Comforting spectacle of a Labour nationalisation

There was something comforting about a Labour government nationalising Northern Rock – it’s the natural order of things. Come to think of it, even Harold Wilson never got as far as the banks. He stuck at steel.  But will the two little words Northern and Rock become as resonant for New Labour as Black and Wednesday became for Conservatives?

Maybe not. Black Wednesday, way back in 1992, and Britain’s ignominious ejection from the ill-starred ERM adventure (thank you Nigel Lawson) was the moment when the feeling crystalised that the Tories were not competent to manage the nation’s economy. That has not happened for Labour – yet. And the legacy of poor Tory opposition is the major reason.
 
In fact the 18 years of Conservative rule were, with some bad exceptions, an era of exceptionally good economic management which hauled the country back from the depths of the economic old second division to a respectable position in the old Div. One.

It wasn’t always pretty and the PR was often sadly lacking, but if you looked at the annual league tables of international competitiveness produced by organisations like the World Economic Forum (WEF), Britain’s position in 1997 was for the first time in generations getting much better relative to other major economies.

The (in)famous Gordon Brown line from 1995 that we were “slipping down the competitiveness league tables” ignored the fact that new (and hyper-capitalist) economies such as Singapore and Hong Kong had been added into the tables. It was like adding AC Milan and Barcelona to the premiership and then claiming Man U and Arsenal were slipping back.

In fact the 1997 WEF survey - sadly published just after the general election – showed that despite the adding of these Tiger economies to the table, the UK was shooting up the table to 7th place – well ahead of Germany in 25th and France in 23rd places.

In 1998 Britain advanced further to 4th place – a testament to the ongoing legacy of fine Tory economic management, obviously - but since then our rating has slipped,, settling this year on 9th place, behind Germany.

Remember another of Brown’s great catchphrases – “Black Hole” - Britain’s finances had, apparently, by 1997 sunk into one. In fact, the UK’s fiscal deficit had improved in absolute and relative terms between ’79 and ’97.

Brown’s record on government debt was in fairness also good - until recently at least - but only at the expense of shifting the burden onto the taxpayer and burgeoning private debt. Brown has also contrived to run a fiscal deficit when times were good, leaving to fat for the lean times now well on the way.
OK, I sense I’m beginning to bore you, so last heavy point, I promise.

Productivity - the holy grail of the UK’s economic performance and a key measure of efficiency or competitiveness. A year or so ago Brown claimed on the Today programme that Britain’s productivity performance was “better than France or Germany’s”. Needless to say he wasn’t challenged by the star-struck thrall put up by Radio 4 to interview him.

Some perspective, because this matters. By the end of the 1970s, after decades of left-wing economic management – not least under that old socialist Ted Heath - Germany and France had overtaken Britain’s productivity, with Italy and Japan not far behind. The US was out of sight.

During the ‘80s, the Tories managed to steady things and the growth in the productivity gap with our main competitors was slowing. By the ‘90s, despite the legacy of woeful monetary mismanagement of the Lawson years (that ERM thing again), Britain’s productivity growth was top of the table of major economic powers -  yes, the gap was finally was closing – and for first time under any government for more than a century, Britain’s productivity growth was above the average for its main competitors.    
 
And since 1997? Our rate of improvement has began to slip back.
So what of Iron Man’s ‘Today’ programme claim that our productivity was better than France or Germany’s? There are in fact two main ways of measuring productivity – per hour and per worker. International comparisons are generally based on the per hour figures because of widely differing working hours. On a per worker basis, a country where working hours were increasing could claim an improved relative productivity position, even though the per hour figure was falling and the real productivity performance was deteriorating.

So the man who apparently binned spin and is in favour of a better work-life balance for Britain’s workers, used a secondary set of figures and Britain’s long working hours to make his deeply dodgy claim. And the nice people at the BBC didn’t pick it up. What a surprise! Using the more generally accepted productivity figures, Britain’s growth has again been overtaken by France and Germany by a substantial margin – not to mention the Eurozone countries.
So back to the Rock. I think the way the Rock was run epitomises much of the corruption at the core of business culture – but more of that on another day. The regulator should also have picked up on the bank’s out-of-kilter savings to loan ratios which had been flagged up by commentators. One might also have hoped that the Rock’s sleek and well-paid non-ex directors might have earned their plump remuneration by tinkling on the alarm bells.

So far so bad. It gets worse. The bank should never have been bailed out with guarantees - courtesy of you and me - any more than Rover or a host of other failed businesses should have been.

A more nimble Treasury, under anyone more competent than Alistair Darling, who more and more resembles the self-important, bungling, minor Scottish local authority chief-executive which is his true career level, would have moved fast with limited guarantees and a quick sale to another bank, which would almost certainly been do-able.

So it’s bad for Brown, but not fatal. Whether it becomes so depends on how bad the economic downturn becomes and how good the Tories are.

The failure of the Tory opposition since ’97 to counter the claim that they had presided over 18 years of Boom and Bust, and until recently to dent Iron Man’s economic reputation means the clunking killer blow has yet to land. Only Frankie Maude made any headway as shadow chancellor with his “stealth tax” line. But Obsorne, thanks goodness, is beginning to grow into the job, so there is some hope.

Northern Rock hasn’t quite killed Labour’s hard-won and not entirely fair reputation for economic competence. It’s more likely to be death by a thousand cuts – and I’m going to enjoy every one of them.