The Green shoots Baroness is a disaster for what she does more than for what she says

The Opposition will continue to remind people of the insensitive remarks of Baroness Vadera, claiming to see the green shoots of recovery on the worst day of the recession so far, when more than 5000 jobs were lost.

Words are cheap, and on this occasion make no difference to the underlying reality. Her offence is a grave one in the world of spin, and her attitude will upset people struggling to keep their companies going, or queueing to collect their P45s. The bigger damage the Baroness is doing lies in her behind the scenes work to nationalise great chunks of the UK private sector.

Normally Investment bankers aim to offer advice to convert loss making or underperforming businesses into more profitable and successful outfits, by recommending and overseeing mergers, takeovers, private equity injections, demergers and other methods of challenging and changing management to get a better result. This former Investment banker seems to specialise in advice which takes private sector businesses with a profitable past and a present actual or alleged problem and turning them into heavily loss making pensioners of the state through the dead hand of nationalisation and government intervention.

Her hand was on the disaster that is nationalised Northern Rock. This business, once very successful, is now in the advanced stages of run off, unable to lend new mortgage money, and under pressure to secure repayment of mortgages on its book and to slash its staff numbers and other costs. In the meantime taxpayers rack up large losses and have to put capital in to keep the thing going and to pay the billls. The Baroness has a reverse Midas touch. Her alchemy turns gold into base metal. Why on earth didn’t she suggest short term Bank of England loans against security to replace the money market funds, coupled with whatever guarantee was needed to keep the depositors happy with their bank? It would have been much cheaper and easier, and Northern Rock would still be making mortgage loans today if she had recommended that.

Just as bad was her involvement with the government bankrupting Railtrack. Following nationalisation the costs of providing track and running the railway shot up whilst train speeds fell and dislocation to carry out works worsened. The Baroness allowed the railways to operate over bank holiday periods badly or not at all, and the huge taxpayer bill we have to pick up to gurantee and subsidise this taxpayer owned company.

The condemnation of the Baroness today is understandable, but it should include the real legacy – a massive expansion of taxpayer debt, and a huge increase in the loss making public sector. When we see the large losses RBS will probably report soon we should see this as part of the bill. We cannot afford the Baroness. Her infelicitous remarks on green shoots are a minor matter compared with the serial and serious damage being done to the public accounts by the government’s nationalised industry policy.

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25 Comments

  1. Tony Makara
    Posted January 15, 2009 at 11:09 am | Permalink

    One has to wonder how people like Baroness Vadera rise to so lofty a position in public life? She is one of many who are clearly not up to the art of government. A major part of being a senior political figure is knowing how to respond to given events, the wrong comments can unsettle markets and rattle public confidence. Nonchalant remarks like those of Baroness Vadera will have hurt people deeply.

  2. alan jutson
    Posted January 15, 2009 at 11:19 am | Permalink

    Oh John of course there are green shoots.

    The problem is they are the green shoots of more Government Regulation, in other words Bind Weed that will strangle recovery and future growth.

  3. A. Sedgwick
    Posted January 15, 2009 at 11:21 am | Permalink

    This episode and your recent comments about insufficient debate in the Commons fall into my recurring thought – what ever happened to democracy? I wish David Cameron at PMQs would remind Brown after each question that he doesn’t answer that the PM is supposed to answer questions put to him and not go into a party political broadcast. DC is losing out to the New Labour mantra of if you say something enough it will be believed. The condolences offered most parliamentary weeks for the needless deaths of some of our best young people is increasingly sickening. It is a futile war and polls show a good majority want us out – it is another area where the Conservatives should break away from consensus and follow the people. There are numerous other examples where the will of the people is ignored not least with the EU.

  4. chris southern
    Posted January 15, 2009 at 11:26 am | Permalink

    Considering she has been criticised for describing Railtrack private shareholders as “grannies” in the past, it doesn’t suprise me that she shows no connection to what is realy happening in the UK.

    Or perhaps the fabian society is still wanting to get an entire country run by the state, great plan eh, except it has never ever worked in history, it has always failed.

    Once people like that are out of politics then this country will start to recover, until the rot is fully removed it’s just going to be a cycle of rebuild then tear apart unfortunately.

  5. Donitz
    Posted January 15, 2009 at 11:34 am | Permalink

    The Delusion of Labour.

    A great name perhaps for your next book John or Stuart F another author on this wonderful Blog. (If you get chance read Stuart F’s book Single Acts of Tyranny.)

    “Green Shoots” what planet are these socialists on?

    My latest prediction on the economy:
    “The Great Bond Crash”!!!

    Governments around the world are selling Bonds like there is no tomorrow. (This may be the case the way things are going).

    The Coupons on these Bonds are very low and their Capital Values will eventually stop increasing as future interest rates reach zero(or near zero).

    As more and more Bonds are created the demand will eventually stop as the market will not be able to continue to support this over supply. We are already near this point in my opinion.

    When interest rates reach zero(or near zero) the government will start printing money on a large scale – creating inflation.

    Combine the following:
    Over supply of Bonds
    Funds over weighted in Bonds.
    Inflation.
    Low Coupon returns

    BANG!!!!!!!!!!!!!!!!!!!!!

    • Posted January 15, 2009 at 3:09 pm | Permalink

      Thanks for the recommendation, I would like to go on record as saying Donitz has a fine and manly head of hair with no suggestion of alopecia.

      At all.

      Its just the forehead getting a bit high these days.

      And wide.

      But regardless of this, he’s dead right on the bonds.

      • Acorn
        Posted January 15, 2009 at 6:37 pm | Permalink

        I have to agree with both above. The planet is going to be flooded with government paper (IOUs). Government “interventions” in market systems always create distortions in those markets which take time to be absorbed and create uncertainties. Markets go into defensive mode, waiting for the next government shoe to drop.

        The really worrying bit is where governments start getting involved in the long term debt markets. Such as buying up long term toxic securities like mortgaged backed bonds. This will put the taxpayer at a long term risk and create a nasty hangover for years ahead which the markets will not forget. Better to let them die naturally and take the pain now.

        A better explanation at

        http://www.financialsense.com/fsu/editorials/merk/2009/0113.html

        Good piece at the following, on money supply. Notice in the notes, number 4.

        http://www.financialsense.com/fsu/editorials/dollardaze/2009/0112.html

    • APL
      Posted January 15, 2009 at 11:33 pm | Permalink

      “BANG!!!!!!!!!!!!!!!!!!!!!”

      Yes, that is pretty much what I have thought. But perhaps not just yet. Hugh Hendry has a pretty solid record. As usual, it’s all about timing.

      http://www.cnbc.com/id/15840232?video=994367935

      • Donitz
        Posted January 16, 2009 at 10:25 am | Permalink

        Yep, I must agree Hugh Hendry is a top chap and an excellent Hedge Fund manager.

        I too heard him mention in an interview that he was investing in Bonds but I truly thought this was for the benefit of the BBC(Business Daily interview – radio).

        I think he was actually taking the “mick”.

  6. rose
    Posted January 15, 2009 at 12:36 pm | Permalink

    about time the truth was out about this damaging and very long standing influence at the heart of government.

  7. Thatcher-right
    Posted January 15, 2009 at 12:52 pm | Permalink

    Setting aside the political madness of the “Green shoots of recovery” statement, does anybody think it’s actually true?

    My view is that, while the banks, central banks and governments are starting to stabilise the credit markets, the recession that has been triggered by the credit crunch is only just starting to kick in.

    Reply: Exactly. Some improvement in credit markets, moving from 10 feet of ice to nine feet, is not about to swing the economy round.

    • Stewart Knight
      Posted January 15, 2009 at 6:57 pm | Permalink

      The recession was not triggered by the credit crunch; the recession was coming regardless and some, many, had warned of it for years.

      • Thatcher-right
        Posted January 17, 2009 at 1:56 am | Permalink

        I don’t think we’re far off agreeing on this. Certainly, the recession was coming but they might have kept the plates spinning for a little while longer if they hadn’t suffered a sudden crissis in confidence in the dubious loans they had been trading as super safe assets.

  8. adam
    Posted January 15, 2009 at 1:50 pm | Permalink

    A few months ago Osborne was being criticised for being negative about the pound.
    Since then the news media has gone into doom monger mode, and now a Labourite is getting criticised for trying to be positive.

  9. Freddy
    Posted January 15, 2009 at 2:27 pm | Permalink

    Sredni Vashtar’s main qualification for her current position is that she has spent the last decade as one of Gordon Brown’s right hands (the other being the execrable Ed Balls). These two were the ones charging around implementing all Brown’s daft ideas.

    Among those with whom she has had dealings, her reputation is, um, not sure how to put this in a civilised environment such as this blog …

    Unlike Balls, she had the good sense to recognise that being a Labout MP was not a good long-term prospect, so got a peerage when Gordon was in a poistion to dosh them out.

    (And in terms of destruction of tax-payer value, do have a look into the lunacy of the privatisation of London Underground, another of her little projects.)

  10. David H
    Posted January 15, 2009 at 2:49 pm | Permalink

    John
    Spot on as usual!
    As an Engineer, I can say that we used to call the reverese Midas touch the `Tish Touch’! Everything she touches turns to ****. It doesn’t take much to work out the anagram.
    Same old, same old Labour

  11. Lola
    Posted January 15, 2009 at 3:38 pm | Permalink

    It wasn’t totally clear from your piece, so if I might just clarify your position, you don’t think a lot of her then?

  12. Waramess
    Posted January 15, 2009 at 4:10 pm | Permalink

    There is no doubt that the problems have just started; with companies starting to go bust unemployment will increase, people will be unable to pay their mortgages (amongst other things) and so on. So definitely no green shoots.

    She says she was talking about the bond market, but that is a bubble waiting to burst, so no green shoots there either.

    What does puzzles me is that in a fractional reserve banking system, because it is impossible for banks to honour their withdrawal commitments to depositors, it is incumbent on the Central Bank to provide liquidity.

    In the case of Northern Rock that is exactly what happened. So where was the Central Bank.

    Brown says the business model was flawed (insolvency) but, even if he knew what a business model was, how would he know at that point, and if he did know in advance, why did they not do something about it earlier?

    What we now appear to have is banks happily taking one, two and three month deposits from business customers, without the capacity to honour their obligations to repay and no Central Bank behind them to provide liquidity where necessary.

    Sounds like fraud.

  13. Posted January 15, 2009 at 4:23 pm | Permalink

    I’d just like to know why we have non-elected officials speaking on behalf of the government about our economy, and what “this lady” has accomplished in her life to be made a life peer, Baroness with title, a fat pay cheque and all the frills that go with it, when there are approximately 60 million other people in the country from which there are many many millions who could advise Gordon Brown as to precisely what he needs to do as a Prime Minister who appears to dedicate much of his own time to telling the rest of us how good and perfect HE is at running the economy.

    (Para left out-ed)

    • Waramess
      Posted January 16, 2009 at 6:09 pm | Permalink

      I am one of those that could advise Gordon Brown as to precisely what he needs to do as Prime Minister:

      RESIGN NOW!

  14. Satnam Singh
    Posted January 15, 2009 at 5:50 pm | Permalink

    She makes an ideal partner for Brown, after all he has the Jonah touch, the latest example is visiting Media Wales and shaking hands with the MD. Four days later the MD gets the sack.

  15. StevenL
    Posted January 15, 2009 at 6:12 pm | Permalink

    I can’t stand her, I think she lacks both the knowledge and the intellect to carry out her remit.

    As for the excuse she was talking about the corporate bond market, the only reason speculative investors are buying up cheap corporate bonds is because they are betting on people like her bailing out certain industries if they go under.

    Never forget she was Gordon Brown’s Treasury advisor with a remit for ‘city issues’ from 1999 to 2007. Perhaps someone should make a FOI Act request and find out exactly what she advised the PM during this time?

    I suspect she has been the main driver in government of the response to the credit crunch. Darling as good as admitted in his Guardian interview he didn’t have a clue what was going on and he was supposed to be Chancellor.

    She has been part of the Downing Street bunker for a long time now and from what I have heard on the grapevine was Brown’s favourite Civil Servant. ‘Freddie’ suggested above:

    “Among those with whom she has had dealings, her reputation is, um, not sure how to put this in a civilised environment such as this blog …”

    This echoes exactly what I’ve heard about her too. However, more importantly, like JR says, everything she has done has been a disaster.

  16. Bernard Johns
    Posted January 16, 2009 at 6:36 am | Permalink

    “The bigger damage the Baroness is doing lies in her behind”

    Sorry to lower the tone, John,
    but this just got me laughing.

  17. brian kelly
    Posted January 18, 2009 at 6:29 pm | Permalink

    She is of a typical cast of those whom Brown has always surrounded himself. a complete apparatchik; totally subservient and mediocre. Can we ever forget the dreadful crew he surrounded himself with at the Treasury? They will only do his bidding. He will never tolerate for long working with anyone who has the intelligence to argue back and the strength of mind to do so. This country is in a terrible mess and each day that passes the problem becomes worse and more complicated – he loves complication and believes the more he sloshes billions around the more he will be seen as ‘doing something’ whereas he is mostly digging the hole deeper for this country to extricate itself.
    from.

  18. brian kelly
    Posted January 18, 2009 at 8:33 pm | Permalink

    When she used the derogatory term ‘grannies’ re Railtrack you must remember that these are the sort of terms which earn her browny points within that group in which she circulates – that close knit circle round Brown who regard themselves as whizz kids who have suddenly found they are actually in charge and can, with growing impunity, play as with a toy, with the destiny of this country, In actual fact they are a set of amateurish incompetents with not a breath of experience between them of the real world and they are laying on this country endless misery and indebtedness as a result of their endless incompetent experiments and failings.

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  • […] Redwood has taken aim at Baroness Vadera and her passion for nationalisation on his blog. It is certainly true that after Railtrack, Northern Rock and RBS, if you were a boss of a firm […]

  • 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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