Only a little more than a year ago, Gordon Brown was considered very clever when he had a word with Sir Victor Blank at a cocktail party and encouraged him to merge Lloyds and HBOS to help save the British banking system. Not long afterwards, Sir Victor was forced to resign after the merger produced chaos and stupefying losses were exposed. Mr Brown, however, is still here, and this week, with equal brilliance, he has ordered the break-up of the bank he merged, in order to help save the British banking system again, while he puts a further £5.8 billion of government money behind it. It is not easy to resist Mervyn King’s recent suggestion that the relationship between government and the banks is the greatest system of moral hazard ever created. I do not understand why this long-running crisis is said to have been caused by ‘market fundamentalism’. The concept of being ‘too big to fail’, which dominates the crisis, is the biggest anti-market idea there is. Surely we have not a market problem but what economists call an ‘agency’ problem — the power of those involved in the trade to skew it to their own advantage and make everyone else take the consequences of disaster. The argument that Britain needs such zombie banks is very much like the belief in the 1970s that Britain needed British Leyland. It was wholly untrue except, unfortunately, in the short term — hundreds of thousands of jobs, and therefore a good many parliamentary seats were at stake. The prospect of immediate and total collapse was — and is — too frightening. By the Leyland analogy, the government now has a dilemma: does it want able Michael Edwardes equivalents to work within the existing rotten big bank structure (at the cost of almost indefinite taxpayer-backing), or does it want creative destruction? Its answer is the former, but only because it is politically too weak to attempt the latter. The big explosion is being delayed.
In tracing what went wrong, the history of the word ‘investment’ should be studied. What were once ‘merchant banks’ only became dangers to civilisation when they renamed themselves ‘investment banks’. You might as well call a casino a ‘building society’. Mr Brown also likes the word ‘investment’. It replaced ‘spending’ in his lexicon, and his rule was that, over the cycle, one borrows only to ‘invest’.
Until reading Juliet Nicolson’s new book The Great Silence (John Murray), I had not realised that that first two-minute silence 90 years ago next week came about only at — mot juste — the 11th hour. Not long before the first anniversary of the Armistice, a man called Edward Honey wrote to the Evening News calling for a five-minute silence of ‘bitter-sweet remembrance’. Sir Percy Fitzpatrick, the author of the children’s classic Jock of the Bushveld, pointed this suggestion out to Lloyd George, the Prime Minister. In South Africa during the first world war, he said, there had been a daily three-minute silence at noon, a sort of secular Angelus. Why not have a single, great, national silence on 11 November? LG took up the cause. King George V was hesitant because, being obsessed with punctuality, he fretted at the idea that people would be too disorganised to observe the time precisely, but he agreed at last. So it was only on 7 November 1919 that the King publicly called for a two-minute silence on the 11th hour of the 11th day of the 11th month. The silence was universally observed, men bareheaded. As for the Cenotaph, which in 1919 was still only a wooden structure threatened with demolition, it had already become a shrine where anyone could lay flowers, so that in the summer there was a smell of rotting from the heaped bouquets. It was all very like the death of Diana, except that it mattered deeply, and matters still.
Without taking sides on how to classify cannabis, I feel a little suspicious of Professor David Nutt, the dismissed government scientific adviser on drugs. He said that taking cannabis was less dangerous than ‘horse-riding’. As a columnist, I feel affronted. Flip comparisons like that are our stock-in-trade, and do not become scientists, who are supposed to speak soberly. One is left feeling that Professor Nutt likes the sound of his own voice (an impression confirmed by his description of himself as the government’s ‘major expert’) and has somehow got it in for equestrians. His remark resonates oddly, rather like when the then Bishop of Durham, Dr David Jenkins, was criticised for saying that the Resurrection was ‘a conjuring trick with bones’. What he actually said was almost the opposite — that it was ‘not just a conjuring trick with bones’ — and yet there was a certain arrogance in his choice of phrase which made the criticism of him essentially correct.
There is uncertainty, I gather, about where the Camerons will live if David makes it to 10 Downing Street. The flat there is unsuitable for a family, and besides, Samantha Cameron initially held to the view that family life would be better protected if it could be kept away from the office. Now, though, she is said to have come round to the idea that it is simply impossible to separate the two if her husband is to see his children and her and run the country. The Blairs’ solution was to occupy the larger residence at No. 11 and to shove the then childless Chancellor of the Exchequer, Gordon Brown, into the flat at No. 10. But if Mr Cameron makes George Osborne Chancellor, he will have to contend with the fact that the Osbornes also have young children. One of the difficulties in this matter is that it would be hubristic to think about it now, and yet those involved cannot quite avoid doing so. A mischievous solution would be to make William Hague, who does not have children, the Chancellor instead. It sounds improbable, but one has to remember that, at root, almost every problem in Britain is related to housing.
Recently negotiating to buy a small piece of land, I complained to several people about the cost. The jocular answer was always the same: ‘They’re not making it any more.’ True, but, when you think about it, why not? In the Middle Ages, large bits of land, some of it on Romney Marsh, near where we live, was reclaimed from the sea by ‘inning’, creating flat, fertile pastures. And look at the Netherlands. Is it beyond our modern abilities to do the same?
Seen at the state banquet for the President of India at Buckingham Palace last week: the Foreign Secretary David Miliband facing one way all evening to hang upon every word of the Prince of Wales, never once turning to the unfortunate woman on his other side.
Comments