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The biggest loser from Sunday’s news that the Government is going to nationalise Northern Rock is, the Government’s and specifically Gordon Brown’s claims to financial probity – “You can trust me, I’m the Iron Chancellor, I am prudent…” words that will come to haunt him. Now personally, I have no issue with that, Brown’s arrogance and pomposity as Chancellor, was always well deserving of a good comeuppance ! However and within this sorry saga, there are more serious issues to raise and questions to be asked.

Perhaps it’s not so simple:

Although quoting yourself is probably the height of total “naffness”, in a previous blog I mentioned the English King Canute who is most famous for the throne on the beach episode of “commanding the tide” to cease rising. However as I wrote then, for both political and religious reasons, he was out to prove an important point; “Let all men know how empty and worthless is the power of kings. For there is none worthy of the name but God, whom heaven, earth and sea obey”.

The reason that I return to Canute is to question just how much control do politicians have over events such as Northern Rock in today’s world ?

Oh certainly and regardless of political party, in their pride and foolishness they will claim all the credit for the “good things” as flowing quite naturally from their great wisdom and foresight whilst “bad things” such as the “International Credit Crunch/sub prime ”, are clearly totally out of their control and therefore definitely“Not their Fault”.

I fell about laughing listening to a Yvette Cooper who I believe is married to the clearly odd (with the mad staring eyes of a Minister with Myxomatosis, Mr Balls), explain that absolutely no taxpayers money has been spent to date, yes, cast iron guarantees have been given but none so far called upon so its all fine, it beggars all belief ! In a market where banks are hoarding money because of fear, as a banker you get to lend NR a £Billion or so at commercial rates and you are underwritten 100% by HMG – bonanza ! Would you like any more ?

As my political views are to the right of centre, it would be easy for me to attack Brown and his minions for 10 years of financial mismanagement and downright profligacy with the public purse and to a large extent, that would not be totally unfair because the Blair/Brown years have been a period where in so many areas of government, they have well and truly ridden their luck rather than followed a clearly mapped out “destiny”, over 90% of legislation has been made on the hoof.

In this regard, the Gordon Brown non-election farce was supposed to give us the “Great Leader” annunciating his personal “vision” for the Brown Government and to date, all we have had is silence. People accuse David Cameron of being short on explaining detailed Tory policies as well he might given the plagiarist tendency of New Labour but, in comparison to Brown’s Vision (“The Dream of Gerontius ?”) perhaps, he is a model of clarity because his opponent chooses silence.

However, leaving aside all the political frolics and froth, a question is growing in my brain which goes beyond what currently serves as “politics, political processes & politicians”. My question is whether we have actually and unwittingly perhaps, already crossed some kind of Rubicon and are sailing in uncharted waters where the recent models don’t work any more and where we need to reach back further in our history to rediscover basic principles and from there, build a new navigational model, as it were.

What Has Actually Happened ?

The biggest problem lies in the drive for never ending growth and people must surely start questioning that whole concept and especially here in the former industrialised West with its falling population growth. The myopic drive for new customers I experienced recently on an insurance renewal when I found I could buy the same cover from the same company I was already with by going on the web rather than responding to my renewal quotation. When I challenged this, they told me that as an existing customer I had to pay the higher premium – the business went elsewhere.

Let us take just another facet of the current political lexicon, true a “Labour Policy” but in fairness, not one violently opposed by the Tories or the LibDems, University entrance. The concept that +40% of children should attend a University because we need a ‘better educated workforce’ in order to survive and prosper in the 21^st Century, is the proposition, but is it even vaguely true ? Will there be a requirement for substantially more Doctors, Dentists, Vets, Engineers, Architects, Civil Engineers, Mathematicians, Chemists, Physicists and on and on than we have today ?

As our industrial base has been decimated over the years by a combination of international competition, short term views of growth in the City and British Government indifference to incubating new industries, even if we had lots more ‘scientists’ who could develop and build many ‘wondrous things’, we certainly don’t have the infrastructure to develop and commercially exploit their ideas. Also historically, it is not the “educated people” who are the entrepreneurs that discover new opportunities so that the “educated people” can be employed anyway. Sure from an employers perspective, having 3 qualified people for each post ensures lower employment costs and greater flexibility but, it is not a good reason for misdirected government policy.

That we need a better educated workforce is correct but most employers would settle for job candidates with basic numeracy and literacy plus, a personal sense of self-discipline all of which should be taught and achieved at the Primary and Secondary level but isn’t in 25-33% of cases. Closing down a third of the so called newer ‘universities’ cobbled together from Polytechnics, FE’s- various etc. and focusing the financial resources on education up to 16, makes a lot more sense than what happens currently of students leaving Universities with multi-disciplinary crap degrees and a pile of personal debt.

In taking this one thing – higher education and highlighting it, what I’m saying is that we are all going in the wrong direction and we are not listening to our own island race’s history and experiences, high time we did.

India me old China

The British Industrial Revolution was only made possible by the Land Enclosures Act where 1,000s of people were driven from working the land in favour of the landowner raising sheep. This led to a concentration of people needing work in urban areas which provided the workforce needed to make it happen. In recent years within China, something similar has happened except on an unimaginable scale of many millions moving from rural to urban areas to provide the workforce for China’s exports to the rest of the world.

In a similar way, we have seen a parallel pattern emerge in India but perhaps because of their Western connections historically, instead of cheap assembly labour, they have grown in higher value support and development operations in IT. The Indian equivalent of “sweatshop” labour lies in manning Helpdesks for a whole range of services.

I am not going to dwell on the intimate details of both economies but as between them they actually have over 25% of the world population, their ability to grow their industries exponentially relying only on internal demand, is obvious. However, their ecological footprint could make the earlier example of the USA where less than 4% of the global population consumed 25% of energy resources, seem insignificant and the political repercussions of say China supporting Sudan because it needs their oil too, a fairly plain to see already.

A New Britain

History has no beginning, it is a continuum. Without Jim Callaghan and the “Winter of Discontent”, the stage would not have been set for the wholesale structural reform that came with the Thatcher Years. Without Britain getting thrown out of the ERM, the Tory track record of being good with the economy would have endured. However, the crash of Sterling paved the way for a resurgent British economy which when Labour got back in power, Gordon Brown was able to use for his own demented reasons which have bought us back to a high tax, large State situation at a time of economic difficulties.

History always repeats itself but not quite in the same way but however you try and “trick the figures”, inflation is back and the reality is that it never went away. The Brown Government will cling to power until the early Summer of 2010 when it will become the opposition but, it is important that it should do so because all the things that happen over these next 24 months, will prepare the electorate for a fundamental change of direction.

Looking ahead at the probable growth industries, they are fairly predictable, energy – mix and match anyway you like from wind, nuclear and wave but independence will be the key. Food production within the UK with basic self-sufficiency, fisheries protection and defence spending.

How Much in-charge is Brown’s Government ?

With regard to Northern Rock, never at any time because this bank grew by borrowing short and lending long, the cardinal sin of banking. I personally cannot understand how the Board of NR allowed this to happen, either they were totally stupid or, criminally insane. As to them not accepting the Lloyds/TSB bid to take it over on the grounds it is suggested, of potential EU rule breaking well what can one say except just another good reason to leave the EU.

Once the Government had given the levels of guarantee support it has, nationalisation was the only thing that they could do but, Rolls Royce still had an element of public ownership some 16 years after it too had been nationalised. However, Rolls Royce was a unique and one off asset, Northern Rock isn’t and we really do not have a shortage of banks in the UK or, mortgage lenders so ‘nurturing NR’ for years is bizarre and not what HMG should be doing.

The Government didn’t cause this particular problem so having had to press the ‘nuclear button’ it can only have one stance which is to go in and get the taxpayer’s money, its a Fire Sale. Pay the shareholders nothing just, remove their voting rights for the time being, they can have it all back once sufficient of the mortgage book has been sold off to liquidate the guarantees made thus far. NR should not be able to continue doing business until that has happened and then whatever is left, can be given back to the shareholders to do with what they please.

The Really Big Lesson

Northern Rock was not the biggest lender in town and yet, we the taxpayer’s have guarantees laid out that are almost double our defence budget and we are fighting in Afghanistan, have deployments in Iraq and also now Kosovo, that is total B/S. Never again should this happen without either the ‘bank’ going bust or, it being taken-over by its competitors, it should never require the government to get involved.

It is not the job of HMG to bail out the poor commercial decisions of any bank, mortgage lender or credit card business, they should do that themselves even if it means an enforced levy on every customer and every institution into a central fund designed for this purpose.