Ten reasons not to nationalise Northern Rock

There are at least ten good reasons why Northern Rock should not be nationalised:

1. It is bad enough for taxpayers to have ?57 billion at risk in Northern Rock. Nationalising the bank would put more than ?100 billion at risk, a very large sum even for the government and taxpayers.
2. Once nationalised, taxpayers become liable to pay all the wages and salaries. Ministers would have to sanction redundancies if these are needed to cut costs, and taxpayers would have to pay for them.
3. The taxpayer would become liable for the whole pension fund, which has a deficit.
4. The management of Northern Rock appointed by the government would doubtless expect substantial new funding from taxpayers to invest in and develop the business, adding to taxpayer woes.
5. There is nothing the nationalised management could do that cannot be done now to try to cut the liabilities and repay some borrowings.
6. Nationalising would make it more difficult to persuade the management of the bank that there is a crisis which requires exceptional efforts to increase business revenues, cut business costs and sell assets to repay borrowings. It would take the pressure off.
7. Politically it would become a long term reminder of the governments failure to handle the credit crunch well. The bank is unlikely to have been privatised again before the next election.
8. Given the growing pressure on public spending ?? difficulties in finding money for police pay, hospital improvements and the rest ?? it would be an embarrassment to see spending rising on a nationalised bank at the same time as cuts elsewhere.
9. The pay of people at the top of such a bank is likely to be high even by the standards of modern higher pay in the public sector, leading to further embarrassment, especially if they do not perform well.
10. All the spending on Northern Rock would then have to be accounted as public spending, whereas at the moment it is kept off the governments balance sheet to make the public accounts look better.

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  1. apl
    Posted January 13, 2008 at 11:39 am | Permalink

    JR :

  2. Rosemary Bloom
    Posted January 14, 2008 at 4:22 am | Permalink

    Please show this article to Alistair Darling and his boss.

    Brown has already reduced my pension shares in my invested monies and now he wants to take the last few shares I managed to hold on to – the last drop of blood. This man, a man of the 'Manse'! has no scruples when it comes to covering the terrible mistakes of the last ten years' Labour Government's deceit.

    He steals money from the careful saver to make himself look clever. He is not clever – he is just plain dishonest.

    They have done as he and his cronies demanded saving to provide for their old age – which don't forget Labour were advocating and even demanding that we all do – and now, Labour having swamped England with huge population growth and no money or infrastructure to pay for it, he wants to take more blood from the poor suckers who scraped and saved all their working lives to live at least comfortably in their old age, in order to support all the layabouts.

    Labour is working? Working for whom – and these idiots are runnng a country!Don't make me laugh.

    If this wasn't so serious, Brown and Darling could be called a couple of farces – that's farce with an 'f'.

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  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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