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Bernard Ginns: Maybe it's time for us to go it alone over credit ratings
WOULD you bet on Gordon Brown and Alistair Darling being able to sort out the public finances? Nope, me neither.
Using that rationale, it is entirely unsurprising that Standard and Poor's decided to lower its outlook on Britain.
The ratings agency believes there is a real danger that Government debt may soar close to 100 per cent of GDP and so shifted the position down.
I know that the agency takes all sorts of things into account when deciding creditworthiness, but I do worry that anyone looking at the stinking mess in Westminster could easily form a negative opinion of our overall prospects. With this in mind, I'd like to say a few things to S&P about Yorkshire.
Yorkshire is home to some of the world's best businesses, both big and small. It has a diverse and strong economy. It has a solid manufacturing base. It has a highly skilled and capable workforce. It knows the value of money and hard work.
So perhaps it would be an idea for S&P to create a separate rating for this fine region?
We might need one, unless our leaders come up with some better ideas to rid us of this mountain of public debt.
When in debt, most sensible people make the decision to stop spending and work out a plan to get back in the black.
That might take some discipline and self sacrifice, but any hardship is worth it because it is the right thing to do.
But what do Brown and Darling do? They print more money and carry on spending.
The extraordinary row over expenses is but a drop in the ocean when you compare the sums involved.
The budget deficit is predicted to hit 175bn this year.
That is a very big hole. And it could get even bigger, according to S&P.
"Even assuming additional fiscal tightening, the net general government debt burden could approach 100 per cent of GDP and remain near that level in the medium term," said S&P credit analyst David Beers.
If a business had that debt ratio, the administrators would have been called in months ago.
n A story that caught my eye at the weekend was that despite the massive amount of taxpayers' money that has been hosed at the banks, lending to corporates is still an issue, it seems.
The Royal Bank of Scotland and Lloyds Banking Group were both reported to have told the Government they may miss lending targets set as a condition for receiving more state support.
RBS, which is 70 per cent owned by the taxpayer, had been told to lend an extra 25bn this year to inject more credit into the economy, while Lloyds, which is 43 per owned by you and me, had been instructed to lend 14bn.
Before you start blaming the banks again, the apparent problem lies not the supply of credit, but in demand from large companies.
Targets for lending to corporates are proving hard to meet, said a newspaper report.
This chimes with what I'm hearing in Yorkshire; in a conversation at RBS's corporate headquarters in Leeds last week I was told that the demand for debt facilities is weak. In fact, the bank is seeing its growth in its cash balances from deposits as large firms preserve cash. Firms also see RBS as a safe place to put their money.
This is not surprising, given the huge recapitalisation.
It is still a new twist in this credit crunch story. The banks have money to lend, they say, but businesses don't want to borrow as they are being prudent and cautious in the current environment.
That makes perfect sense, but it will probably be a long time yet before things reach a natural equilibrium between caution and an appetite for calculated risk taking.
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Weather for Yorkshire
Wednesday 23 May 2012
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