Purge The Soul

He's only gone and done it.

Alistair Darling has bared his teeth and swiped with his mighty paws at the City bankers to assuage the public's anger and try to win some votes. In doing so, he claimed it was not about the money but was a deterrent to stop banks paying excessive bonuses.

That's certainly going to work, right? Certainly, our souls are purged - not only can we feel satisfied that bankers have suffered for their follies, but we now see that the Government has distanced itself so far from the greedy City spivs that we can no longer believe that ministers had any culpability for our financial mess as surely they would not have punished them if they had endorsed what they were doing? Believe that and you believe I am Tiger Woods - let's not go there.

So the banks will have to pay 50% of any individual bonus over £25,000 as a levy - not the individual, and there are anti-avoidance measures already in place. Indeed, there must be as Mr. Darling has told us there are.

Curiously, among all the £billions contained in bonus pools, it is alleged the tax will only raise £550m which can go toward unemployment. Just as well, because in the great scheme of things £550m is hardly going to make a dent in the damage the bankers caused. The chances that it will deter them from doing the same thing again are about the same as for me surviving 5 rounds with Frank Bruno.

This is headline grabbing tosh. Bankers will be laughing all the way to new pay packets and bonuses.

Meanwhile, down here below Wonderland, National Insurance goes up 0.5% which probably raises more than the tax on bankers - shows that headline - grabbing taxes are just that.

'At Every Point, We got it Right'

Gordon Brown must prepare for bed each night mumbling this simple mantra to himself and perhaps he sleeps with one of those nighttime self-help tapes playing the same message from under his pillow. That way when he wakes up each day he has actually convinced himself that what he has done in the face of the economic obvious has been right.

It must come as some surprise then that despite all his evening preparations that the reality each morning is somewhat different. I mean, take away the spiteful snapping terriers in the other Parties who constantly fail to appreciate his economic genius, there are those daft sets of figures that just doggedly won't seem to tell the truth.

This week has been yet another bad one in a long succession but the news that Britain still wallows in contracting quarters GDP-wise was bad enough, then there was the news that Italy's economy is now bigger than ours while they are also set to announce the end of their recession, then Brown's good mate, Barack Whatsisname, has prevailed over a US economy that did not just emerge from recession but actually grew at a very acceptable 0.9%.

Britain remains in the dunce's corner.

The saving grace is that no one seems to think that the policies followed by our Government were wrong. From the day Northern Rock was saved, Brown seems to think every subsequent event was met with the right action and that Britain benefited for it. And guess what, it seems the public have agreed. True, there are those annoying issues like bankers earning stunning bonuses having caused the whole crash and the Postal Workers seem to defy all best advice to surrender their jobs, but on the whole the disaster of The Sun not supporting Labour has been averted and Britain believes Brown is the best man in a crisis.

Well that's what the tapes say.

What perhaps was not part of the script was that this week Brown had to go to Europe and start campaigning for Tony Blair to be EU President when patently he would prefer to sit in a bath of hungry piranhas with bovril smeared on his private parts. That was certainly not part of any script but it is the price you pay when you have been 'rescued' by Peter Mandelson. It's almost as bad as having to repay £12,500 on expenses for dry cleaning and such while McNulty, Smith, Blears et al get away scot free in the expense bonanza affair for selling houses.

That's the trouble with reality - it tends to be, err, reality. We could all like to keep saying the same things over and again to our bosses about how well we have done and how things are just around the corner, but there is no arguing with reality. If you do your job badly, reality says that the outcome is rubbish. For all the PM's self-help mantras and tapes, the fact remains that our economic position was nothing like how he described and has not responded to the stimulus he gave it afterwards.

Quantitative Easing (QE) is a classic example. The economic patient lay critically ill on the bed and intravenously money was fed in. Sadly it never got to the vein as an unforeseen valve led the money away to different bank vaults who have just used the money to go play 'casino banking' again and shore up their balance sheets as the FSA wanted them to do while hardly any of it has got into the real world where it was needed. Indeed, this week the Broad Money supply called M4 showed that the amount of money in the country is falling, showing QE has effectively gone down a drain. It has propped up our Government Debt market and that could be equally dangerous when the whole thing finally ends before we descend into being a banana republic.

Our real stimulus money for the wider economy was VAT decrease and scrappage plus a few minor things. Loan Guarantees are a mess because the Government has used the same criteria to lend as banks and the decisions still lie with banks anyway. Reams of form filling and economic data has meant many businesses have just given up on it. Oh, numbers look fine with some 200,000 businesses allegedly going for it but again reality says it was banks just getting the Government to underwrite existing debt - nice fiddle.

Meanwhile Toxic Debt has been the biggest winner. Thanks to our loans, guarantees, insurance and capital, banks have been able to write down debt positions to the point where it all looks cheap again. Guess what? Reality bites and all the banks are making hay by trading in them once more and bonuses are up again.

Our whole strategy was to save the banks and that's what we have done making rich people richer on the back of their failure. The rest of the country has suffered. Meanwhile heroes in Afghanistan die as we equip them poorly while fighting our wars, don't give them enough of the right transport and propose to send untrained reservists.

It's a script you could have been hard pushed to write as it was so patently wrong. Yet that's what happened and our PM still claims he was right. Despite the 47% rise in coffee houses in Britain in the last year, he still can't smell any.

Perhaps the whiff of Government Bull is too overpowering.

It Can't Affect Us Chickens

'Nightmare on Downing Street' could be the title of a new movie on the life of Gordon Brown. It would be a sad story of a man who just could not interpret simple facts and kept muttering to himself, 'It can't affect us chickens'.

Despite the most pessimistic of estimates by the most gloomy of economists who predicted that we would, Britain has failed to emerge from recession for a record sixth successive quarter. The hollow words of our Chancellors, past and present, as they pointed toward how strong Britain's finances were, how we could avoid a recession, how a recession could not affect us so badly and how fast we would emerge from recession are lost in the vapour trail left as France, Germany and Japan left recession status last quarter.

The fact seems a nightmare in itself. Despite spending £175bn on creating new money and £1.4 trillion on bank bailouts, our economy shrank again by 0.4%. There may be some revisions up or down but the reality is that this contraction defied all best estimates. We are getting into the habit of getting sums wrong and forecasting badly as our team seems to continually under estimate our borrowing requirements as each month we have to go cap in hand for more money.

There cannot be any shying away from a stark truth. The country's finances are a mess and the remedies chosen to right the situation are either wrong or simply have not worked. Meanwhile, in the banking sector, which we handily threw a massive lifeline to, they are partying as if there is another credit crisis to come. Banks are reporting plenty of profits, hiring new whizz kids on guaranteed bonuses and swelling their bonus pools, telling us that this is a good thing.

It is now abundantly obvious that Britain's bailout plan actually tackled only one part of the economy - banking. What's worse it righted the part of the sinking ship that had directly caused the credit crunch - it has not had any effect on the kinds of banking required by real people. It has given unlimited chips to the casino bankers to go back to the table and blow it all again, as they inevitably will and then come back to ask for more. Each time they do, the gun they use to point at our heads will be ever more deadly as Britain fast runs out of ways to raise the money.

The chilling fact is that after 6 successive quarterly contractions, Britain is now lurching toward severe danger levels of finance. As of this week, Quantitative Easing is spent and in the new year the VAT decrease is reversed. There is only one place left to go as the Government repeatedly defy the facts of having to make cuts and that is to go back and raid the taxpayers' pockets again.

With an election due in June, it's not good practice. But as time runs out for our finances, Britain needs money and fast. The time for action is actually long past and each day we avoid making tough decisions on saving money or finding new cash will costs us more in the long term.

The economy has been compared by Vince Cable as a person suffering a heart attack and we are now stabilised and preparing for recovery. I would say there is a severe danger of MRSA in the analogy.

This Government has been guilty of monumental mis-management of our finances and their remedies in the face of almost ruin have been wrong. At some point the penny may drop for them but until then, any recovery we have will just be a prelude to another crash. In our analogy to a heart attack victim, should the victim recover, sending them home to continue to eat, drink and smoke in the same way as before will only bring on another heart attack.

In our case, we haven't yet left hospital and we are already smoking again.