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Leaders: CBI loses | Questions for borrowers

Prepared to be quizzed alot more before getting mortgage. Picture: PA

Prepared to be quizzed alot more before getting mortgage. Picture: PA

ADMITTING to mistakes is always difficult for any organisation, especially if it is one which demands high standards of efficiency of others.

So some plaudits are due to CBI Scotland for admitting it made a mistake in registering with the Electoral Commission as an organisation campaigning for a No vote in September’s independence referendum.

But there is also no disguising the fact that this is a humiliation. In the face of a string of resignations, mainly by publicly-funded bodies anxious to maintain punctilious impartiality, it has insisted that its registration decision was right and proper.

Now it is saying that it was wrong and improper.

It was wrong, the CBI said in a statement, because while it may say when asked and in statements that it does not believe independence was in the best interests of its members, the confederation never had any intention of campaigning for a No vote or indeed of telling the people of Scotland how to vote. It was also improper because the application to register was not approved under the normal corporate governance rules and other legalistic blah-di-blah about counter signatures. This is clearly the legal get-out clause. If the application was made by invalid procedures, then the Electoral Commission has no choice but to agree to the CBI’s request to make its application “null and void”.

However, it makes the CBI look chaotic and confused. If it never intended to campaign in the first place, why did someone make the decision to register as a campaigning organisation? If those who run the CBI were advised that it was necessary, who supplied that advice?

The idea that it was done to make sure that the CBI was not flouting the law, by engaging any speakers for its dinners and conference who might talk in favour of a No vote did not fall foul of the law, sounds implausible. Providing a platform for a speaker from either side does not constitute a campaigning act. If it was, then universities at which speakers from both camps are regularly appearing are also in breach of the law. Plainly, that is nonsense.

And more to the point, why did it spend days justifying the decision only to then claim it was all a horrible mistake?

Evidently the CBI has work to do if it is to appear to be the premier business representative body that it claims to be. Those members who have resigned, apart from those favouring a Yes vote, may take some convincing that it is back on an even keel and that those in charge know what they are doing.

The damage it has done to itself is not just in those 20 or so resignations, but in its public image as a body which, it has now confirmed, has 1,200 Scottish members employing 500,000 Scots – a third of the workforce.

Such a body ought to command respect, but its actions over the past seven days have dissipated much of its standing in the eyes of the public.

Tough questions for borrowers

THINKING about getting a mortgage? Then prepare to be quizzed about a lot more than just how much of a loan is wanted, the price of the property sought and your income. New rules coming into force mean lenders have to inquire far more deeply to make sure borrowers can afford to make repayments.

This sounds sensible. After all, it was irresponsible lending to people who could not afford it which caused the financial crisis, first of all in the United States and then here in Britain.

The questions will cover spending on holidays, club memberships, eating out, alcohol, savings and so on. The aim is not just to establish whether someone has sufficient income, but whether their lifestyle makes them a low-risk borrower.

This, however, is a tricky judgment to make, and some will think the questions intrusive. Moreover, the questioning is intended to look ahead and find out whether future income, should interest rates rise from their current lows, is likely to cover heftier monthly payments.

Given current levels of uncertainty, can such judgments be reliable? And what if they are not met? Is this the borrower’s fault, or the lender’s? And what would be the consequences for either party if expectations fail to
materialise?

The financial crisis was caused by lenders desperate to push money on to borrowers, often in order to earn a short-term bonus regardless of whether or not there might be long-term problems, with the false security of
apparently ever-rising house prices. The Financial Conduct Authority’s new rules are intended to stop that happening, but whether they will succeed remains to be proven.

 

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