Politics

13 December 2008

Fraser Nelson reviews the week in politics

Before a country has to beg the IMF for a bail-out, there are normally several clear warning signs. Its national debt needs to be vast — say, several times its entire economic output. Next, it becomes dependent on that debt, as its government is unable to balance a budget. Then, the downfall: its currency starts to devalue rapidly, as the world begins to doubt whether this debt will be repaid. The premiums to insure it against default start to soar. The risk premiums demanded by creditors become simply unaffordable. And then: pop.

It is still highly unlikely that Britain will go to the IMF, but the highly unlikely has been happening rather a lot recently. Monday’s newspapers had a full-page advertisement from a high-street bank boasting about its ‘global vision and prudent long-term strategy’. Seeing Gordon Brown’s leaden economic clichés used to sell mortgages is an almost Orwellian sign of a new economic order. Lord Mandelson, who railed against state bail-outs as a European commissioner, is making an actual list of companies he considers worth saving.

To judge by the newspaper headlines — the latest being an offer to pay sacked middle-class workers to study for MBAs — one can labour under the misapprehension that Mr Brown has stumbled across a cash geyser. There seems to be no end to the money flowing from the Treasury at the PM’s behest. Yet if the government is bailing out companies, banks and mortgage holders, who is bailing out the government? There is no clear answer to this, and it lies at the heart of the biggest single peril the Prime Minister now faces.

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michael clarke

December 14th, 2008 3:41pm Report this comment

The Unitary Authority for Corwall which 80% of the people did not vote for or want!!the costs of which have spiralled up from £19million to a stagerring £60million and I think it should be stopped as we are in a recession!!anuther of Labours quangos!how pathetic!!