Monday, February 18, 2008

The politics of Northern Rock

I’m not at all convinced that the Government is going to take much of a political hit for the nationalisation of Northern Rock.

Here (in full) is the Tory press release on the subject:

George Osborne has described the announcement that Northern Rock is to be nationalised as "the day Labour's reputation for economic competence died."

The Shadow Chancellor said the Conservatives would not back nationalisation, and would "not help Gordon Brown take this country back to the 1970s".
He slammed Labour for making the taxpayer bear the full risk of lending £100bn of mortgages in an "uncertain" housing market.
And he attacked the way the crisis had been handled, saying "Gordon Brown has dithered his way to the disaster of nationalisation."

There are two lines of attack here, but notably they don’t both work together. One is that the Government delayed indecisively for months until getting a resolution; the other is that the Government is preferring an old-left statist ideology to a market solution.

Clearly it’s taken a long time getting to this point, during which many people (including the Lib Dems) have been calling for more speed. The Government has spent months casting around for a suitable private buyer – and failing to find one. You might well call this dithering, but given that, you can’t also say that they’re eager to take Britain “back to the 1970s”.

(NB. I have literally no idea whether nationalising Northern Rock is a good plan, nor whether it was reasonable to wait this long in search of other options.)

Cassilis suggests:

these things have a habit of lingering in the public consciousness, becoming character-defining events that somehow typify the politicians in office when they occurred. This happens even when the events are actually pretty tangential to government policy.

Maybe, maybe not. We’ll see. Personally, I’d guess that the missing data discs from last autumn are likelier as an event of this sort.

This, incidentally, is what The Sun says:

THE GOVERNMENT tried desperately to find a private buyer for Northern Rock.
And they were right to do so.
No government should make a habit of propping up failed institutions with taxpayers’ cash.
But no private firm wanted to pay the right price. So there was no option but to take the bank into temporary public ownership.
It was the lesser of two evils, and the only sensible way forward.
Gordon Brown has been brave enough to get us out of the mess his Chancellor got us into.
The Prime Minister will have The Sun's support provided the nationalisation lasts no longer than is strictly necessary.
A good start has been made with the appointment of Ron Sandler to run Northern Rock.
There are some tough decisions ahead — and he is the only figure with the credibility to take them.

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