credits. once again an example of public money going to private, from the poor to the rich. Role on the end of capitalism soon please.

When in a hole, stop digging, Alistair.

A strategically-inportant company comes under economic pressure, because of unfair trade terms. We do nothing to sort the trade terms out, to restrict the competition, or to promote the business, neither do we expect the shareholders not to take a dividend. Instead, Tata goes straight to blackmail, cough up or we destroy some workers' lives.

Tata, Tata, if you need support sell it back to us for a penny.

More so than America is being 'held up' by the Car Industry there, the UK Government are over a barrel with any foreign owned industry facing difficulty. Corus know full well that the number of people on the benefits queue would increase with any economic cut backs made by them, actual jobs would be lost permanently, but more importantly, foregn investment would be lost - throwing yet another ball into the juggling act that is the UK economy.
We all remember the uephoric sigh of relief and almost pleasant surprise, when TATA began investing in our industry, can we afford to find out what the reverse might be like?

Think of words strong enough to describe the opposites of 'Euphoric', 'sigh of relief' and 'pleasant surprise' and I think the importance of our actions here becomes self-explanatory!

Mick Hart
Nottingham

Ridiculous idea; once again things that are attractive in the short term lead on to disaster.

1) Can we trust this government to make the right (not politically favorable) decisions?

2) Where is the money coming from?

3) Who will be next to come cap in hand?

4) When do we start saying no?

The Dutch are in dreamland if they think things will start picking up in 24 weeks !

All this would do in the UK would be to park the problem for a while.

#5

No, that was the end game. I used to trade with Woolworths when they were powerful and they were simply poorly managed.

A rubbish company to whom it was very hard to seel on any terms other than price, run badly.

Yes - it has a level of attraction in that it keeps skilled workforces together, but business is business and should not expect government handouts when they get into difficulties. There is a worrying trend here of everyone getting out their begging bowls.

What I would prefer to see if we as taxpayers are to provide any support is that it is only provided in a structured way that takes the politics out of picking who gets support and who does not. Perhaps under the umbrella of insolvency procedures or perhaps a scheme where the support is given but if the jobs do not still exist in X months or years then the value of the support together with interest at a punitive rate is recovered through corporation tax.

An interesting proposal but:

What happens after the 6 month period?

Does the company go back with another begging bowl?

Will this bailout happen for small businesses or just for those who employ large numbers of people?

I'm not sure how feasible this proposal is given that the recession is likely to last more than a year.

People, businesses and Govt. need to accept responsibility for their actions.

Will we continue to reward failure instead of teaching people about accountability and responsible actions?

Risks are taken but the taxpayer cannot bailout anyone and everyone otherwise we will have a debt millstone around our necks forever.

Britain is no longer a world powerhouse and is unlikely to ever regain such a position for the forseeable future...

And what happens when the 24 weeks are up? Do we get another bout of begging or blackmail? What happens if like Northern Rock the employer has lots of employees in labour held constituencies?

It doesn't answer the simple question just who will pay for this?

Post 5 the issue for Woolies was simple. They didn't own the shops as the shops had been sold off and leased back the last time Woolies were resold. Woolies having been bought and sold and refinanced a number of times since 2000. As such they had little they could sell to keep going and a huge amount of debt.

The credit insurance was merely the final nail in the coffin. Credit insurers stopped giving cover as they knew the business was effectively bankrupt and depended on credit from suppliers to keep operating. Credit insurers and suppliers were effectively allowing them to continue trading

woolies owed huge amounts, I believe over GBP 300 million, to banks including the finance arm of General Motors and it was the banks that pulled the plug in the end as they didn't want to roll over or increase borrowings.

No!!!!!

I don't think the banks were suitable for a bail out.

In the same way why should we bail out failing companies.

It's called insurance, if the companies want this then they can pay into a pot that they can draw from in times of need.

Same should be applied to employees, so only people who've never been in work qualify for JSA.

The taxpayer is getting regarded as the gift that keeps on giving, and considering we're already going to have to bail out Browns economic boondoggle over the next half century and we're being expected to spend our way out of recession, how about giving our squeaking wallets a break?

This is the first time i have commented on one of these blogs.

In one word... "Ludicrous"

Everyday a new failure. Everyday the same question.

Should 'Smash Gordon' print more money to keep paying this particular group or that a wage. Even if that means further deterioration of our currency, and yet more debt for the future. Maybe he should in some cases, I do not know. Certainly Woolworths employees who sell tat for a living will not be saved. Steel workers may have some strategic value. Welcome to the depression where every decision hurts both ways. I'm sure many here now regret buying that new X5 from the proceeds of an equity release on their house now that they have to service a large mortgage and have job worries.

For those fools here talking about 'looking forward to inflation' because they somehow think that the erotion of savings is a good thing and are motivated not by any desire to see a fairer, more secure country, but by sad envy, are going to discover they are still going to be bottom of the heap only their standard of living will fall the most.

The wealthy and the smart have already deserted sterling in droves. There have been dozens of mentions on this site going back months to get out of Sterling and those who heeded this advice have secured their savings and made a profit. Why else do you think the rate has already dropped to 1.12 today. This is the smart money. The main wave is yet to come. What do you think the Germans are talking about?. For those who only have wealth in their house and totally rely on salary or pension things will be bad; which is most of us including me - minus my savings in Euros. For those with no savings who lose their jobs look forward to a soup kitchen.

In a crisis most of the rich only get less rich which means they stop lending to the poor. Many in the middle find out they are not as clever as they boasted at that dinner party last year. Those at the bottom discover inflation means that benefits literally will do no more than prevent starvation.

Time for an election. Enough of the socialists.

Woolies problems were cash-flow related to not being able to pay for stock while waiting for their customers to pay them. This kind of thing is why many businesses are failing suddenly - they are owed money which isn't being paid to them by their customers.

And, as 1 business fails, it stops paying its suppliers which creates a huge snowball of other failing businesses.

I reckon this is more important to the economy than any amount of fiddling with VAT and house prices, having a tremblingly weak currency isn't going to help exports if there aren't any exporters left!

And house prices aren't going to hold up if everyone loses their jobs, regardless of the new repo protection scheme, it'll end up costing us more in the end than if we did help out struggling businesses with their cash flows.

Re comment 5
How could a company that has been in existance for so long owe so much? Its my understanding that a long time ago Wollies owned B&Q and split it off and the holding company also sold Woolies assets (eg shops - the trendy thing to do then encouraged by institutional shareholders wanting income) and then Woolies rented them back. So the assets were sold on the grounds that retailers shouldn't be property companies. And people invested in Woolies not understanding the significantly changed nature of the business. And no doubt there were sales projections just showing sales ever increasing. This happened throughout retail, so now they only have long term leases (ie liabilities) with no assets. I doubt if administrators will get any money for shareholders. (This has happened with Kwik Save, Somerfield, Gateway and I'm sure many others).

Some rescue packages are cheaper and less disruptive than bancruptcy but in the long run the steel industry is going to have to contract yet again.

We should be spending the money investing in a low carbon future.

Robert,

this Dutch scheme you mention:

(What Corus would like to see in the UK is a version of a scheme recently introduced in the Netherlands, by which the Dutch government pays up to 70% of the salaries of struggling Dutch companies for up to 24 weeks.)

Is it a loan?
Is it a bailout?
Who pays for it?
Who is eligible for it?
Can't the government advertise enough underwater basket-weaving co-ordinator posts in the Guardian to soak up the excess?

This presupposes the economic future can be predicted. Politicians cannot be expected to back winners or we would not be in this mess!

Dear Robert
An Absolute cracker of an idea, as long as it is for the worker thats fine, and there are no Hidden issues. "wHY Not"?
Cetainly keeps people off the dole , and in ajob,
This is also the basis of the governemnts return to work policy for those on benifit, if you want benifit, it should be linked to the number of Hours you work, for the community, or other community service and at an hourly rate.

Well the Government has put our money into the banks - strangely though that seems to have protected the salaries of the fat cats rather than the jobs of front-line staff. And it certainly hasn't done anything to ensure that banks treat their customers - business or personal - equitably.

If taxpayers' money is to be used, then the Government needs to be strong in ensuring it is used to look after the people who most need it. It should NOT be used to ensure that those who cream off the best from those organisations in the first place and 'laughing all the way to the bank' (excuse the irony)

HotNewsCol

#11 stanilic, I thought Gordon Brown was leading the world, and saving it. I'd watch out, a comment like yours could lead to Anti-terrorism police turning up at your home and workplace!
Isn't a Democratic Government wonderful?

Of course if we had any industry in this country the demand they generated for steel would make this kind of interventionist action unneccessary.

It would be nice if the government would share with us its vision for the future. We have been world class spenders, now we need to be world class at something else.

No share holders should

If Corus' problems are temporary, then they ought to be able to cover costs from internal resources (see Alex Curzon's post #7 for how it's done).

If they need government subsidies it means they don't expect a turnaround soon, so get the pain over and done with now.

And, RP, please don't try dressing up this "Dutch idea" as something novel, interesting, and worthy of great debate. It's nothing more than a scheme to pay unemployment benefit to people who, nominally, are still in work. As such, it has the great attraction to your mates GB and Ally D of reducing headline unemployment figures. The money will be paid one way or another. The question is whether or not we have the honesty of higher unemployment numbers to go with the cost.

Per RP: "The point of the Dutch scheme is to keep employees on the books of stretched companies during the most acute phase of the economic contraction - in the hope that the relevant companies can afford to pay wages once more, when the recovery begins.

There's certainly a logic to the Dutch safety net, in that it should mean that important companies don't permanently lose access to a trained, skilled workforce."

If any of this were the case, Corus would cover the costs themselves, as many other firms are already doing without putting out the begging bowl. Actions of this type already attract government help, in the form of lower corporation tax liabilities and income tax/NIC in the case of salary sacrifice.

The fact Corus is asking for explicit government help means they have little confidence of the good times returning.

I say again: if accepted, this would be nothing more than a scam to hide the true level of unemployment. Incidentally, what are the Labour majorities in the constituencies around Llanwern?

Perhaps if "Master of the Universe" hadn't planned to hike up NI.

A TAX ON JOBS.

Then firms requesting its employees took a pay cut wouldn't be required.

Now Peston you float the idea that government subsidies wages.

So let's get this right.

1. Government taxes workers and employers more NI.

2. Firms cannot afford the payroll.

3. They lobby government for subsidy.

I have an idea.

Why not just cut out the government middle-man, they are not exactly adding value are they?

Just cut NI for firms and employees.

Far, far, far more effective and it might save some jobs.

Jobs pay tax revenue and don't take dole.

I can't believe what I read here...

Taxpayers subsidising the economy, subsidising business.

Why not just cut government spending and cut taxes?

Set business free from the slow, incompetent hand of this government.

Oh, sorry, too Thatcherite but exactly what happened to sort out the last Labour administration that pee'd the country's money up the wall.

You can’t beat having a free market and then intervening at every step along the way

They call it policy?

#14

"This government has to go soon"


We can only hope - I beleive that unless he continues with this borrowing to subsidise cr@p that the Labour party could be effectively wiped out at the next election.

The concern that that raises is the possible rise of the BNP to fill the vacuum left by the implosion of the Labour party.

They could come 4th in the next election!

Instead of Gordon Brown wasting borrowed money existing manufacturing companies who export should be given financial support as they will be the life blood of any recovery.

Not to rescue them from inevitable insolvency but to give them sufficient time to restructure and maintain viability.

Unfortunately because of the financial restrictions a selective response is required as to which companies are given such help.

As in the US they should be able to produce a sound business plan for the future.

New businesses take years to become established so it is essential for now that what is sound is preserved.

There is no point in this PM being stubborn because it blows away his ridiculous idea that countries should not be protectionist.

He will find that inevitably all countries will be doing the same.

PetersKitchen wrote:

So redundancies in the banking sector are ok but in the steel indusrty they are not.
________________

Since the steel industry actually manufactures a real, physical product that can be exported and create real wealth, then yes protect what remains of our steel industry.

The idea that the Government haven't bailed out the banks and saved many jobs in the financial industry is a off the mark as well.

Taxpayers credit card. Biggest credit card in the world. Any lame giant duck can apply. Special rates for 10% job discounts. Sorry not available to individuals and small businesses. Save the world now.

If this happens then surely the subsidy must be swapped for equity in the company, which could then have the option to buy back later at a price which reflected the taxpayer contribution plus interest.

5 re Woolies and credit insurance.

The thing that made credit insurance either unobtainable or unaffordable for Woolies was the absence of any significant assets in the company, for reasons correctly stated in post 1.

Apologies if this explanation turns out to be in one of the other 30 posts awaiting moderation.

I wouldn't have a problem with subsidising wages of struggling companies if we were living in a COMMUNIST SOCIETY.

However, the last time I looked, we weren't. The danger is that the subsidy will keep the workers in employment, but when we reach the other side of recession, that money will effectively make up executive pay.

You can't have your cake and eat it. Either we save all industries - or we save none.

Saving the banks has set a dangerous precident, and now everyone wants in on the action.
In hindsight - maybe the banks should have been allowed to fold because the Government cannot afford to save every business.

That means there will be picking and choosing - and we all know what that means don't we? Donors and Friends of the current administration will be saved while the others are left to wither and die.

Does that sound like a free and fair society to you?

If they save the car industry then I really will go mental. Next we'll be subsidising the reconstruction of the wolly mammouth industry, which really shouldn't have been allowed to die out 40,000 years ago in the first great depression.

I vote for us subsidising the pay of people who teach our children, look after us in hospitals, and maintain law and order...

Railtrack gets subsidised - whether you call it a subsidy of workforce wages or something else, it all amounts to the same thing.

Politicians seem to have an easy enough time deciding which of these 'businesses' to save. I don't see any anguish about the increase in civil service numbers over the past few years, and the general widening of the state.

Are you seriously trying to tell me they get all coy about being able to make decisions when it comes to businesses that don't usually strain the public purse?

Why's this a problem for the steel industry, when the decision seemed so easy for the banks?

I know there's little justice in the world, but please, save me from the bleeding hearts who feign that they can't make a decision...

On the main point of employment subsidies, these are simply unaffordable.

On the other hand, they potentially would have been affordable, indeed potentially desirable, had the government not panicked itself into the broad-brush, vastly expensive and (as we shall soon see) utterly ineffectual cut in the VAT rate.

There is much to be said for a policy of incisive, targetted and temporary intervention to save jobs, indeed whole industries, in times like this. But only if it can be afforded. And Gordon has already spent all we had, and then some more, elsewhere.

Post 10 Base_experince

Quite right we should not keep afloat anything which has perished by its own hand or will be of little value to us in the future.

However we should work hard to preserve anything we will need for the future

My feeling is SME’s, more than any monolith retailer, heavy industry or bank will be more important and essential in any future order of society.

Problem is no one seems to want to work out what the future will be and therefore what we will need to make it work.

Let’s hope when Barack Obhama said change he meant change and had a few ideas for what that might be.

Of course he could always consult the world’s saviour Gordy.

Quite an appropriate slip given the time of year though im’ not sure which is the Inn and which the stable number 10 or the House of Commons.

I instinctively hate this idea, I remember British Leyland and the money that was wasted on British Steel but...
We have an enormous structural problem in the UK paying for our current standard of living. We run a 4% deficit because we don't make enough and spend (and borrow) far too much. We have been dependent on Financial services which are unlikely to provide as much wealth and tax for many years to come.
Can we really afford to lose yet more manufacturing capacity? What are the implications for car makers in the UK if they have to import all their steel? Are new plants likely to be built nearer the source of supply? Unlike the days of Red Robbo there is commendable realism and practicality being shown by the Unions here and this deserves support. I totally agree that things are likely to be worse in 24 weeks not better but why is it always the UK plants that are allowed to close first when capacity is being reduced?
Our major problem going forward is that this incompetent government has spent far too much on the Banks (£600bn+) which has damaged our credit rating as a country. I therefore also agree that we have to learn to start saying no and stop wasting money like the VAT cut. Oh Lord help me stop sinning but not just yet...

where will this stop, sorry but NO , no no no, my company have advised no salary increased for next 2 yrs, now we need to get a wake up cal lin the uk, the wages paid are too low to live, when the average house costs almost 1?$ million and av wage £20k or less how on earth was this mess not seen.... this government must be held accountable and must stop bailing companies. will they pay my salary increase ive needed for year but my comapny ( one of biggest employers in uk - private sector ) in saying that they can pay milliuons on stupid tv adverts

Robert Peston, whilst sitting back in his Ivory Tower, should rembember that his salary is paid for by licence payers, many of whom are employed in the private sector. Licence payers in the publice sector are paid for by the private sector through taxes. He seems to think that he can spout off about what happens in the private sector as if it is another world, as though what happens there doesn't matter.

It is the private sector that ultimately pays for all government spending and creates the wealth of the nation. The government should be doing all it possibly can to help private business without Mr Peston's somewhat dismissive ramblings from his Ivory Tower.

Perhaps Mr Peston would prefer to see the UK as a centralised economy, nationalise business and have 5 year plans? Come to think of it, isn't that what Gordon Brown would secretly want too?

Chorus and the American big three should be put to producing Dutch tulip bulbs to save capital costs .


Remember Britain is well placed [at the bottom of the sea like the tuttannic]to wether the current financial storm according to the highest par lammentable Authority

Rest assured that the mperrors will not cut hire taxis

Well here we are again writing miles of complaint about what is wrong or sometimes right but offering nothing towards the debate as to how to resolve matters for the future.

Is it to difficult or is it to horrific to unpopular to even debate the solution.

It’s certainly a lot easier to do nothing problem is doing nothing will give more space to anarchy (see Greece) of course you can lie that you have the answer that will delay anarchy (see Zimbabwe).

If you want the indicator of who is on the right economic track and who is on the wrong tack take a look at the Dollar the Pound and the Euro exchange rates.

We can not become a manufacturing exporter in hard economic times because basic products can be produced and distributed far cheaper in the Far East Eastern Europe Africa and India and until we get back to world wide growth we will not be able to export our high value technology and service products.

In short we would in the West have been better of rather than give our money to our banks to have distributed it among the poor of eastern Europe and South America they would have then spent it on buying essentials food, warmth clothing ( basic Maslow’s hierarchy of needs) so improving their position.

That would have improved the wealth of the middle economies Russia China India etc who would then have bought our hi-technology from which we would earn money.

We may be a nation of shop keepers as one prominent European once accused us of being but given Woolworth’s position maybe not for much longer and as we are no longer the industrial power or basics manufacturing nation we were no solace there

The banks will never earn anything for us again until they can build a new false economy and that is going to be a long memory away from now.

Sadly blogs are turning the pen from being mightier than the sword to being a blunt penknife folded neatly even more effective than the police are being with knife crime.

Now I'm of for a four mile walk

There that’s most of today’s news dealt with in a few short lines but to what avail.

Read this view point elsewhere before me thinks?

Wonder if there something in it?

Gruad999

"The economic illiterate view the state as a vast unlimited source of succour whereas in reality it still has to obey the laws of economics."

What a fantastic sentence to sum up the origin of our nations problems.

Economically illiterate covers a very significant percentage of the population and I fear includes members of the cabinet.

When will enough people realise that nothing is "free" and everything has to be paid for by individual taxpayers (not the "state")

This government has done more than any other to encourage the beleif that we can have everything we want and have to pay little or nothing for it.

This has been acheived by excessive individual and government borrowing. Now we've got to pay for it and I for one doubt that we can.

I'm worried / scared!!!!

"it would involve ministers making a nightmarish judgement about which companies and employees deserve such a subsidy"

And their judgement has proved to be so good, hasn't it ?

But just as much to the point, which 24-week period would they select ? Despite what Darling is relying on - a recovery starting towards the end of 2009 - things aren't looking at all good for the whole of that year - and beyond.

30 gbjbaanb

You suggestion is fine providing the true facts are presented and the situation is steady state and the assessing agency is accurate. This is usually not the case. The true facts are not presented, the situation is dynamic and developing, probably downward, and the assessing agency, the government, is abysmal in its judgement. Just why should UK taxpayers money be piped to multinationals where it can be moved at the click of a mouse - Lehmans Bros moved money from the UK to the US. Or do you then say no to multinationals and if so why economically. It could just turn into a Dutch Auction, quite appropriate as the quoted case is in the Netherlands. And how do you limit who applies. Corus seem to think a 10% salary cut will save them, why? Their judgement has been wrong, why should this be right.

45. At 2:12pm on 11 Dec 2008, TheMightyRover wrote:
PetersKitchen wrote:

So redundancies in the banking sector are ok but in the steel indusrty they are not.
________________

Since the steel industry actually manufactures a real, physical product that can be exported and create real wealth, then yes protect what remains of our steel industry.

If that is the case why do they need bailing out or protected?

The idea that the Government haven't bailed out the banks and saved many jobs in the financial industry is a off the mark as well.

Wasnt it the financial hub in London that contributed 20% of UK GDP?

I dont think it is way off the mark, a failing business needs to restructure and if nescesary, cut jobs - you can only export what people want to buy and more importantly what protectionist policies allow people to buy. This is a no brainer, the factory's only market will be what it has internally and unless they decide to build a lot more carriers, it aint a lot. Finance is/has done it and so should every other sector without support.

Voluntary 10% wage cuts the tip of the deflationary spiral, this is just the beginning. In the 30's US unemployment rose to 25% and those still employed were paid 40% less. The modern day labour force is far less fluid than in the 30's can you see city workers digging holes

If Corus is Indian owned, shouldn't it be the Indian Government bailing it out

As no17 comments, if it is bad we'll buy it back for £1, and let the administrators follow you for the rest

Quit incredible in my responses on this blog I got

The Heinz post
The pack of cards post
The meaning of life post

Now I wonder where this post will fall.

Maybe it’s the way forward for governments to make decisions on our future, by the law of co-incidence.

{Has he finally gone - I hear you say?]

I wonder why Gordy can’t

This wage cutting has happened many times in the past and it has never stopped redundancies or the closing of businesses.
All it will achieve is the workforce accepting less money and the company bosses laughing at them while their salaries an bonuses remain the same. It will not help the company or save any jobs at all in the long term.

49 theresonlyonesoupey

I agree - its capitalism on the way up, socialism on the way down - then capitalism on the way up again. A downsize is needed with some of these businesses, there just is over production based on over consumption and some of these businesses had problems when the bubble was there, they are boud to have problems when the bubble has gone. It is just madness and will be uncontrolled.

"If they save the car industry then I really will go mental. Next we'll be subsidising the reconstruction of the wolly mammouth industry, which really shouldn't have been allowed to die out 40,000 years ago in the first great depression."


very funny, but a few too many meaningless 'have your cake and eat it' phrases in the rest of your post

there yuo go I missed both sides

Ah well we carry on as always then. shame it might hve worked.

without any guarantee this scheme is foolish ! What happens when after we have saved the world ( or its steel makers ) they decide that , on the rise out of depression , Corus decide to say ta-ta and go anyway?. To paraphrase a slogan from about 1776 ' No taxpayers money without guarantee '

What should have happened is schemes like the dutch one should have been in situ all along for a set of core british industries.

But hindsight is a wonderful thing the Governments past and present have allowed all our core industries to be in foreign hands and its impossible to pick and choose who should or should not get help.

Jobs are safe at westminister though and pension funds are secure so why should they care,and as they are the only ones who can change it they are in a rosy position.

With industry in foreign hands,our education system in turmoil,our national health being slowly privatised,europe making our laws,the banks bringing the world economy to its knees it does make you wonder just exactly what an MP does,we should really look at forcing major cuts on the numbers of them, they are surplus to requirements.But how ???

Screams in Horror, so we are now paying our own wages through Tax, brilliant idea

I have a better idea, scrap the government, let companies that cant adapt or adjust fail, and let me spend my wage how I want

What happened to the days of good old free market Britain?

We've lost our way.

Recession is a natural part of the economic cycle, trying to "prevent" them only prolongs them and the suffering they cause.

If we had money I'd say yes, but the government is broke. Can't pay anymore money. If it keeps spending the whole country collapses. Its redundancies or company collapse.

By the way Robert, could you tell us what would happen if the government declared the country backrupt and said our loans were too big to pay.

50 peabop

The jobs you quote are typical public sector jobs. They, bar the odd case in the private sector eg private teachers or nurses for example, are already paid for by the taxpayer. The public sector pays tax but in doing so it is just returning some of the taxpayers money it has been given. In what way are you suggesting the taxpayer further 'subsidises' something they are already paying for. If you are saying that you dont want cuts in the public sector that will have to happen so it will be a case of means testing services or getting rid of invented jobs like dustbin police and litter police and fluffy feelgood jobs. And stopping the public sector feeling they have to investigate every numpty query for fear of offending or not being politically correct. Something called 'efficency' more usually present in the private sector.

I see

So I am a small company in competition with a big one

The big one employs 500 people and I employ 10

The big one has contacts with government because it gives large donations

I do not because I am small

The big company gets a 70% subsidy on it's wage cost

I do not.

I go bust

He does not.

If I pay tax I have to subsidise my competition.

This sort of interference will not work unless it is for everyone and it will not work if it is for everyone as it will cost too much and support businesses that were going to fail anyway

I really think that these are all pointless eyecatching political initiatives and should be avoided.

As far as Corus is concerned Tata will save what should be saved based on what is worth saving

does it matter really......whats really worrying is that i dont think anybody knows what to do? brown .cameron .king economists. me .people on here .danny blanchflower(wasnt he the footballer!!). nobody has a clue its the blind leading the blind....the only thing for sure is the money men get richer and the poor get poorer. and what happens wen the euro = the pound? does that mean were in the euro? the whole system is a total mishmash. we could do worse and get some of the bright kids on countdown running the economy.

The real problem with bail outs, guarantees, employment subsidies and the rest of the proposals for softening the effects of recession is that they are largely deferring the day of reckoning, and possibly thereby prolonging the recession. Robert, you have highlighted how a funding gap grew of £740bn in your ecellent sumary on Monday. What the government seems to be doing is trying to defer curing that particular problem until after the next election. Good for Gordon, but not necessarily for us and our children in the longer term.

As for the government trying to pick out those to subsidise, well, we have some history with the last period of labour government. Picking and propping up industrial champions, particularly British Leyland just doesn't work. The wrong recipients are chosen for the wrong reasons, and the taxpayer foots the bill.

I believe that the government must oil the wheels of banking to allow normal commerce to resume, but otherwise there has to be a lot of pain. The country has been on a binge to end all binges and now has to suffer the hangover.

Frankly, the huge truth is that we need to encourage true entrepreneurs and discourage those on the publics books. We must shrink the public sector. Remove the final salary scheme from all public sector workers who earn more than £25K/year - cut back on the endless number of overpaid public servants in job-for-life posts or make them compete (globally) as the rest of us.

I don't understand the logic in this proposed scheme. I can't see recent levels of growth in the global economy returning for a long time, if ever; these levels of growth were driven by record levels of consumer borrowing in developed countries and, from I can gather from the commentators, this will not happen again (at least not for a while). The result of this is that we have overcapacity in certain industries and that overcapacity is not a short term problem. There is only one real solution to this; capacity will be lost. I appreciate that this will involve job losses but attempts by the Govt. to bail out/subsidise these industries will not work. It will cost to much and o on for too lon. The other big problem I see arising from it is that it effectively involves protectionism. Presumably we will have to throw EU competition law and the free trade treaties out of the window. There is a risk that this is the start of a slippery slope. Maybe we can prop up Corus by purchasing steeel to build armaments............

I hope the Government are not seriously contemplating this madness. It would make the German Finance Minister's comments seem flattering.

"What Corus would like to see in the UK is a version of a scheme recently introduced in the Netherlands, by which the Dutch government pays up to 70% of the salaries of struggling Dutch companies for up to 24 weeks.

The point of the Dutch scheme is to keep employees on the books of stretched companies during the most acute phase of the economic contraction - in the hope that the relevant companies can afford to pay wages once more, when the recovery begins."

I'm sure Corus would LOVE to see a scheme like that, but it's not for their benefit, it's for the benefit of the tax payer.

24 weeks from now is May 2009 and I've not seen any sensible predictions that say we'll see a recovery by then.

So, as others have asked, what will happen at the end of the 24 week period?

Also, what restrictions would be placed on it?

I appreciate it might have some use if it's saving companies that would otherwise go broke, but how do you stop it being exploited by companies that have enough money to last 24 weeks, but nevertheless fancy having 70% of their staff costs paid?

Maybe the answer is to cut a deal where companies that are:

(a) in shrinking sectors

(b) don't have the money to tide themselves through 24 weeks

(c) show promise of recovery

could get a deal where the govt pays their staff what the staff get on the dole (including housing benefits etc) and the company makes up the rest.

That might be a bit fairer.

(and more likely to save jobs, rather than just postpone redundancies)

#71 wrote
"Screams in Horror, so we are now paying our own wages through Tax, brilliant idea

I have a better idea, scrap the government, let companies that cant adapt or adjust fail, and let me spend my wage how I want"

And when your wife or child contracts a nasty disease and you have had to sell your house and you can no longer afford the treatment for them, will you still have the same opinion.

#61 "Wasnt it the financial hub in London that contributed 20% of UK GDP?"

Hmm... More like the financial hub in London *consumed* 20% of GDP. I'm not sure it contributed all that much of real value. It's like having the finance depatment of a company costing 20% of turnover. Crazy.

Better to see the finance sector itself as being another tax on the few of us in manufacturing/farming etc that produce real wealth

I would love to see the economy in 4 years time, I suppose it will be in a mess if Labour still rule the Goverment policy.
My father works for Corus, my mother in the National Trust and I work for a large finance company.
We are all now at a desperate threat that we all may be made redundant. I shall be made redundant next year... so in response to an earlier blogger I neither or have never got a bonus and will have no job as of next year.
We need a change of government...and quickly!

On a related topic, here's another Bloomberg article. This also has resonance with GB and Ally D's campaign to kick start bank lending.

GB's new best friend, Pres Sarkozy, has been "doing a Gordon" on a few French banks, and now has them lending money to a loss-making auto parts maker at less than commercial rates. Which means that somewhere in France, firms that are willing and able to pay commercial rates (and are probably profitable) cannot get credit to stay afloat (or even better expand). A sign of things to come in Britain?

https://www.bloomberg.com/news/exclusive/

The relevant article is entitled: "Faurecia Receives `Windfall' Credit as Sarkozy Pushes French Banks to Lend"

According to the article:

"French banks that got 10.5 billion euros ($13.8 billion) in a government bailout gave loans to Faurecia SA, the nation’s largest auto-parts maker, at below commercial rates, credit analysts said."

"What happened to good old free market Britain" ?

"Free market Britain " helped get us into this mess. Compare our current prospects with France.

Would this apply to the self-employed? Would there be a limit on the size of company, or its location, or the sort of product/service it provides?

Frankly, I'm against any bail-out of any kind, for any company - and that includes the banks. But I wish the world was so simplistic as to easily accommodate my hardline position.

In the Depression of the 1930s legislation was passed to maintain wages as a means to aiding recovery. Sadly, the consequence was that companies continued to shed labour and the downward spiral continued. As the Depression progressed this law was rescinded and wages fell to reflect the wider fall in prices. Soon the economy started to recover and employment recovered. Falling wages were only part of the recovery process but they did play their part.

One of the things that made a fall in wages possible was the deflation going on such that the cost of goods and services fell which made the lower wages easier to manage. It is reprehensible that the politicians believe that encouraging inflation to come back will be a solution to our problems. It emphatically will not and will hit the poorest in society most. Take a look at Zimbabwe where the consequences of printing money and encouraging inflation are vividly seen. The Governor of the Reserve Bank of Zimbabwe was even praising Gordon Brown's monetary policy recently! Inflation is never a solution. Who would want to pay more for something rather than less? Pursuing a policy of encouraging inflation to make things feel better in the short-term is a policy of a charlatan who is more interested in popularity and re-election than solving the problems.

Well is it not time to reduce Council Tax now, the houses are worth less, the tax should be cut in half at least to let the good folk get back on top of things again.

Tax Tax Tax that is all we get, we pay out a fortune, just like the 16th Century, come on UK fight back and let the good people of this UK get back to some sense.

#88copernicus62
The Governor of the Reserve Bank of Zimbabwe was even praising Gordon Brown's monetary policy recently!

You know you are trouble when your monetary policy is being applauded by the Zimbabwe government!!

PetersKitchen wrote:

Since the steel industry actually manufactures a real, physical product that can be exported and create real wealth, then yes protect what remains of our steel industry.

If that is the case why do they need bailing out or protected?

Wasnt it the financial hub in London that contributed 20% of UK GDP?
______________________________

You are quite correct, there is little reason why the bulk of the UK's manufacturing capacity will not be transferred to the Far East to take advantage of the lower labour costs. As we purchase their low cost products then that money is lost from the British economy. It creates the illusion of prosperity but in the long term it is financial suicide.

The Chinese love of gambling and dexterity with numbers suggests in a few years they will be able to handle the stock markets as well as the best traders in London and New York. When this happens the City of London will decline as a financial centre.

#67 - acrossley89

Have my cake and eat it? I come from the United Kingdom where the public vote in the party who promise lower taxes and higher public spending.

I seem to recall the Lib Dem's suggested a policy of higher taxes and higher public spending a few elections ago - and no-one believed they could deliver it!

Unfortunately the reason we have this reccession is because too many people have had too many cakes and eaten the lot.

....hence the rise in obesity.

Just a thought:
Even if we wanted to join the Euro now as €/£ parity surely approaches, would they have us - the sick old man of Europe - in the club?

The problem with giving money to beggars is it becomes impossible to refuse all the others too. In the end you have given everything away.
Sometimes you have just got to walk past them.

Frankly, I would rather subsidise workers of a struggling but potentially viable business than subsidise the bonuses at the banks.

If we ALL get our wages paid through tax then surely we have created an economic perpetual motion, and none of us need to go to work? Count me in!

It's understandable that Corus and the unions would discuss pay cuts amongst other things - in the Depression wages in the US declined by a third over 5 years or so but unemployment still rose to 25%

But your mention of the Dutch initiative to pay 70% of wages for 6 months reminds me of the huge dangers associated with the unco-ordinated nature of all these bail-out arrangements piling up at national level; the EU alone is now home to a dozen competing/bickering bail-out programmes....... the US and Canada are not co-ordinating their actions despite being in NAFTA together; China, Korea and Japan are all doing their own thing; god knows what the Russians are doing etc etc

I agree that extensive govt intervention is justified to try to soften the severity of the downturn, but the lack of co-ordination makes these bail-outs less likely to work, whilst greatly increasing the likelihood that multi-national companies will demand money from each country in which they operate; if they don't get paid to stay then they will close their operations; if they do get taxpayers money they may close their operations anyway whenever they like; if govts are going to intervene then they need an industrial strategy to identify priorities ....... banks vs steel vs cars vs Woolies vs aircraft carriers vs housing........ tricky choices!

And what about the UK construction industry? The whole sector will be on its knees by the Spring so are they to be bailed out? very hard to tell if it would be justified, though at least they can't easily up sticks and move 'production' to a different country

The Big 3 US automakers are a perfect example of how difficult it may be to achieve much through bail-outs; even if they do get the $15 bn 'bridging loan' through the Senate, and it seems doubtful that the bill in its current form will get the necessary Senate votes (a false start, like Paulson's $700 bn toxic debt bail out, might mean a new and severe dip in the stock markets next week, by the way). A Big 3 bail-out would only keep them going for 3 or 4 months, when there is no sign of sufficient demand to justify the continued existence of more than 1 or maybe 2 of the 3 companies; and will they keep their branch plants open in Canada, which employ 400,000 workers, if they don't get the $6 bn they demand from the gov't there? but Chrysler have friends in govt so the lamest duck still gets to carry on quacking .... for now

This patchwork of reactions to the crisis shows no sign of working at all so far. Our great leaders might as well give us each £10,000 in vouchers and tell us we have to spend them by the end of the financial year. That would also lead to the wasteful consumption of a bunch of stuff we don't need but it would make the winter more cheerful. Whatever the short-term measures though, we do need to start accepting a lower standard of living; get those allotments hoed over so that we can plant some vegetables in the Spring; good for us and good for the planet

If the government subsidises industry then the taxpayer must be given shares to the value of the subsidy so that if and when the recession ends ,there is some reward for the taxpayer. However before any subsidy is paid then the employees of the company and the directors must agree to take considerably less out of the company in salary while it is being subsidised and no dividends can be paid to shareholders, or shares traded on the stock exchange.

NO.

There will be no economic recovery for YEARS.

Look at what the market data is telling you, Robert.

Such a scheme would quickly become a sunk cost, and once the fallacy takes hold, as it surely would of our stubborn politicians, our economy will be sucked into a black hole. I do not trust their judgement to choose impartially, let alone wisely.

JayPee28bpr #40 - couldn't agree more. Keep the unemployment figures articficially low - along with fibbing about the true nature of public sector debt and just how much tax, pain and currency devaluation is around the corner - just long enough to squeeze over the line with a tiny majority in a 2009 election thanks to the support of the traditional Labour supporting electorate that those in Tory and Lib Dem constituencies have been paying for for 6 months or more