BBC News - 2008

[Macmillan]

For news that occurs in 2008

[Macmillan]

January

Northern Rock to be Nationalised

• The Chancellor of the Exchequer, Sarah Hastings, has announced that Northern Rock will be taken into "temporary public ownership" by Her Majesty's Government after Bank of England liquidity assistance failed to stabilise it and a suitable third party buyer could not be established.
• The move was preceded by the ceasing of all trading in Northern Rock shares and will cost the Treasury £35.3bn, it ensures that all depositors are fully protected from losing their money.
• Ms Hastings also announced a review of existing banking laws and regulations accusing the previous Labour Government of "lax and fragmented [regulation]" which ultimately caused the bank to fail.
• Speaking in the House of Commons the Shadow Chancellor, Peter Brichford, accused the Chancellor of being unfit for her job and asked, essentially, if her predecessor had lied to the Commons when he said that Northern Rock wouldn't fail
• International markets were jittery overnight as expectations grow that another bank could go under after Northern Rock, the Governor of the Bank of England urged the public "not to panic".

[Dan]

Southern England recovers from Cyclone Dirk as Insurers face backlash over refusal to pay out for flood claims

 

 

The Met Office has confirmed that the country has seen the worst of Cyclone Dirk, which has caused severe disruption across Southern England and most of Europe. A spokesperson for the Met Office has indicated that the weather event looks to be passing the United Kingdom with most of the country relatively unscathed, with Southern England having faced the brunt of the storm.

As the crisis was at its worst, the Prime Minister gave a statement to the house, telling MPs “I can tell the House that the Government is absolutely looking at every measure to ensure the safety of the situation to the best of our ability.”

Within hours of the Prime Minister’s statement detachments of the Royal Engineers and the Royal Air Corps were seen in the affected areas providing support to the local community. The Army Air Corps were seen evacuating the elderly and vulnerable from the worst affected areas. A spokesman from the Ministry of Defence confirmed “military personnel were at the affected areas and providing all available support to those who need it”.

The BBC understands that although there was a risk to life at one stage of the weather event, fortunately there have been no deaths as a result. Local hospitals have reported an increase in A&E arrivals during the storm period but a spokesman told the BBC “There is enough capacity to process demand on local NHS services”. 

It has also been confirmed that UK Power Networks has restored power lines to 90% of the 100,000 affected, with the remaining 10% expected to be restored within the next 24 hours. A spokesman said teams are working around the clock to restore power lines.  Those affected by damage to water pipes have also been restored with Thames Water, confirming that all reports of damage had now been resolved. 

It is clear that areas of Leatherhead, Dorking and Guildford, particularly near the rivers Wey and Mole have seen devastation which has turned entire communities upside down. Although MPs at Westminster will no doubt be debating what the next steps will be, Authorities said today that the situation could have been “far worse” but the assistance of the Army Air Corps and the Royal Engineers as well as the Army in evacuation and relief efforts has prevented what could have quickly turned into a major catastrophe, even a humanitarian crisis.  

Although the storm has passed, the aftermath is still here and it appears that this crisis is certainly not over. 

In the last couple of days  there has been growing discontent and anger amongst those who have been affected by this crisis, with reports of Insurance Companies refusing to pay out many Home Insurance claims for flood damage. 

The BBC understands one person who had been affected was told by their Insurance company, Direct Line, after spending 2 hours trying to get through that she was unable to claim for flood damage to her home because this was “an act of god”, with another being told a similar story by their provider, NFU Mutual, having to wait 3 hours on the phone. A spokesman for both Direct Line refused to comment on the particular case, but a spokesman for NFU Mutual told the BBC, “Although we are sympathetic with all claims, policyholders can refer to their policy cover in their documents, limitations and exclusions apply in all cases and are clearly identified before the policyholder takes out the policy”.

There are rumours in the insurance industry that some insurance companies are refusing to pay out because they would struggle to afford a payout which could ultimately be in the hundreds of millions of pounds. There is also evidence to suggest anger is starting to spread outside of Surrey into other areas of the country, Admiral, the insurance company based in Cardiff, today saw a small number of protestors outside their head office in response to a number of residents in Dorking who have all been told by their insurer Admiral that they will not pay out for flood damage. There are also unconfirmed reports of a small protest outside LV= Insurance headquarters in Bournemouth and reports of police being called to Aviva’s Offices in London, after a man refused to leave the building when directed by security. There are unconfirmed reports that the man wanted to see a senior manager to reassess his unsuccessful claim for flood damage in his home in Leatherhead.   Although these appear to be small incidents and somewhat isolated.

[Macmillan]

Economy Contracts and Unemployment Takes Off

• The political and economic scenes were rocked last night as it was confirmed that the United Kingdom economy contracted by 0.4% in Q (April to June) and is now expected to enter a recession that "could last between 2 and 3yrs in the worst case scenario"
• This news was compounded by unemployment breaching 6% (6.25%) for the first time since the Premiership of John Major
• The figures, while better than expected, represent a serious worsening of the United Kingdom's fiscal and economic situation with the projection that a recession could last between 2 and 3yrs putting significant squeeze on the public finances and on unemployment
• Some good news for the Government came through when the Bank of England confirmed that measures to shore up the banking system had "worked better than we could ever have imagined" with most banks now capitalised very strongly. Sir Mervyn King, Governor of the Bank of England, told the BBC "We have only one bank now being monitored for special measures at all, the rest are capitalised as well as can be expected. Without a shock over and above the recession it is looking good that the Government won't have to nationalise anymore banks"
• Bank recapitalisation has not sparked business confidence or investment with banks sitting on the money to insulate themselves against shocks over Q2
• The Government's scheme to buy foreclosed homes and turn them into Council Houses has sparked banks to take what has been described as a zero tolerance approach to mortgage lateness, expecting that the Government will renew the policy and buy the repossessed property, helping them unload so called "Subprime Mortgages" and hopefully turning them into the Council's problem rather than the banks'. 

[Macmillan]

Israeli Troops Enter the Gaza Strip

• Following a month of rocket bombardment Israeli ground forces entered the Gaza Strip "for as long as needed to ensure the safety of Israel and Israeli citizens"
• Israel took control of the Gaza Strip with minimal resistance from the Palestinian Authority although sporadic firefights did break out leaving 31 Palestinian combatants dead and 2 Israeli soldiers injured
• Israel's Foreign Minister Tzipi Livni declared the first phase a "complete success" before adding that work would now begin on "dismantling the terrorist infrastructure that has infested the Gaza Strip since the Palestinian Authority took control"
• Arab countries were quick to condemn the move calling it a "clear violation of Palestinian sovereignty" and "against the very norms of international diplomacy"
• Analysts, already expecting OPEC to reduce oil supply, now expect an even larger contraction set to increase inflation upwards of 5% as oil producing Arab countries seek to pile international pressure on Israel and the West to see an Israeli removal