By Robert Hutton and Mark Deen
April 1 (Bloomberg) -- Prime Minister Gordon Brown wants fellow leaders to sign up to his “grand bargain” to rescue the global economy. At home, many Britons are concluding his plan to reverse the recession is no bargain at all.
Since December, Brown’s government has announced nine initiatives to help people keep their homes and businesses get loans under the slogan “real help now.” Only three of the measures are fully operating. Lawmakers and lobby groups say others aren’t working as promised.
Few of the leaders at the summit of the Group of 20 nations tomorrow in London are in worse political shape than Brown. Behind in opinion polls for more than a year, with an election at most 14 months away, the prime minister isn’t likely to get much of a bounce out of the eight-hour meeting.
“Brown is seeing his carefully orchestrated plans unravel by the minute,” said Jon Moulton, founder of Alchemy Partners LLP, a venture capital fund. “Each leader is turning up with his own particular bag of problems, the U.K.’s perhaps being the biggest, so to expect them to unveil a bunch of silver bullets is just ridiculous.”
In the past month, the prime minister has visited Brussels, Washington, New York, Brasilia, Santiago and Strasbourg, France, to persuade fellow leaders that, as he said in February, “every part of the world must be part of the stimulus to the economy.”
Even before the summit, Brown scaled back his rhetoric. Talk of a “grand bargain” -- a term he started using Feb. 18 - - to raise spending and cut taxes while tightening market oversight was absent in speeches this week. His spokesman, Michael Ellam, said March 30 that the G-20 was “a process, not an event.”
Poll Readings
British voters say by a margin of three-to-one that the prime minister should focus his efforts at home, according to a ComRes Ltd. survey completed on March 29. It found 58 percent of voters believe Brown has the wrong policies to get Britain out of recession, compared with 31 percent who supported him.
“Politicians think that by standing next to someone like Barack Obama they can give themselves a sheen,” said Steven Fielding, head of the Center for British Politics at Nottingham University. “But something has to be going right at home for that to happen, and it’s not.”
The U.K. economy may shrink 2.8 percent this year, the most in the Group of Seven nations, according to the International Monetary Fund. The budget deficit may touch 8.8 percent of gross domestic product, double the average in the euro area, the European Union forecasts.
Allies Resist
That shortfall limits Brown’s maneuvering room. Two months ago, Brown urged G-20 nations to increase spending. Germany, France and Australia resisted.
Then Bank of England Governor Mervyn King told lawmakers on March 24 that Britain’s deficit is so large ministers should “be cautious about going further” than the 20 billion-pound ($29 billion) stimulus Brown announced in November.
“What Brown was originally trying to do was to get further fiscal stimulus from other countries so he wouldn’t be hammered by the markets,” said Ben Read, senior economist at the Centre for Economics and Business Research, a London-based consultant. “The finances are in such a bad way that the U.K. doing it alone could have a damaging impact.”
Banks also haven’t yet resumed lending at 2007 levels, which Brown demanded when he offered the first of 40 billion pounds in direct support to Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. Institutions are writing mortgages at a third of the pace of two years ago.
Promises Unfulfilled
That’s not the result Brown envisaged in December and January, when he had narrowed his gap in polls to a single percentage point against the Conservative opposition after announcing the nine programs under the “real help now” banner aimed to channel cash to small companies, homeowners and entrepreneurs.
Chancellor of the Exchequer Alistair Darling rejected criticism of the efforts when questioned yesterday in Parliament.
“One hundred thousand businesses have already benefited from the extra time we have given them to pay taxes,” he said. “We have also helped small companies by postponing the increase in corporation tax.”
Government departments say just 161 million pounds of the 15.4 billion pounds in promised support and loan guarantees have been released. A separate 50 billion-pound asset-backed securities program is still under negotiation.
Government Programs
One of the support plans, called the Enterprise Finance Guarantee, has backed 145 million pounds of loans out of the 1.3 billion pounds pledged by March 2010. Regional Loan Transition Funds have given out more than half the 25 million pounds allocated to them.
Less successful have been the Capital for Enterprise Scheme, the Automotive Assistance Program and the Homeowner Mortgage Support Scheme, which have yet to release any cash. The Department for Business was unable to detail the status of its Working Capital Scheme. Another program giving incentives to companies to hire the long-term unemployed starts this month.
The Department of Communities didn’t return calls to find out how much of the 200 million pounds promised for the Mortgage Rescue Scheme have been paid out.
The help that actually trickles through is “not what they’re advertising,” said David Foskett, a partner at London- based Copping Joyce, a property appraiser.
He fired one person and cut pay for others after a bank refused to extend an overdraft facility. He was told he must offer his home as collateral to obtain any government aid.
‘Wasted’ Time
“I’ve wasted an awful lot of time and effort finding out that the government aren’t going to help me,” he said.
The Homeowner Mortgage Support Scheme, announced on Dec. 3 as a 1 billion-pound plan allowing people to delay mortgage payments when their income drops, still isn’t working yet. The program’s Web site says it will be available in “spring 2009.”
“That’s what makes me angriest of all,” said Peter Luff, a Conservative member of Parliament who leads a panel overseeing the business department. “It’s heartbreaking. I have constituents coming in who’ve been promised this program by the government, and it’s not there.”
Business lobbyists are no happier.
“Around 120 small businesses a day are going under,” said Stephen Alambritis, spokesman for Federation of Small Businesses. “All this money is being given to the banks, and the bank chief executives say they will help, but in the local branches the managers don’t want to know.”
To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net; Mark Deen in London at markdeen@bloomberg.net
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