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Can the UK government ever remain impartial regarding finance?

As we covered in an earlier post, the UK government now owns Northern rock, the Bradford & Bingley mortgage book, has a substantial stake in Royal Bank of Scotland and is expected to announce a holding of 43% of the Lloyd's/HBOS merged entity. As the UK government looks to put more pressure on UK banks to increase liquidity for UK consumers and offer the best interest rates, can they really remain impartial?

This is a question which has been asked of the government more and more and until now has not received a favourable response. Many had hoped that the acquisition of Northern rock would take some pressure off Northern Rock mortgage customers who were struggling to make ends meet. However, Northern rock currently has one of the highest repossession rates in the sector and one which is nearly twice the sector average. This is a perfect example of how the expectation of better terms now the bank is under government control has just not happening.

Many economic experts believe that the banking sector is just too strong for the UK government to take on and despite the threats of various legal restrictions and regulations the leading banks do not seem bothered at all. They know, as do the government, that if any further money was needed to bail them out then taxpayer's would need to come to their aid once again. Whether we will see a change in this in the future remains to be seen, but at the moment the banks have the government over "a barrel".

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