Financial Crisis Has Odd Effects in UK
The most striking example of this was the failure across the board of Icelandic banks. Now you would not expect this to be a major effect on UK householders, but it might be a problem for some time to come. It is not just those UK citizens with funds in Icebank, which went under, freezing all their assets and causing a great deal of consternation among ordinary savers, but many of the local councils in the UK have put taxpayers' money on the island due to their high interest rates:
The number of councils in England and Wales which invested money in Icelandic banks has grown to 116, depositing a total of £858 million, it has emerged. That works out at about £7 million per council.
It’s a major problem for new chancellor Alistair Darling, who has been in talks with the Icelandic government over the various members of British society in danger of losing their money in Iceland.
However, the most interesting event that has occurred as a result of the financial fallout is related to the referendum on Scottish independence. First Minister of Scotland Alex Salmond has included the referendum as part of his most recent policy promises. His reaction to the fact that two of the major bank failures happen to be leading Scottish banks -- the Royal Bank of Scotland and HBOS-- has been most satisfying to the prime minister:
The prime minister said the underlying message of the rescue package announced this week for banks, including the Scottish giants Royal Bank of Scotland and HBOS, was that Britain was stronger together and weaker apart.
So bad is the situation that Mr. Salmond had to ask the British taxpayer for £1 billion to help cover the costs of bank failures. The fact that the British government had to step in to bail out both of these banks does make the case that had Scotland not been part of Britain, it would have been in serious financial trouble. There is even speculation that Scotland would be suffering in the same manner as Iceland. In fact, Salmond has been on record comparing Scotland to Iceland:
He also attacked the SNP's claim that an independent Scotland would perform better emulating smaller countries such as Ireland, Norway, and Iceland -- the so-called "arc of prosperity."
It must really grate Scottish nationalists like Salmond that HBOS (Halifax Royal Bank of Scotland) will cease to be Scottish when it's taken over by Lloyds TSB, which also owns the Scottish Bank. They are reacting rather badly to the prime minister’s comments on the state of the union.
As it is said in the UK, “it's early days,” and the effect on the British economy and its people is yet to be determined. It is not clear how long they will be able to snicker at the plight of bankers in the City until they suddenly find themselves in dire straits.