2011-11-27

If it doesn't work, do more of it!

Looks like the mortgage subsidy plan was just a warm-up for our boy George Osborne. He now proposes to sink a good few £bn into underwriting bank loans to small and medium businesses. What could possibly go wrong?

Why does this look to me like a "heads I win, tails you lose" plan for the banks? They can up the risk they are willing to take on, safe in the knowledge that the Government will backstop their losses. So businesses that should not have got a loan will now benefit from one, proceed to pour money via direct and indirect means into the pockets of the less scrupulous, then fold. If this scheme is to be at all successful, it must end up putting Government money into the pockets of a business that would not have received a bank loan - the Government is relying on the bank to pick its winners.

I await Tuesday's Autumn Statement for the details, but I can't see this going well.

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