“The much more substantial charge is that the Government has mishandled public finances, borrowing far more than it planned, year after year. We are heading into a global downturn, with a bigger fiscal deficit of more than 3 per cent of Gross Domestic Product. That is bigger than that any other large developed nation. We have a government that spends £11 for every £10 that it receives in taxation, borrowing the balance at higher interest rates than the US, Germany or France. And there is every prospect of our national finances getting worse as our economy slows. Northern Rock is a cock-up; our public finances are a disaster.”
However, I disagree with McRae’s other contention that “nationalisation is … the least bad outcome to this sorry tale”.
There are two particularly strong arguments against fullscale nationalisation. Firstly, there’s the irreparable damage it will do to Britain’s global business reputation. The likely loss of foreign investment could suck £billions from the British economy, regardless of whether Northern Rock eventually results in a profit or a loss for the Exchequer.
The second argument is half-stated by McRae himself. With the current Government being such a poor custodian of the public finances, why should we trust them to both run a bank and safeguard some £100 billion of taxpayers’ money? A Northern Rock shareholder gets it right, over at the BBC website:
“The Government is totally financially inept and I certainly wouldn't give it the keys to my piggy bank.”
The Government’s mishandling of public finances backgrounds the Northern Rock debate, and it contributes massive weight to the Tory opposition of nationalisation.
Brown and Darling are keen to lay the blame for Northern Rock’s troubles at the feet of global forces, but it’s their taxation-spending-borrowing spree which has most exposed Britain to the credit crunch’s effects. And it’s that same spree which has closed off many of the avenues of escape…