The get-out clause in the Project Merlin deal with the banks

Ed Balls, Labour’s shadow chancellor, said:

“No wonder George Osborne didn’t give me a copy of the full Merlin agreement before his House of Commons statement and only gave me a copy of his statement 10 minutes in advance – because the Chancellor’s cosy deal with the banks is unraveling by the hour.

“The small print of the agreement has a clear get-out clause which allows the banks to do whatever they wish to enhance the interests of their shareholders.

“As for the toothless agreements on lending, Vince Cable himself said only a year ago that gross lending targets completely let the banks off the hook. And as representatives from small and medium sized businesses have said this announcement does not go far enough.

“The unanswered questions for George Osborne are mounting. Why won’t he enact the legislation on pay and remuneration transparency which Labour passed last year following Sir David Walker’s review?

“And why does he refuse to adopt Labour’s plan to repeat last year’s £3.5 billion bank bonus tax, as well as the bank levy, in order to help create the jobs and growth we badly need this year to kickstart the stalled recovery?”


1. The small print of today’s Project Merlin agreement today has a clear get-out clause for the banks:

“3.5 Nothing in this statement derogates from the obligation of the banks, and their boards and remuneration committees, to manage pay policy in a way which protects and enhances the interests of their shareholders.”
Merlin Agreement, 9 February 2011

2. The Coalition Agreement said the government would consider “net lending targets for the nationalised banks”:

“We will develop effective proposals to ensure the flow of credit to viable SMEs. This will include consideration of both a major loan guarantee scheme and the use of net lending targets for the nationalised banks.”
The Coalition Agreement, page 9

But today George Osborne has announced unenforceable plans for higher “gross lending” in 2011.

“The statements related to credit refer to new gross new lending.”
HM Treasury press notice, 9 February 2011

“..more gross new lending to small and medium businesses”
George Osborne’s statement to the House of Commons, 9 February 2011

Less than a year ago the Business Secretary Vince Cable said such a move would be “completely letting the banks off the hook”:

“This would be completely letting the banks off the hook. It’s perfectly possible for banks to achieve a gross lending target while withdrawing capital from small to medium-sized businesses. Even if they have a gross target, what assurances do we have that it will be enforced, because the banks have been running rings round the Government so far?”
Vince Cable, Daily Mail, 23 March 2010

3. Representatives from SMEs have criticised today’s lending package saying it does “not go nearly far enough” and today’s announcement shouldn’t “let the Government or the banks off the hook”:

“Industry will feel today’s statement on Bank lending did not go nearly far enough. The new targets may lead to some increase in lending to SMEs, but the track record of previous agreements is not a good one.”
Terry Scuoler, EEF Chief Executive, 9 February 2011

“Today’s announcement should not be allowed to let the Government or the banks off the hook, and is a preamble to what we hope will be bigger announcements from the Independent Banking Commission.”
John Walker, National Chairman, Federation of Small Businesses, 9 February 2011

“It is also a concern that the additional £1.5 billion will only go to businesses looking to receive between £2 million and £10 million in equity finance and so will not hit the smallest of businesses that need it most.”
Federation of Small Businesses, press release, 9 February 2011

Share and Enjoy:
  • Print
  • Digg
  • del.icio.us
  • Google Bookmarks
  • Add to favorites
  • Yahoo! Buzz
  • Technorati
  • email
  • Facebook
  • MySpace
  • Reddit
  • RSS
  • Twitter
Posted February 9th, 2011 by Ed's team

3 Responses to “The get-out clause in the Project Merlin deal with the banks”

  1. Nicola says:

    Looking at the reaction on the messageboards, there’s a general sense that you kicked Osborne’s butt. However, too many people still believe the big lie (which even Goebbels himself would have been aghast at) that Labour – rather than the banks – caused the recession. I know it’s easier said than done, but Labour really needs to be much more assertive about tackling this lie head on, in very frank and simple terms. The more Cameron & co repeat the simple minded ‘Labour’s mess’ mantra the more it gets ingrained in the minds of the naive.

  2. Mary nash says:

    Thanks Ed, for all the details, protecting us from being hoodwinked by George Osborne and for helping us understand what Project Merlin is really all about. We also enjoyed watching and listening to your clever dissection of Osborne’s agreements. The Tory led govt needs something beyond their tiresome mantra that ” there is no alternative” bec of “…the appalling mess left by Labour” which no longer resonates. The Opposition Party should explain to the public ,again and again, that there is an alternative which is to grow the economy and create jobs, and not to cut too fast and too deep. It would not be surprising if soon the public will start calling the destruction of our public services as a “Coalition mess”.

  3. Patrick Boyle says:

    I agree with both Nicola and Mary’s analysis re the causes of the recession–the global banking system, and also the need for the Party to keep challenging the coaltion’s mantra re Labour so called ‘mess’
    I am still awaiting the Coalition’s so-called ‘economic/business growth strategy’(unless I have missed it!!)
    My sense is that it is in difficulties because the macro-economic levers deployed by goverment to boost the economy have been or are in the process of being scrapped by the Tories ,with Lib Dem connivance.One example is that the raising of tuition fees,coupled with the abolition of the EMA, will have a long term negative impact on skills levels, to the detriment of the country as a whole. As none of these cuts are necessary if tax avoidance(currently legal and also illegal) was clamped down on the Tories (backed by Clegg ,Cable etc) are throwing away the country’s future to keep bankers and tax dodgers happy!

Leave a Reply