Peter Hoskin

Dragging a Rock

Dragging a Rock
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There's plenty in today's papers about Alistair Darling's U-turn on Northern Rock.  The Lombard column in the FT sums it up: the Rock has become a "dangerous laboratory for banking policy", screeching from reining in its business one minute to expanding back into the mortgage market the next.  To my mind, it's a clear demonstration of what can happen when something becomes political.  The government knows it's open to criticism over its handling of NR, so it's flapping around to find something - anything - that will work.

Problem is, what grabs the short-term headlines may result in medium-term embarassment.  Take the figure the Government have slapped on Northern Rock's new lending capacity: a hefty £14 billion.  Sounds impressive enough, but - as one of Westminster's best readers of the small print, Paul Waugh, revealed last night - there's every chance that could turn out to be as little as £8 billion. When it comes to finance, at least, the Government's building its own gallows.  And building them high.

I imagine George Osborne's looking on in fear.  Northern Rock, and - who knows? -  other banks too, may soon be a millstone around his neck.  In which case, the Tories need to be thinking seriously about reprivatisation, about which too little is being said at the moment. Sure, there are currently plenty of unknowns, but some outline of the hows, whys, whens and whats of reprivatisation could inject some much-needed confidence into the system.  Particularly as banks looking on at the continuing Northern Rock fiasco are probably thinking: this could be us next.