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It is good news that two of the biggest banks are making money. Barclays has declared a £3 billion profit while HSBC will declare its own profits today. This will mean paying big bonuses, chiefly to investment bankers, which is likely to reinvigorate resentment towards the sector. But we want banks to succeed, not fail. And these banks did not receive a taxpayer bailout, though importantly, Barclays and HSBC both benefited from the Government's Special Liquidity Scheme, allowing them to swap bad assets for loans.
It is the performance of banks that did get bailed out that should concern us. Neither RBS nor Lloyds will be reporting profits this week: Lloyds is suffering from taking over HBOS while RBS is predicted to break even. They ought not to be awarding big bonuses. Meanwhile, the suggestion by Labour deputy leader Harriet Harman that the crisis would have been less grave had women been in charge is speculative.
Today's figures also confirm that it is investment banking that makes most money, not the retail banking sector with which small businesses and individuals have to deal. Here the banks' record is patchy: even good businesses are finding it difficult to obtain credit at low rates of interest. As for credit card customers, they are being royally fleeced. The banks argue that they are meant to build up cash reserves; they cannot both lend freely and keep their assets liquid. But as Vince Cable, the Lib-Dem shadow chancellor, points out on this page, building up liquidity is meant to happen in the good times to safeguard against the bad. It makes little sense for taxpayer-supported banks to refuse loans to good businesses because they are building up capital.
The other issue is the Asset Protection Scheme, which, as Mr Cable says, is remarkably one-sided, although at the height of the credit crunch it was generally agreed that it was needed to give banks the confidence to lend. In more normal times, it could be reassessed, especially if it means the taxpayer insuring risky investment operations.
The jury is still out on the health of banks following their greatest crisis in decades. It is their long-term performance that matters; these results are only the start.
Afghan dilemma
The Foreign Affairs Select Committee has declared that the Government is doing a poor job at explaining just why British troops are in Afghanistan. It also argues that troops' efforts have been undermined by politicians' failure to provide clear direction to the Army. This is not what ministers will want to hear, and it comes as Tory leader David Cameron calls for more British troops to be sent to Helmand to achieve their objectives faster.
But what objectives? The Government needs to reiterate what soldiers are fighting and dying in Afghanistan for. It is to ensure that the country does not become a safe haven for the Islamic extremists who would, unchecked, be a real threat to our security here. The most crucial task in Afghanistan is to reinforce the action that the Pakistani government is undertaking against extremists in border areas. But as the Select Committee points out, "mission creep" away from the central security objective risks bogging our troops down for longer. Any other benefits soldiers there can provide - supporting democracy, countering drugs production and assisting development - are admirable but not central to the mission. And for that job to be effective, Mr Cameron is right that more troops will enable the Army to do its job better.
Tougher tests
The row over soaring numbers of university Firsts has re-ignited the issue of dumbing-down of academic standards. Yet while ministers refuse to release previous exam papers, it is hard to assess whether exams really are getting any easier. The Conservatives' proposal to publish previous exam papers online is an admirably transparent solution, allowing parents, teachers and pupils to judge the matter for themselves. Not that it should stop them celebrating A-level and GCSE results in a few weeks' time, of course.
Reader views (2)
I second Hutch's proposal. The west should use its financial power more than its military power to engineer a peaceful solution which will benefit all parties. Outbid the Taliban for poppies and deprive them of their profits from illegal drugs which they use to buy explosives to kill our troops and intimidate their countrymen. Its a better investment than subsidising the BBA. Burning or confiscating props is a cheap and hopeless policy.
- Bloke, London, 03/08/2009 13:45
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Instead of policing/destroying the poppy fields, secure (ie buy) the product officially for the international drugs companies to make our hospital narcotics. Bad news perhaps for the legal plantations dotted around the place, but it will go a substantial way towards winning "hearts & minds". And that's the only way we and the Yanks will ever get out of the place.
- Hutch, High Wycombe, 03/08/2009 12:52
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