Switzerland and Denmark go negative

Negative nominal interest rates arrive.

Government interest rates have, in real terms, been negative for quite some time. Britain, the US, and Germany are all in the position where they are being paid to borrow money. This creates some rather interesting incentives for governments: they can fund massive investment programs at minuscule expense, they can use money which would be spent on interest payments on more valuable projects, or they could even just stop collecting taxes entirely.

Unfortunately, political considerations have meant that most governments have been unwilling to show even the slightest innovation when responding to a situation in which the most basic rules of the game no longer hold. And, when negative interest rates came to business, the same thing happened.

Unilever and Texas Instruments are also borrowing below the rate of inflation, but when presented with free money, businesses – even ones like Google, supposedly staffed with the world's greatest blue-sky thinkers – don't do anything other than sit on monstrous cash piles waiting for a more favourable investment environment.

Now the trend has spread in a different direction. Two banks – State Street Corp. and Bank of New York Mellon – have announced that customers holding accounts in Swiss Francs or Danish Crone will be subject to a negative interest rate. That's negative in nominal terms, so in real terms it's an even sharper penalisation of savers.

These two currencies are experiencing some of the tightest squeezes because they are both pegged closely to the euro (Denmark is in ERM II and Switzerland has enacted a ceiling on how much it can appreciate relative to the currency), while also being in strong demand because they are not actually the euro – making them the star choice for investors who want to hold european assets without taking the risk that the eurozone will messily implode.

Conventional wisdom says that nominal negative interest rates can't happen. Savers will merely withdraw their money and keep it in cash to avoid the "fee". This doesn't seem to be happening, probably because the value of having a bank account in another countries currency is high enough that it's worth paying for the benefit. Conventional wisdom, yet again, is apparently wrong.

The Matterhorn, Swiss icon. 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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Jeremy Corbyn challenged by Labour MPs to sack Ken Livingstone from defence review

Former mayor of London criticised at PLP meeting over comments on 7 July bombings. 

After Jeremy Corbyn's decision to give Labour MPs a free vote over air strikes in Syria, tonight's Parliamentary Labour Party (PLP) meeting was less fractious than it could have been. But one grandee was still moved to declare that the "ferocity" of the attacks on the leader made it the most "uplifting" he had attended.

Margaret Beckett, the former foreign secretary, told the meeting: "We cannot unite the party if the leader's office is determined to divide us." Several MPs said afterwards that many of those who shared Corbyn's opposition to air strikes believed he had mishandled the process by appealing to MPs over the heads of the shadow cabinet and then to members. David Winnick declared that those who favoured military action faced a "shakedown" and deselection by Momentum activists. "It is completely unacceptable. They are a party within a party," he said of the Corbyn-aligned group. The "huge applause" for Hilary Benn, who favours intervention, far outweighed that for the leader, I'm told. 

There was also loud agreement when Jack Dromey condemned Ken Livingstone for blaming Tony Blair's invasion of Iraq for the 7 July 2005 bombings. Along with Angela Smith MP, Dromey demanded that Livingstone be sacked as the co-chair of Labour's defence review. Significantly, Benn said aftewards that he agreed with every word Dromey had said. Corbyn's office has previously said that it is up to the NEC, not the leader, whether the former London mayor holds the position. In reference to 7 July, an aide repeated Corbyn's statement that he preferred to "remember the brilliant words Ken used after 7/7". 

As on previous occasions, MPs complained that the leader failed to answer the questions that were put to him. A shadow minister told me that he "dodged" one on whether he believed the UK should end air strikes against Isis in Iraq. In reference to Syria, a Corbyn aide said afterwards that "There was significant support for the leader. There was a wide debate, with people speaking on both sides of the arguments." After David Cameron's decision to call a vote on air strikes for Wednesday, leaving only a day for debate, the number of Labour MPs backing intervention is likely to fall. One shadow minister told me that as few as 40-50 may back the government, though most expect the total to be closer to the original figure of 99. 

At the end of another remarkable day in Labour's history, a Corbyn aide concluded: "It was always going to be a bumpy ride when you have a leader who was elected by a large number outside parliament but whose support in the PLP is quite limited. There are a small number who find it hard to come to terms with that result."

George Eaton is political editor of the New Statesman.