YOUR LETTERS

It is depressing but not surprising that the debate among MPs in the Labour Party over a replacement Gordon Brown is less over if he will be better for Britain over the next year or so but if he will be better for their chances of re-election. Prime Minister Brown is given much blame for the current economic woes of the UK. The credit crunch, as it has come to be named, is going on throughout the Western World not just Britain. His removal at Westminster would have as much effect on it as would the substitution of Zapatero in the Cortes.

The main blame lies with the banks who loaned our money in ever easier conditions. Again criticism is loaded almost exclusively on the US ignoring the same slackness in the UK (and in Spain). For many decades mortgage terms were written in stone. The maximum loan was 80% of the property's value or 2½ times the breadwinner's salary whichever the lower with payback in not more than 25 years. To get on the property ladder the first time buyer had to have saved his 20% deposit plus some additional cash for all the associated costs. In the last few years this had corrupted to offering 110% (no deposit required plus extra funds to cover legal and mortgage fees) or 5 times salary of both breadwinner and partner whichever the greater and a leisurely 40 years payback.

The earlier, more stringent terms, were not numbers pulled out of the ether but based on a sensible balance between mortgage repayments and the other essential living costs. Recently the borrower has had everything on a plate – absolutely nothing to come out of his pocket. With “other people's money” price was of little importance so prices rocketed. Now we all have to pay. House prices have fallen some 20% in a year in my neighbourhood and still no buyers. Over the same period our top Banks have seen their shares fall even more - 60%. Others have gone bankrupt like Northern Rock (UK) or Bear Sterns (USA) and just yesterday the largest Lehmans. We'll not be quoting “safe as houses” or “solid as the bank” for some years. As far as I can see apart from some cringing apologies “a chastening experience and something we regret very much” bank directors have not been called to task. Their chastisement is long overdue.

But is Brown fit for purpose? For 10 years he was in charge of the British economy travelling the globe meeting with all the movers and shakers in politics, finance and industry. He should have been one of the most in touch politicians on the world economy. In June 2007 he became Prime Minister and by September was on a wave of popularity with soaring poll ratings. He also had a valid reason to call an election to correct his unelected promotion. Rumour has it that he got cold feet after a one-off poll pointed to a loss. Ever since, his political future has been in free fall in parallel with the economy. Where was his fiscal judgment? There is a glib maxim to judge someone's ability in tough conditions. If he didn't know and did nothing he's a fool and should go. If he did know and do nothing he's incompetent and should also go. Could he not foresee the approaching downturn with Northern Rock already calling for help at the Bank of England?

If he did see the approaching calamity why didn't he take a political risk? He has next to no chance to recuperate in the run up to the May 2010 deadline.

Mike Lillico
Playa de Palma