Northern Rock, up to now, has not seemed to have caused any serious damage to the government. Even this weekend’s polls only put the Tories on a nine point – which may sound like a lot, but in the grand scheme of things is nothing that would be seriously worrying those behind the door at No.10. However, today’s news that the bank will be nationalised could well be a tipping point.
The decision to nationalise the bank in itself is not a major disaster – it was always the most likely and sensible option given the run of events. However, the way this debacle has been handled is starting to become a major, major embarrassment. The accusations of the Brown government “dithering” have never been more appropriate. It seems, and it is only a perception, but it does seem that the Treasury not only is dithering and wavering on what to do, but it has no conviction in what it is doing. One minute we are definitely going to have a nationalised bank, the next Branson will definitely buy it, then we wake up to a sort of temporary nationalisation that might well become permanent.
Perceptions have been damaged
I suspect the long term financial impacts of all this are not going to be nearly as bad as many of the more vocal right wing commentators would have us believe. We’re not all just about to be £25bn out of pocket. However, the question is still not so much whether this will cost the tax payer, but how much it will cost the taxpayer. It won’t be £25bn, but we will pay. Much worse however, is the perceptions that are being formed over all this.
Firstly there are the voters. Almost no –one from either side of the political spectrum is giving praise for the way Darling has handled all this. There has to be some sort of impact on the polls after all this, even if only temporary. If the Tories cannot make big gains out of this, then I’m not sure they ever will –and I mean in to double figure leads across the polls. If this does happen, there will be a very precariously balanced axe hanging over Darling’s head. If he goes, the Tories will be able to move on to phase two of the Cameron mission. They are currently at a stage where people are willing to accept them; the next phase is where there actually start to listen. If the government really do make things any worse over this, then people really start to listen to the Tories – the only phase after that is voting them back in to power. A long way, but these next few weeks could well be giant steps for them.
Secondly, it is the overseas perceptions. What must the traders and investors in New York be thinking about all this? Probably quite pleased actually – just when London looked liked it might succeed in becoming the number one financial centre on planet earth, it gets its pants pulled down by a goon of chancellor in front of the whole world. The damage is done on this one – it is now just a question of how bad the damage will be. For a country that has put all its eggs in to industries such as banking and moved completely away from manufacturing, this could well be disastrous. Again, it’s too early to tell, but just how bad are the impacts going to be on all of us? Iain Dale has some cuttings from the world press and they do not make good reading.
Sack him or back him?
Things continue to go from bad to worse for the government – I just do not know how much more it can take before the polls start to really reflect the mess they are in. If they do, it will be very hard for them to turn things round. Brown now faces a very difficult decision: does he back Darling or sack him? Backing him may prove to be one step too far for the electorate; on the other hand, sacking him may well fan the flames. Whatever he chooses, it is a critical decision.