Last night Moody's slashed its ratings for Barclays, HSBC, RBS and Lloyds (Barclays saw its credit rating cut by two grades from Aa3 to A2. HSBC, RBS and Lloyds suffered a reduction of one)
George Osborne might be relieved to hear that this is - at least in part- due to the eurozone crisis.The downgrade coincided with a warning from the CBI that economic recovery was at risk of being "choked off by a lack of finance". You can read the full story here.
The key point is banks are weakened in the markets, which means borrowing costs may be pushed up and hurt chances of a recovery. It also puts back chances of the taxpayer unloading its mega-stakes in the bailed-out banks.
Andrew Tyrie, Conservative chairman of the Treasury select committee, hits on this, saying:
"Any increase in the cost of funding would add to the squeeze on banks. The UK needs the banks to recover – we can't have a full economic recovery without them. This is particularly important to hundreds of thousands of small businesses and sole traders who have difficulty getting access to loans at reasonable rates."
Lord Oakeshott, a former Lib Dem Treasury spokesman, jumps in as well:
"The banks have just had their mouths stuffed with even more government gold. It would stink if they hid behind a downgrade to hoard the extra tens of billions taxpayers have handed them instead of lending it to head off a slump."
This comes on the same day as the IMF warns that Europe has reached a 'critical stage'. The Mail reports that the bank is calling for action, which is needed to arrest 'the decline in confidence engulfing the region'.
The Telegraph's Jeremy Warner warns against following the IMF's advice too closely though, saying that the Bank would set the eurozone on the road to fiscal and political union – and we shouldn't encourage that.
Italy's PM Mario Monti senses the gravity of the situation too, telling the Guardian that without a successful outcome at next week's summit of EU leaders, " there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries". And that the attacks would be focused not only on those who had failed to respect EU guidelines, but also on those like Italy, which he said had abided by the rules "but which carry with them from the past a high debt".
GOVE WARS
Michael Gove's plan to axe GCSEs and reintroduce the O-level has caused quite a stir - not least among the Lib Dems, who say they weren't consulted. Nick Clegg has come out fighting, saying it is "not Government policy," and threatening to block the plans. Could this be the Tories' revenge for the Lib Dems refusing to back Jeremy Hunt last week?
But Nick shouldn't feel too hurt. The Times says David Cameron hadn't seen Gove's plans either.
Speaking at the Rio+20 Earth summit, Mr Clegg outlined his problems with the proposal. He said:
"An exam system needs to be rigorous and stretching of course but any review of the exam system – and we have already done a number of changes – should always be built for the future not turning the clock back to the past as has to reward hard work and aspiration by all children not just cater for a few at the top. Any exam system and any school system should be for the many not for the few."
Mr Gove thinks the complete opposite, of course, arguing in an urgent question from Labour yesterday that England already had a "two-tier" education system, with large numbers of leading independent schools dropping GCSEs in favour of more rigorous qualifications such as the International GCSE.
He branded the English state system " one of the most inequitable, stratified and segregated" in the world, adding that it created a "race to the bottom...The way we tackle that is not by dumbing down qualifications, it's by raising expectations at every level."
Our leader column says he's has "laid out a compelling and radical agenda for transforming secondary education" and "Despite the disruption that these reforms may cause, they are not just welcome, but utterly necessary."
The Times leader is more cautious, asking: "With a greater focus on the technical and the vocational, CSE equivalents must be regarded as an alternative qualification, not a lesser one. But, in practice, would this ever happen? Who will be the first Cabinet minister to proudly explain why his own children are not O-level material?"
The FT is a lot firmer, saying the plans would hurt social mobility, and using the headline "Children on scrapheap" . The FT's Chris Cook has some great analysis (with graphs) showing how this would happen.
In the Telegraph, Neil O'Brien is more generous to Mr Gove's plans, discussing the positive effect they could have on tackling on grade inflation. He also comments on Mr Gove the man, saying he is: "the darling of the Conservative party as a result."
I blogged last night on what should be seen as Tory differentiation - and how this is a clear example of what the Tories want more of.
TAXING TIMES
The furor over Jimmy Carr and tax dodging continues. Although yesterday the Prime Minister said:
"I'm not going to give a running commentary on people's tax affairs. I don't think that would be right. I made an exception yesterday because it was a very specific case where the details seemed to have been published, and it was a particularly egregious example of an avoidance scheme which seemed to me to be wrong."
But later he told ITV News: "People work hard, they pay their taxes, they save up to go to one of his shows. They buy the tickets. He is taking the money from those tickets and he, as far as I can see, is putting all of that into some very dodgy tax-avoiding schemes. That is wrong."
Fraser Nelson suggests politicians should stop moralising and fix the tax system that allows this. He said: "Lowering tax rates means entrepreneurs (and comedians) have no incentive to hide. Russia found its tax receipts surged by 50 per cent after its flat tax, as money from the rich came flooding in."
While the Times leader column says "It is understandable that people take an interest in legal ways to reduce the burden. But there is a world of difference between protecting savings from tax in an ISA, for example,.. and investing in tortuous schemes involving offshore trusts in order to reduce tax payments to minuscule levels."
But the trouble doesn't end there for Dave and tax. We report that David Cameron is facing calls to pay back cheap loans of £1.2 million to the Conservative Party from companies registered in tax havens.
The Conservative Party accepted the two loans on favourable terms from companies in known tax havens before the last election. One £250,000 loan came from Juniper Trading, registered in the British Virgin Islands. It was given in 2004 at 0.25 per cent below the base rate, to be repaid in 2029. Another £950,000 loan was made by the Medlina Foundation, based in Liechtenstein, at the base rate plus 1 per cent in the same year.
Last night a Tory spokesman said: "These are historic loans from before David Cameron was Conservative Party leader. The Conservative Party no longer accepts loans from non-UK trading companies."
MILI-MISTAKES
Meanwhile, Ed Miliband will make a speech on immigration today. He'll say:
"Labour has to change its approach to immigration but you cannot answer people's concerns on immigration unless you change the way your economy works."
" Overall, immigration has benefits, but the thing we did not talk about was its relevance to class, and the issue of where the benefits and burdens lie. If you need a builder, it is good that there are more coming into the country and lowering the price of construction, but if you are a British builder it is less beneficial."
We're told this won't be a "British jobs for British workers" speech, but a speech drawing attention how we can level of the playing field for Brits.
He proposing sanctions against labour agencies that advertise solely for immigrant workers, an early warning system if some industries are employing disproportionately large number of foreign workers, a doubling of fines if employers undercut the minimum wage, and no early lifting of migrant barriers for new EU countries such as Croatia. You can read more in the Guardian's interview with him here.
This is an interesting move. Polling recently published by Policy Exchange shows that a Labour shift on immigration and welfare would be the single most important issues to win back Labour swing voters.
Labour's record on this gives them nothing to boast about, but by raising the issue he challenges the Tories to do the same. Mr Cameron reckons government policy is robust and popular with voters. But he won't be pleased with the Mail's account of a Cabinet spat between Baroness Warsi and Theresa May. The Tory co-chairman described plans to limit family reunion by imposing a strict income requirement as racist, not something her colleagues are likely to agree with, or thank her for. Does that make her even easier to reshuffle I wonder?
Labour MP John Denham, PPS to Ed Miliband, has just been on the Today programme. He said that people weren't ready for the mass immigration that happened under Labour. He refused to talk about precise numbers of the number of immigrants they'd like Britain to have. But talked he talked about how the law needs to be changed to make things such as the legal distinction between race and nationality clearer.
TWEETS AND TWITS
"@ChukaUmunna: Took one of my constituents (my mum!) to hear Aung San Suu Kyi speak in Westminster Hall this noon - inspirational speech."
Awww. How sweet of the Shadow Business Secretary.
Andy McSmith's excellent Independent diary picks on yesterday's email omnishambles *cough* which I'll just skate over without looking. But he also rehearses the joy of that Grant Shapps Spanish moment when he accidentally helped advertise a Spanish brand of chocolate when his Twitter feed was hacked yesterday:
"The tweets, which he has since deleted, were in Spanish and when translated were found to be aphorisms such as "those who worship statues that are filled with grief and blush. By comparison, his unhacked twitter feed is, frankly, tedious."
To which I say "Amigo!"
POLL WATCH
Latest YouGov/The Sun results: Conservatives 33%, Labour 43%, Lib Dems 8%, UKIP 8%
Overall government approval rating: -37
TOP COMMENT
In The Telegraph
Fraser Nelson: Britain's tax system is the real villain of the Jimmy Carr case
Dan Hodges: The union takeover is tearing the Labour Party into pieces
Jeremy Warner: The IMF helping the euro is feeding the monster on our doorstep
Leader: Gove's courage should be a lesson to others
Best of the rest
Phil Collins in the Times: Can you live a good life on 40 grand a year?
Ian Birrell in the Independent: Labour's cowardice on immigration is sickening
Fiona Millar in the Guardian: Michael Gove is the enemy of promise
Philip Stephens in the Financial Times: Cut adrift between America and Europe
THE AGENDA
Today: David Cameron gives Aung San Suu Kyi tour of his constituency
9.15am: Rebekah Brooks appears in court for a preliminary hearing. Southwark Crown Court, 1 English Grounds (off Battlebridge Lane), Southwark, London
10am:Ed Miliband speech on immigration and the economy. Coin Street Neighbourhood Centre, Stamford Street, London |
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