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Stephen Timms appears to have done enough to tamp down speculation about nationalisation and avert a run on Lloyds shares. But it still feels like the government is struggling to convince the market that it really does see full public ownership as a last resort. Privately, ministers make clear that they want another nationalised bank like a hole in the head. But their public statements sometimes seem too terse and contrived. Contrast their approach with that of Barack Obama, who gracefully addressed the question in a recent ABC interview:
MORAN: There are a lot of economists who look at these banks and they say all that garbage that’s in them renders them essentially insolvent. Why not just nationalize the banks? Read more
Chris Giles chronicles Mervyn King’s faltering response to the credit crunch and the fading power of the Bank:
Success certainly bred a certain arrogance when it came to views about how the economy worked. Dismissing as “an old shoe” the idea that asset prices should be taken into account when setting interest rates, [King] said those who worried about the effect on consumer spending of rapidly rising house prices were peddling “mindless regressions” and should instead think about the economics. “Housing does not determine consumption; there are more fundamental influences on consumer spending,” he insisted. Read more
There is a certain irony to David Freud’s defection. When he first unveiled his plan to massively expand the role of private providers in finding work for the jobless, the ideas were compelling but largely ignored by politicians. He now joins the Tory frontbench at a time when his welfare plans are as popular in Westminster as apple pie. But his ideas, out in the real world, are facing their first real test.
The early evidence from Freud-style welfare programmes suggest the reforms are harder and more expensive to implement than first envisaged. Freud designed them in the good times, when credit was easy and jobs were aplenty. The core ideas are still sound. But neither Labour nor the Tories have really come to terms with how they will need to be changed to cope with a severe recession and credit crunch. Read more
A cabinet minister told me a while back that he expected no pay rise for any government ministers this year. Gordon Brown imposed a pay freeze last year as a gesture of austerity.
This week a No 10 spokesman said that it was too early for the prime minister to make the decision for the coming financial year. Read more
It lacks the punch of Sarko. But the French finance minister has clearly made her own bid for a Brit-bashing award. Christine Lagarde’s target for reproach is Alistair Darling, who apparently failed to warn her about Britain’s last rescue package, in spite of all his rhetoric about global co-ordination.
Unlike Darling, Tim Geithner had the manners to consult her before unvieling the US bailout, Lagarde says in an FT interview. She sounds exasperated at Darling’s failure to act on his own pleas for collaboration. Read more
Remind you of another country on the other side of the world?
The lack of attention given to the Bank of England’s grim forecast for the economy is bizarre. Mervyn King basically said the recession, from peak to trough, will be two times worse than the Treasury expects. That knocks about £30bn to £40bn off official GDP forecasts, hits the tax take by up to £20bn and raises the deficit from 8 to closer to 10 per cent of national income. You have to wonder why David Cameron decided to raise VAT in the Commons on Wednesday and ignored the big “gloom gap” between Gordon Brown and the Bank.
For those who are interested, the calculations are based on this Bank fan chart. It is not a straight comparison with the Treasury forecasts, so the figures have to be put into a spreadsheet. Read more
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