Britannia Radio

TELEGRAPH    21.1.09
How much rope does Gordon Brown need?
Simon Heffer argues that only one honourable option remains for 
Gordon Brown - but is confident that he won't take it

By Simon Heffer

The way things are going, we shall soon be faced with a choice 
between panic and rage, and I am in no doubt that the second of those 
is the better option. And as we recall the Prime Minister's 
outrageous and pathetic performance over the past couple of days, as 
our banking system and currency have tottered, and he has proved 
unequal to the task of stabilising (let alone clearing up) a mess of 
his own making, I think we can agree where that rage should be directed.

A colleague observed the other day, with some veracity, that 
governments have fallen for less than this. To bring this one down 
requires a mixture of two factors, neither of which is present. The 
first is a sense of honour among Mr Brown and his henchmen, which 
would be a bit like finding a contraceptive in the Vatican. The 
second is a feasible opposition with a plan. That should be more 
readily available, but is not. The Conservative Party chose to spend 
a pivotal day in this increasingly shocking financial and economic 
crisis rearranging their deck chairs, redividing their party over 
Europe, keeping as shadow chancellor a man who gives every impression 
of needing a map to help tie his shoelaces, and failing to bring into 
the shadow government either of the two men on their benches - John 
Redwood and Michael Fallon - who has the slightest idea what is going 
on. The Tories remain completely unserious, and the less said about 
them the better.

Yet their turn to let loose their incompetence and shiftiness on an 
already benighted country may well come. Despite the collusion 
between the Conservatives and the Labour Party to keep Mr Brown in 
office, things are getting desperate for him. The wheels came off 
long ago: the chassis is now fragmenting. Even a public that has 
shown, by massive abstention at recent general elections, that it 
wishes to disengage from politics cannot fail to have seen the 
enormity and the enormousness of the blunders over which Mr Brown has 
just presided. He threw £37 billion at some banks in an attempt to 
get them lending. This is a sum larger than our defence budget. It 
disappeared into a black hole. So on Monday Mr Brown offered yet more 
incentives to useless banks to stay in business. We are assured these 
are just guarantees, not handouts, and in the end a sound banking 
system will repay generously the support given to it by the taxpayer. 
If you'll believe that, you'll believe anything. The markets 
certainly didn't, for banking shares went south. Nationalisation, 
according to a depressing and unreliable political consensus, starts 
to seem the only option.

The Government now owns 70 per cent of Royal Bank of Scotland 
[NatWest included]. I should have thought the way forward for this
abortion was pretty obvious. The majority shareholder should close it 
down forthwith. It will lose its - our - money, but that may be a 
cheaper option at a time when firms such as Unilever and BP are 
regarded as better investments than gilts. Under existing laws, most 
depositors will get all their money back. The assets of the bank, 
such as they are, could then be sold, and other creditors could get 
their penny in the pound. There is no point keeping it in business. 
It should be put out of its misery for its own sake and to encourage 
the others.

We now have too many banks. One fewer would be a blessing. The 
vultures of Lombard Street would feed on its corpse and seek to prove 
the late Professor Hayek right yet again: that bankruptcies are good, 
because they drive inefficiencies out of an economy. That is sorely 
needed, and would serve RBS right. I am aware it would upset the 
Scots, but they have only themselves to blame: and the wellbeing of 
the Scottish banking community should be regarded by the rest of us 
as a poisonous political consideration that Mr Brown will just have 
to ignore. He has bigger problems than that.

Let us return to the question of his viability. He refuses to admit 
it, but in his emulation of Alan Greenspan in the early part of this 
decade, when he deliberately pumped money into circulation to create 
an illusion of wealth, he invented our end of this problem. The 
Americans are to blame only in that they set us an example. It was 
the policies of the then chancellor - Mr Brown - that brought this 
debacle about. Having so much money in circulation (and for about 
five years its supply grew by 14 per cent or so per annum, way above 
the rates of inflation plus growth) enabled the banks to borrow vast 
sums cheaply and to do stupid things with it. I do not exculpate the 
banks: those responsible deserve penury. But it was Mr Brown who made 
their idiocy possible. If you give a child of five a loaded revolver 
and send him into the street with it, someone will get killed.

Also on the charge sheet against Mr Brown was the inadequate 
regulatory system he invented after 1997, when those who knew about 
banking were no longer watching how the banks did their business. So 
his record is shocking: regulatory failures, policy failures, 
practical failures. How much more rope does he need?

There has been much talk in the last few days about Britain going 
bankrupt. It is, I hope, an exaggeration. The International Monetary 
Fund would come in before then, as in 1976. But there is a rumour 
that Standard and Poor's is about to downgrade our debt, meaning this 
respected credit agency fears our ability to repay it. The 
possibility of default becomes more likely. It is a shame the IMF 
cannot come in now, and end the insanity of Mr Brown and his puppet 
Mr Darling trying to fit the quart of reckless spending into the pint 
pot of sustainability. This mess is worse than it need be because the 
Government is grotesquely overborrowed and is grotesquely overspending.

The IMF would doubtless apply the principles of 1976: real cuts in 
public spending and serious cuts in indebtedness. Mr Brown remembers 
that Labour lost the ensuing election; but it was only what it 
deserved, as a defeat next time would be for him.

The price the public is paying for Labour's probably fruitless 
campaign to cling on to power is so high as to be lethal. We are also 
being robbed of our democratic accountability. The scale of the 
crisis should dictate a general election now, so the public can be 
consulted on the stewardship of the economy. There are plenty of 
precedents: Heath's election in February 1974 is the most recent, but 
also (and closer as a parallel) that of October 1931, which led to 
the formation of the National Government. Mr Brown prefers to follow 
the disgusting example of John Major, whose key policy was torpedoed 
just five months after the 1992 election, and who preferred to 
destroy his party by limping on for another four-and-a-half years.

The public has rumbled Mr Brown, and he is the focus of their anger. 
As worse horrors occur in the months ahead voters will have more yet 
to remember him by. He can, in his dishonourable way, avoid 
accountability for another 16 months if he wishes. Yet the longer he 
waits to take his punishment, the worse it will be. If he doubts 
that, let him ask John Major.