Westminster Blog

The Tories have sought to burnish their credentials as the party of business by criticising the proposed rise in capital gains tax. On Northern Rock, however, they are playing a more populist game.

Here the priorities are depositors and taxpayers, according to David Cameron, the party leader. The shareholders are – to paraphrase – almost an irrevelance. With stormy scenes expected at today’s extrardinary meeting of the stricken bank’s shareholders, the issue is highly political. Few observers want these investors to seize total control of Northern Rock’s future.

But only the Liberal Democrats have come out with explicit plans for how the company’s investors would be dealt with in the event of a possible nationalisation (which is not yet a given). The third party has an obvious distaste for the hedge funds who bought into Northern Rock after it was already deeply in trouble. On the other hand, it sympathises with the thousands of small shareholders who have held stock since the demutualisation of the group. Its proposition is that shareholders should be given some form of “option or warrant” to benefit in any upside when – after a temporary period of public ownership – the bank is returned to the private sector.

Shareholders should be grateful for getting anything out of the wreckage given that the shares would be “worthless” without government support, said Vince Cable, Treasury spokesman for the Lib Dems, at a press conference yesterday. But he added: There is a feeling that shareholders should get something.”

Contrast that with an appearance by Mr Cameron in which he appeared to have given the matter of shareholders almost no thought. He admitted that because he was not involved in the negotiations he did not know how the situation would play out. “I hope the private deal goes ahead and can be done in a way that protects the taxpayer,” he said at yesterday’s press conference. The first priority were the depositors and the taxpayers.

Asked whether he thought shareholders should be compensated in some way, he replied: “I don’t think it is possible to answer that question at the moment,” he said. It was the Conservative party which laid the foundations for widespread share ownership among the public through a string of over-subscribed privatisations in the 80s. Has this been forgotten?