Dave Osler on the class politics of govt bail-outs

[Friday]

Now that the banks are in turmoil over the credit crunch, think back to previous financial crises the government didn’t intervene in, ones that have affected thousands of working people – who must now be feeling angry that the government didn’t step in to help them in their time of need.

Rather than put it into my own words, let me reproduce this must-read post from Dave Osler’s blog:

In October last year, 150,000 low-income families lost a total of £45m when dodgy Christmas hamper racket Farepak collapsed. As a result, some of Britain’s poorest yet most thrifty people – the very people who don’t whack a few hundred quid on the plastic to pay for their Christmas, because they can’t afford to – saw their festivities ruined. No government bail out for them.

About 125,000 workers and pensioners have lost some or all of their pension entitlement after their employers went under or shut down insolvent occupational pension schemes. No government bail out for them, either.

Of course Alistair Darling was right to guarantee the deposits of Northern Rock customers this week. But why the selective treatment? Building society savers have no more intrinsic merit than Farepak punters or pension contributors.

In round numbers, seeing the Farepak clientele alright would have cost exactly 1% of the £4.55bn value that the taper relief tax break extends to venture capitalists every single year.

As Nick Ferguson, head of SVG Capital, pointed out recently, venture caps pay a lower rate of tax then their cleaning ladies. And cleaning ladies are the kind of people that save with Farepak and who at best have a couple of grand in savings. A Labour government should consider their interests too.

Ah, but it won’t. Because it is a Capital government…

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