Labour have at last admitted that nationalisation is the only sensible way forward for Northern Rock, with Alistair Darling deciding to announce its nationalisation imminently.
Nice to see another Liberal Democrat policy being nicked by other parties 🙂
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27 Comments
A complete vindication of our position on this issue… well done Vince!
its sad how much money has been wasted by Labour during the period. wonder how much we could have saved if it had been nationalised from the start.
Clearly the right decision NOW.
It could have been sold before it came to this, well before, if the Government hadn’t made a hash of it in the first place.
This is still a failure, a huge one and I hope we will be holding the Govt. to account for it rather than patting ourselves on the back.
This is the right decision. But it could still go wrong from here: what we now need is for it to be well run. It will be interesting to see how much the shareholders get. My own view is that they should not get a single penny. The firm went bankrupt and was unable to pay its creditors. Under those circumstances the shareholders should get nothing. If Labour caves into them in the way they did over Railtrack we will see yet again that our money, as taxpayers, is being wasted by a govt that does not understand how financial markets work.
The shareholders spokesman Robin Ashby is a former Lib Dem group leader in Middlesbrough and is a member in Newcastle.
George Osborne’s response was pathetic: claiming that this is a return to 1970s socialist dogma rather than a much delayed inevitability is completely absurd. As far as I remember the only 1970s nationalisation was when the Heath government took Rolls Royce into public ownership because there was a similar national interest to be served in not allowing it to go bust. I suppose that makes Ted Heath a socialist? Oh, sorry, I forgot – plenty of Tories believe that he was one.
Yes, Vince Cable was (and remains) right that public control had to come. Pretty well everyone to the left of the Cameroonies knew that all along.
Except, there is that wrinkle.
There are 134,000 Google “hits” for a combination of “Northern Rock” and “hedge-funds”. Altogether, they leave us little the wiser. Two such vulture-funds (RAB Capital and SRM Global) have been the prime-movers in trying to keep some pretence of a future for Northern Rock (i.e. by attempted blackmail of tax-payers). Those two firms are currently some £80M in the hole on a £150M stake (today’s Sunday Times figures) and “have a fiduciary duty to protect their own investors … they will not go down without a fight”.
Surely, Darling and the Treasury have not so much “dithered” as made as sure as dammit that they are seen to have done everything possible to avoid this recourse. It is to be hoped, then, that the judiciary have not invested their pension funds in Northern Rock, and will descry the Rock among the pebbles.
Meanwhile, what about the 18th-baronet-Osborne-to-be and his claque of OEs? His original position, when it looked as if NR could bring down a couple of other institutions, was wishy-washy support for Darling, the Treasury and all their works. Now he is bleating otherwise. Has there yet been, in all this hoo-ha, in all these months, a single Tory positive proposal? Any bets that we get one in tomorrow’s debate?
Martin Wolf has written an article that is as close to the LD position as it is possible to be. Has Vince tried to sign him up? It shows how little today’s Tories understand capitalism. Wolf suggests that shareholders should not be given a penny.
http://www.ft.com/cms/s/beacc3ba-dd82-11dc-ad7e-0000779fd2ac.html
Heath may not have been a socialist by political philosophy; however his government not only nationalised lame duck industries but also instituted the most far-reaching state intervention in the economy of the postwar period. His labyrinthine prices-and-incomes policies suspended the operation of market forces in setting relative prices in the economy, while his Industry Act arrogated such sweeping powers to the government to direct private companies that Tony Benn praised it for doing the ‘spadework’ of socialism.
Whatever the rights and wrongs of this policy (and I agree nationalisation was probably unavoidable once the government lent money to Northern Rock on this scale), we should not use Heath by way of justification. The Heath government was economically disastrous. Period.
Vince was right and this decision is the ONLY option that gives the taxpayer the chance of getting their money back.
The problem of compensating the shareholders is where I would disagree with Tim.
The bank did not strictly speaking ‘go bust’ and was and is a going concern – it has a net asset base and has a large loan book of performing mortgage debt.
Government dither caused the problems – okay the reckless way managemnet built the book with international loan finance to fund it was the ultimate cause but then when the finance market dried up the FSA, BoE and Treasury indecision led to the run on depositors funds.
Many small shareholders and pension funds will be affected as well as the NR foundation – I would hesitate to say they aren’t entitled to any compensation although I think the £4 a share level attributed to the legal advice given to the hedge fund investors is likely too high, zero is too low…
I hardly think this is a policy to be proud of. Not only should the Government never have got involved in the first place, but they have blown the chance to find a decent solution as the crisis unfolded.
http://lettersfromatory.wordpress.com
Shareholders should get nothing. The fault seems to be primarily that of NR’s board, who relied on the wholesale markets for funding and were reckless in their lending. That was the risk they, and by extension shareholders, took. That the markets dried up in August last year revealed this strategy to be too risky for the bank. Shareholders were happy to get the dividends and/ or capital growth that went with the strategy in previous years so why should they not bear the downside?
But – politically speaking – what a triumph for Vince Cable. For once the LDs look far more economically competent than either of the other 2, and Osborne’s call that this is a return to the days of the Upper Clyde shipbuilders is just wrong.
What are the answers to these questions…?
These tens of billions of pounds, have that actually been spent, or is it something theoretical?
If they have been spent, where have they gone? What was it spent on?
How will we get the money back, if it has gone somewhere?
See Sam Coates’s Red Box Blog – did Cable stop Branson’s bid? on
http://www.timesonline.typepad.com/politics/2008/02/did-vince-cable.html
So just what do the Tories propose? I have been staggered at how they are coming out with the usual rubbish about not starting from here if it were them and that nationalisation is a policy of the past.
In truth they would today be faced with tough choice – nationalise and play for money back in the longer run or giving a way a large amount of public money now… the city at least seems to understand it and the BBA (Brish Bankers Assoc).
Perhaps one of the Tory butterfly brigade who monitor this site would be honest enough to enlighten us? although I have my doubts
Whilst we are supporting this I’m a bit concerned by reports that the bill proposed will give the government power to nationalise other banks. I’ve not seen the text of the bill yet but Alistair Darling didn’t deny this was the case at the press conference.
On that basis maybe we shouldn’t be supporting it. There’s no need for such a wide and sweeping power and it is quite typical of the way NuLabour legislates giving very wide powers to ministers.
Hywel Morgan @ 4:48 pm:
“the bill proposed will give the government power to nationalise other banks”
Yes, inevitably, though it will be a very time-limited provision. It’s merely a device to get around the complications of being a “hybrid bill”. So, pay attention at the back there!
And that distant thud was the sound of the would-be 18th Baronet Osborne’s face hitting the playground tarmac.
In the Commons session Vince Cable was quite rightly enjoying himself, but Darling didn’t do too badly either. Depite the yahoo yelping, I doubt whether the Tories are as cocky tonight as they were when they had the BBC rooting exclusively for them this morning.
Perhaps the Tories should be encouraged to put up or shut up with a Vote of No Confidence. On current form, despite the “dead man walking” nonsense, they will bottle it. That should be pointed out.
“Yes, inevitably, though it will be a very time-limited provision. It’s merely a device to get around the complications of being a “hybrid bill”. So, pay attention at the back there!”
Ah – do you mean by doing it this way they can avoid it being a hybrid bill?
Though Dennis Skinner must be thinking that it has all been worth it as finally after 38 years he gets to vote to nationalise all the banks! 🙂
Hywel Morgan @ 5:20 pm:
That was my understanding. As I remember, a hybrid bill is one which affects a particular private interest (either of an individual or an organisation). That would give a right of hearing before a Select Committee. Ah! visions of affronted, starving hedge-funders, down to their last few millions, queuing round Parliament Square to press their grievances!
Not only Dennis. When I first became political, I was signed up for clause 11 (my enumeration may be incorrect) of Dream an Lucht Oibre (which, of course, all recognise as the Irish Labour Party). That was a commitment to the nationalisation of all banking and insurance. Oh, and as red-in-tooth-and-claw Alistair Darling didn’t quite point out this afternoon, when Vince Cable was in the (British) Labour Party, he was signed up to Clause IV.
Comrades! To the barricades! La lutte continue!
Hilarious to watch the Iain Dales of this world getting all revved up and going nowhere. They should stop point-scoring and just admit that Dave from PR and his far-right mates have got nothing worthwhile to say.
I think Vince Cable should be applauded for accepting the least bitter response to the historic inevitability that became the credit crunch once Gordon Brown became Chancellor of the Exchequer.
Nationalisation is undesirable, but it’s far better that the financial well-being of thousands of individuals is held in the hands of incompetents than in the hands of criminals or those who are in hock to criminals.
At least we stand a fighting chance.
I’d like to ask what is the difference between the impending economic slowdown (caused by the credit crunch as a result of the collapse of the lending arrangements built out of a housing market bubble) and the Great Depression (caused by a credit crunch as a result of the collapse of the lending arrangements built out of a stock market bubble)?
Is it too early to blame Brown for the next World War?
for full coverage on this and other issues by a liberal blog go to the-porkbarrel.blogspot.com
it is run by students so support a youth initiative fellow lib dems!
p.s. vince was right all along and if the country had listened we wouldnt be in such a mess
The bill is time limited to one year (not really what I would call strictly time limited) and only to banks which have been provided assistance by the Treasury.
The thing that bothers me generally is clauses like this:
“(1) The Treasury may by order make such modifications of any enactment as they
consider appropriate for or in connection with facilitating the provision of
relevant financial assistance by the Bank of England to building societies.”
Where Parliament votes very wide discretionary powers to ministers. That particular power is not time limited and will be agreed by Parliament today without any in-depth consideration.
Hywel Morgan @ 10:52 am:
Point taken; but it was ever thus.
I suspect this is less a “catch-all” than a drafting attempt to avoid the Bill being in conflict or used to conflict with all others. In other words, in a Venn diagram, the Bill is the all-embracing circle, but other Acts will be a number of sub-circles defining more specific powers.
I note, however, that the provision relates to the Treasury, rather than delegating responsibility to the BoE or the FSA. What bets that the next Parliamentary session has a measure tidying up that little nest of vipers?
In any case, the aftermath of NR will go, somehow, somewhere, somewhen, to Judicial Review. The vampire funds are £150M down on this one, so are not going to relent. Which is, in my mind, precisely why the Treasury has waited so long, not to “dither”, but to make sure, and be seen to make sure that all the little ducks are in line. The testing moment for that will be if those little ducks swim past the EU scrutiny without being blasted out of the water.
And I am (in the definition of the great President Jed Bartlet) getting distinctly pissed that the BBC keep telling me that Osborne’s falling-out-of-his-pram yesterday was a “strong” performance.
Vince’s comment about sending back Goldman Sachs bill with a note saying that he got similar advice from Lib Dems several months ago will, I think, resonate more with ordinary voters than George Osborne’s ranting.
“I suspect this is less a “catch-all” than a drafting attempt to avoid the Bill being in conflict or used to conflict with all others.”
From what I read of the debate this particular bit seems to be about extending the lender of last resort powers to building societies which it doesn’t currently cover. A valid point – but one which would have been apparent from last autumn and which shouldn’t be done in a bill debated for a few hours (the committee stage didn’t even reach this point).
Farcically, the minister said they would address queries on clause 11 later in the committee stage. At that point the committee was on about clause 6 with less than 10 minutes left to run so it should have been blindingly obvious that they weren’t going to get to that!
There is a need for emergency legislation – but it should deal with matters that need emergency legislation.
It seems from John Hemming’s blog that we abstained on this in the end after the Granite disclosures and our team deserve a lot of credit for not following the easy route of “nationalisation is still needed”.