Bank rate cut - help for whom?

10 November 2008

Brown claims that the Bank of England's "historic" rate cut is supposed to bail out working class households. Except that lenders are reluctant to pass on the full cut. And those which do are still lending at high rates, including government-controlled Northern Rock with its 5.84% rate, almost double the BoE's rate!

Besides, even if lenders did reduce their variable rate, 90% of us would still not benefit, at least not before our current mortgage "deal" comes to end. Since lenders rushed to end "tracker" mortgages, whose rates automatically follow the Bank of England's rate, what will force them to offer cheaper deals? Not Brown's remonstrations, in any case!

Banks and mortgage lenders are in business to make money on the backs of working people at any cost. It was their greed which generated the wave of speculation which resulted in today's crisis. No-one can seriously believe that these sharks will ever be sweet-talked into giving up some of their much cherished profits in order to contain the rise of repossessions, least of all Brown!

It might have been different had this government laid down the law in return for its bail-out of the banks, for instance by imposing that they, in turn, bailed out households threatened with repossession. But instead, it insisted that state-owned Northern Rock should be run "as a commercial concern" and left a free hand to the boards of the two banks it now controls - RBS and HBOS.

While embattled households will not benefit, savers will lose out, including the poorest, because in their case, the banks are passing on the rate cut by cutting interest on savings accounts. So will future pensioners, because a significant part of pension funds are invested in government bonds.

So who will benefit from the Bank's rate cut? Contrary to ministers' claim, not small businesses either, because, like the rest of us, they borrow through the banks. As usual, only big companies will benefit, because only they borrow directly from the money markets, where borrowing is now cheaper. Will this prevent these big companies from cutting jobs left, right and centre, as they have already started doing? Why should it, since like the banks, Brown is offering them a bail-out on a golden plate, and asks nothing in return!

TUC leader hailed the rate cut as a "step in the right direction". On the contrary, it is a step in the same direction, to bail out the rich. The only "step in the right direction" will come out of our struggle against the bosses' attacks, and nothing else!