Daily Archives: November 27, 2008

Jim Pickard

Maybe it was deliberate kite-flying. Maybe David Cameron thought that he was only talking to a handful of northern businessmen. Either way the Tory leader indicated this week – at a meeting of the Greater Manchester chamber of commerce – that he was minded to move away from public sector final salary schemes: “We’ve got to end the apartheid in pensions,” he said.

There is cold logic behind the position: the state may struggle to keep supporting the ever-growing cost of public sector pensions: a £650bn liability over 20 years.

But for millions of workers – whose pay has barely risen in recent years – decent pensions are arguably their greatest incentive to keep on the state’s payroll. What does Cameron hope to gain electorally from voicing this argument? Read more

The Tories are rapidly distancing themselves from the suggestion — made by their leader — that public sector pensions should be phased out.

It is worth reading the full transcript of what David Cameron said in a Q&A session at the Manchester Chamber of Commerce: Read more

Jim Pickard

James Crosby’s report on Monday recommended state guarantees for £100bn of new mortgage-backed securities to help get banks lending to home-buyers once again. I pointed out here that Crosby himself had reservations about this idea when he wrote his interim report in the summer.

Treasury officials tell me that the situation has become more desperate since then. But surely the fundamental pros and cons remain the same.

Mervyn King seemed unimpressed with the idea when he spoke on Tuesday, describing securitised mortgages as a ”form of lending that for rather good reason has fallen out of favour”.

The final Crosby report says the government guarantee would only be used for new mortgages, not for re-financing existing ones. It would be available to banks and building societies. Only “prime” mortgages would be eligible: excluded are high loan-to-value loans, second charge loans or those to people with impaired credit histories.

How else would taxpayers be protected? The answer seems to be the ratings agencies. Read more

Germany is leading the fightback against Gordon Brown’s drive to stimulate the world. Angela Merkel is distinctly unimpressed by the case for a tax cuts, in spite of sitting on a big budget surplus. In a speech to the German parliament she endorsed Brown’s diagnosis of the problem, but dismissed his proposed solution.

“Excessively cheap money in the US was a driver of today’s crisis. I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis.” Read more