Anatole Kaletsky's analysis of the Northern Rock disaster says it all on the economics of the matter. He seems to miss the politics, however. He asks why the Government should put £100 billion on the line to save 6,000 jobs at the Crock, when one-tenth or even 100th of that could have saved many more jobs in more important and valuable companies. What a naive question. The Crock is from the corrupt heartlands of the Labour North where it's simply a given that the Party will look after its own. This was the building society that subsidised the miners in their struggle with the Thatcher Government. This is the bank that diverted profits (when it had some) to a list of projects which read like a New Labour manifesto, including IPPR "the only English policy and research think tank outside London" (which Guido describes as "New Labour's favourite think-tank and source of policy ideas")
Kaletsky then naively observes that
It is quite likely that the European Commission will veto the business plans for Northern Rock unless these provide for a rapid rundown of both its lending and deposit-taking operations.
He may be missing the point there. Of course this
nationalisation expropriation is illegal "state aid" of the kind Brown has vociferously opposed elsewhere in Europe. In announcing "business as usual," Gordon Brown knows he cannot deliver, but also that he can blame the EU for his eventual failure to do so. It is in the nature of Britain's toxic relationship with the EU that it is used as an excuse for every unpalatable action. I am a Eurosceptic myself, but rational enough to know that the EU is not to blame for everything.
Wat Tyler today spells out the mess the Crock is in.
NR's Mortgages in arrears topped £1bn in December - up by nearly a quarter on the position five months earlier. The number of mortgages in arrears also increased by nearly 20% between July and December to more than 9, 000 households.
Repossessions in December more than doubled over the previous month. Northern Rock had to take the keys to 237 properties, swelling its pool of repossessed homes to some 1,100. Properties with mortgages in excess of the value of the property have also been steadily rising - up by more than 10% in five months.
These facts are well known to the government, which has spent millions on the best advice available. Gordon Brown may know nothing about economics but he is a well advised, viciously cunning politician. He knows he will reap political benefits from a pretence of "saving" Northern Rock. He has already recovered from much of the damage Northern Rock did to his opinion poll ratings. In opposing his actions, the Tories will appear to an economically-naive electorate to be the nasty party from the South of England baying for Northern blood. The average voter simply cannot get his head around the idea of £100 billion (which is why I think the cost of all government projects should be expressed as the number of working lives consumed to pay for them).
When, finally, the government is "forced" to do what Kaletsky thinks it should, it will do so "reluctantly" in the face of EU pressure. "Brussels" will be cast in its usual role in Britain as the political equivalent of Satan.
Nationalisation may well be "Absolutely, incredibly, utterly wrong" economically, but it may not prove to be such bad politics.