How effectively did labour handle the recession? Free essay! Download now
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How effectively did labour handle the recession?
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| Words: 1518 | Submitted: 24-Mar-2011
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DescriptionUk labour government's of the economic recession
How effectively did Labour handle the recession? (45 marks)
Bailing out Northern Rock
The car scrappage scheme
Homeowners mortgage support schem
Introduction of a new 50% rate of income tax
Name of economic policy: Bailing out Northern Rock
What is it?: In 2008 the Northern Rock bank was nationalised by the British Government, due to financial problems caused by the subprime mortgage crisis. In 2010 the bank was split into two parts (assets and banking) to aid the eventual sale of the bank back to the private sector. On 14 September 2007, the Bank sought and received a liquidity support facility from the Bank of England, following problems in the credit markets, during the financial crisis of 2007–2010. On 22 February 2008 the bank was taken into state ownership. The nationalisation was a result of two unsuccessful bids to take over the bank, neither being able to fully commit to repayment of taxpayers' money.
When was it introduced?: Between the end of 2007 and the beginning of 2008
What is its aim/ purpose?: To help improve the financial problems caused by the subprime mortgage crisis of 2007
Nationalisation safeguards the banks' future, which is crucial for the financial well-being of the country. They can be monitored closely by the government on behalf of the taxpayer, and so prevented from making the same mistakes which got them into trouble in the first place.
Government attempts to support the banks through taking piecemeal stakes have not worked, so it is vital to implement a comprehensive nationalisation programme as quickly as possible. Any further delay will only succeed in making the situation worse. In addition, it is less expensive to nationalise and clean up the banks than to keep throwing money for recapitalisation at them
The banks have started to increase their lending to consumers and businesses due to government pressure. If lenders were wholly owned by their customers they would be compelled to make even more credit available.
Complete ownership of the banks could be a profitable move for taxpayers – when they are on an even keel again there is the enticing prospect of selling stakes or even reprivatizing them at some point.
In previous banking crises the solution has usually been to nationalise at least part of the banking system. This allows the government to avoid the pitfalls of having to value “toxic assets” and of deciding which loans they will purchase from the banks. Major finacial ...
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