James Forsyth James Forsyth

Why won’t the Tories say they favour the creation of a bad bank?

In his speech earlier today, George Osborne said:

‘we must deal with the toxic debts of the banks we now own. They will be zombies until we do. Neither dead nor fully alive.’

The clear implication of this statement, and several others that Conservative spokesmen have made in the last few months, is that a bad bank is needed. But the Tories always stop short of saying that they actually favour the creation of one. I can’t see any reason—political or economic—why the Tories shouldn’t say openly that a bad bank is a necessary step for ending this crisis. It seems to be another instance where the Tories would benefit from being less cautious.

The rest of Osborne’s speech was typically politically astute. He inveighed against the 50p rate, declaring it to mark the death of New Labour. But he chose to make clear that stopping the increase in National Insurance Contributions is the party’s top priority. The leadership’s 50p straddle—disagree with it, mock it but don’t pledge its instant repeal—is keeping the party united for the moment and has neutralised the political danger the move posed to them. These are not small achievements. But in government, they will have to decide whether or not to scrap it in their first Budget. After all, to govern is to choose.

The biggest applause Osborne got was for the line, ‘it wouldn’t be a bad thing if Britain started making things again.’ Although, Osborne’s attempt to cast his family as part of the small business manufacturing base of the country risks bringing up Labour’s favourite subject, Cameron and Osborne’s privileged backgrounds.

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