Libor manipulation doesn't necessarily mean Libor lies

Reducing the rates at which you loan is the good sort of manipulation

Yesterday afternoon, Ric Holden (the Conservative Party's press officer) tweeted this quote, apparently from the 8 November 2008 edition of the Daily Express:

Chancellor Alistair Darling summoned bank chiefs to an emergency meeting yesterday before reading them the riot act. Just hours later the banking industry reacted by slashing the Libor - the rate at which banks lend to one another.

It certainly sounds like it plays into the narrative that Labour directly encouraged Barclays to lie about the rate at which it thought it could borrow. But there's an important distinction between the communication between Paul Tucker and Bob Diamond (or rather, Jerry del Missier's apparent misinterpretation of their communication) and the meeting of Darling and the bank chiefs, which is that the latter is plural.

Remember that Libor is the rate at which banks believe they can borrow large sums of money, unsecured, from other banks. There are two ways to artificially reduce that number. One is to encourage the banks to lie about the rate they think they could pay for borrowing; this is what del Missier believed Paul Tucker had done.

The other is to encourage the banks to lend to each other at lower rates. That's not manipulating Libor, although it is, of course, manipulating other aspects of the finance system. It's something you can only do if you have the ear of all the banks, though; if Barclays unilaterally decides to loan to other banks for less, all that happens is they lose money. But if all the banks do that, then interbank lending rates drop.

The Telegraph's Andrew Lilico points out today that that may even be what Paul Tucker was talking about in his "no particular reason why Barclays should be borrowing at such a high rate" comment:

Take this as an example. The Bank of England, if it found that one of the banks – let us call it B Bank – were finding it harder to borrow money than the rest, might have a chat with B Bank to see why. It might reassure senior officials in B Bank that it still regarded B Bank as sound. It might even tell those officials that it would have a chat with other banks to reassure them as well. It might also feel that other banks were sufficiently sound that it would be prepared to provide last resort lending to them. The upshot of B Bank being sound and other banks being able to obtain cash from the Bank of England if necessary might be that other banks should feel able to lend money to B Bank at interbank rates not wildly dissimilar to the rates those other banks lend to each other. A perfectly natural way to convey this, perfectly proper, intention by the central bank to reassure other banks about B Bank might be to say that the Bank of England saw no particular reason why B Bank should always be borrowing at the most expensive rate.

Of course, there is a lesser question here, which is whether we should be using Daily Express reports for any type of historical record. Here are the various dollar Libor rates (from overnight to 12 month) for the two months surrounding the reported meeting, with the black line marking when it apparently occurred (click, as ever, for big):

That doesn't seem like a suspicious drop. Or really a suspicious anything.

Alistair Darling: the Brows are Back, Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Single parent families are already struggling - universal credit is making things worse

Austerity and financial hardship are not inevitable – politicians have a choice.

“I don’t live, I merely keep existing”. So says one single parent in Gingerbread’s final report from a project tracking single parent finances since 2013. Their experience is typical of single parents across the country. The majority we surveyed are struggling financially and three-quarters have had to borrow from friends, family or lenders to make ends meet.

This is not the story that the government wants to hear. With a focus on a jobs boom and a promise to "make work pay", a relentlessly positive outlook shines from the DWP. The reality is somewhat different. Benefit cuts have taken their toll, and single parents have been among the hardest hit. Estimates suggest over six per cent of their annual income was lost through reforms under the 2010-15 government. The 2015 Summer Budget cuts will add another 7.6 per cent loss on top by 2020, even after wage and tax gains.

What’s more, for all the talk of tackling worklessness, working families have not escaped unscathed. Single parent employment is at a record high – thanks in no small part to their own tenacity in a tough environment. But the squeeze on incomes has hit those in work too. The original one per cent cap on uprating benefits meant a single parent working part-time lost around £900 over three years. Benefits are now frozen, rapidly losing value as inflation rises. On top of stagnant and often low pay and high living costs, it’s perhaps unsurprising that we found working single parents surveyed just as likely to run out of money as those out of work – shockingly, around half didn’t have enough to reach the end of the month.

Single parent families – along with many others on low incomes – are being pushed into precarious financial positions. One in eight single parents had turned to emergency provision, including payday lenders and food banks. Debt in particular casts a long shadow over families. A third of single parents surveyed were behind on payments, and they described how debt often lingers for a long time as they struggle to pay it off from already stretched budgets.

All of this may be depressingly familiar to some – but it comes at something of a crossroads for politicians. With the accelerated roll-out of universal credit around the corner, the government risks putting many more people under significant strain – and potentially into debt. Encouragingly, the increasing noise around the delays to a first payment is raising red flags across political parties. Perhaps most alarming is that delays are not purely administrative, but deliberate – they reflect in-built, intentional, cost-saving measures. These choices serve no constructive purpose: they risk debt and anxiety for families the government intended to help, and costs for the services left to pick up the pieces.

But will the recent warning signs be enough? Despite new data showing around half of new claimants needed "advance payments" (loans to deal with financial hardship while waiting for a first payment), the Department for Work and Pensions stuck doggedly to its lines, lauding the universal credit project that “lies at the heart of welfare reform to help “people to improve their lives”.

And, as valuable as additional scrutiny is, must we wait for committees to gather and report on yet more evidence, and for the National Audit Office to forensically examine and report on progress once again? The reality is glaringly evident. Families have already been pushed to the brink without universal credit. Those entering the new system – and those supporting them, including councils – have made it abundantly clear that moving onto universal credit makes things worse for too many.

This is not to dismiss universal credit in its entirety. It’s hard to argue with the original intention to simplify the benefit system and make sure work pays. It was always going to be an ambitious (possibly over-ambitious) project. But salami slicing the promised support – from the added seven day "waiting period" for a first payment, to the slashed work allowances intended to herald improved work incentives – leaves us with a system that won’t merely overpromise and under-deliver, but endanger many families’ already fragile financial security. The impact should not be underestimated – this is not just about finances, but families’ lives and the emotional stress and turmoil that can follow.

With increasing political and economic uncertainty, with Brexit looming, this is not the time for petty leadership squabbles, but a time to reassure voters and revitalise the government’s promises to the nation. The DWP committed to a "test and learn" approach to rolling out universal credit – to pause and fix these urgent problems is no U-turn. And of course, the Prime Minister promised a transformed social justice agenda, tackling the "burning injustices" of the day. Nearly all of the UK’s 2 million single parent families will be eligible for universal credit once it is fully rolled out; making this flagship support fit for purpose would surely be a good place to start.

Sumi Rabindrakumar is a research officer at single parents charity Gingerbread.