Non-Election Day

Had things worked out differently today would have been election day. What would have happened? Polls at the time of the non-election announcement showed the Conservative’s advancing, and polls in recent days have shown them in the lead, albeit, not by enough to get an overall majority. If ICM’s poll published yesterday had been repeated at a general election today it would have left Labour 26 seats short of a majority and the Liberal Democrats as power brokers.

So would we have been in for a long weekend as the parties bartered over coalition deals or pacts? Probably not actually, I suspect an actual election today would have worked out differently. Firstly the Liberal Democrats would obviously not have got rid of their leader – that doesn’t actually seem to have damaged their support, in fact it’s gone up without him, but I suspect if there had been an election it would have gone up anyway from the increased puiblicity they’d have been entitled too.

More importantly looking at the current polls I suspect Labour would have been ahead in an election today. The polls straight after the Conservative party conference when Gordon Brown decided not to have an election were showing a temporary Conservative boost from a successful party conference. In this alternate universe they would probably have subsided. In the polls we’ve seen lately Gordon Brown’s approval ratings have plummeted and pollsters are finding that he is suddenly seen as ineffective and indecisive, his image as being more of a heavyweight than David Cameron shattered. Without the humiliation of the non-election announcement I expect that change in perceptions of Brown would not have happened or, at least, wouldn’t have happened to such an extent. Labour’s poll rating would still have been sustained by a new Prime Minister riding high on his honeymoon, with a reputation for strength and decisiveness.

Of course, it’s a hypothetical question now. There is no election. It will probably be years until we know whether the date Gordon Brown does end calling the election on is more or less fortuitous then November 1st 2007 would have been.

49 Responses to “Non-Election Day”

  1. Anthony
    I suspect that if an election had been held today a hung parliament would have been the result with Labour as the largest party as might well have been the case back in the autumn of 1978 if like Brown then PM James Callaghan had not also lost his bottle.I don’t agree with your interpretation of the ICM poll published yesterday because I am pretty certain that whenever the next election was held we would not have a uniform swing from one party to another. The clear unravelling of the anti Tory tactical vote means that every third placed Lib Dem candidate in Labour held marginals faces a grim task in trying to hold onto their 2005 vote. Make no mistake we are talking about a possible meltdown of the Lib Dem vote in such seats.I don’t say this based purely on the opinion polls, the English May 07 election results but because of the changing party membership levels reported from some of these seats.I think it was that sage old warrior Enoch Powell who once said that when the electorate decide to get rid of a government they coalesce round the opposition party most likely to succeed in doing just that.
    I also contend that the longer a government is in power the more progressively difficult it becomes to galvanise their supporters to turn out on election day – I call it the fatigue factor. At the end of the day all governments wind up disppointing a chunk of their less enthusiastic supporters.Differential turnout is more than likely to benefit the Tories in much the same way as it did in for example in 1970 and despite the improvement in polling techniques since then it still remains a problem for pollsters. In short I think that a 5% Tory lead as in the latest ICM poll would produce a small Tory majority.
    That’s not to say that I predict a 5% Tory lead on election day-it is too early to say and there is many a slip between cup and lip but I just don’t accept the commonly held belief that the bar is now so high for the Tories to leap over that victory is beyond their grasp. That in my humble view is a fallacy.

  2. Anthony, I agree with much of your analysis although the Tories would still have sprung their IHT announcement and caught Labour cold with a surge in the polls. So Brown would still have faced the decision whether or not to counter that proposal which would have left him facing the same criticism that he aped an idea that he had 10 years to introduce himself.

    You are dead right however that the damage he has suffered to his ratings on judgment and decisiveness would not have occurred if he had called an election. Indeed if he had called an election off the back of a successful Tory conference and their recovery in the polls, it might even have been seen as a courageous and principled move (as opposed to the reaction if he had called an election after the Labour conference which would have been seen as opportunistic).

    My guess (and it is only that) is that Labour would have won with a reduced majority of between 20 to 40 which would have been damaging. Such an outcome would have energised the Tories and done nothing to give Brown’s premiership some momentum. Indeed the stink of death may have started to grow. Therefore in hindsight, his decision not to call an election, while painful, was probably right in my view. The margins are fine however and had he achieved a majority of 60 (which due to boundary changes would actually represent an improvement on 2005), it would have been a great result and would probably have finished Cameron. With his likely successor being David Davies (Labour’s dream opponent), it could have led to a further 10 years of Tory opposition.

    What is fascinating is that we will never know what would have happened and should Brown go on to lose in 2009, it will be one of the great political questions.

  3. I agree it’s a fallacy that the Tories need to be so far ahead to win. This is mainly because I simply do not believe that ttactical voting will work against the Tories in any meaningful way in the next election. Rather, with Clegg leading the Lib Dems who will be closer to the Tories than Labour, I predict tactical voting will work against Labour. Not as decisively as the anti Tory voting of 1997 and 2001, but a factor nevertheless. I therefore expect to see many more Tories elected on smaller shares of the vote (35-42% or thereabouts) and due to the lack of a sustained anti-tory opposition coming from the other two parties.

    The tactical voting is the factor that changed in 1997. In many other post 1945 elections the Tories
    have won without being a mile ahead of Labour. Without the tactical voting, why should this not happen again?

  4. Brown would have felt vindicated by an increased majority, and weakened by a decreased one. I don’t know what calculations he made – the damaging thing was that he was calculating at all, and doing so almost in public.

    He’ll need to be a better rehearsed performer in two years’ time, and really get away from the machinations and manipulations.

    Personally, I don’t like “honeymoon” effects, and I’m a bit impatient for the LibDem’s new leader to finish his. Then there’ll be a small window of stability before the Johnson/Livingstone rumble starts to shed light on the Clear Blue water.

  5. Anthony,
    I think this is a very sound analysis – without cancelling the election Brown would have regained the lead in the polls and Labour’s vote would have firmed up during the campaign. Support for the Lib Dems would have recovered in Tory/Lib Dem contests but have been squeezed in Labour/Tory marginals. I can only go on evidence from my own south-east marginal which was indicating that the Tories were not making up enough ground to succeed in winning one of the seats they need to wipe out Labour’s majority.

  6. I can imagine an election in May 2010 and, if that’s won by Brown on a reduced majority, the next in May 2015 – this would match the Conservatives’ two four-year terms followed by two five-year terms 1979-1997.

    I base that partly on the “history repeating itself” notion, but mostly on the probability that support for Labour will steadily diminish – not enough to lose the next election, but enough to lose the following one, and that will mean Brown will want to extend Labour’s stay in office as long as possible.

  7. I would have to disagree with your analogy Anthony – it was more than the conference speech which boosted the Tories – they came up with policies which Brown could’nt match , then he copied . This would have carried on during an election campaign .

    I also believe that the first swing that helped Brown climb in the POLLS was from the Liberal voters – this would have gone back to the Liberals during an increased media coverage for them .

    It has now become evident that Brown versus Cameron on a public speaking platform is way behind – Brown does not have charisma to attarct the public – he would have been seen during the campaign as part of the “old guard” Labour .

    The result i believe would have been the recent POLL results the other day with an 8% Tory lead with the Liberals on say 16% – 17%. As i pointed then – i believe that the marginals would have been enough to secure the Tories at least a 20 seat majority / after all the marginals were showing a 6% Tory lead (Brown knew it too) .

    I agree with some of the posters above – there will be less tactical voting this time round against the Tories , mostly i believe because the Liberals are feeling very vulnerable and need to put all their resources into winning and holding onto seats .

    Brown was in a catch 22 – he found from reading the POLLS nationally and in the marginals that he stood a very high chance of losing the election – at least this way he can hold on for 2 more years – even though the longer he stays in power the worse the POLLS and the final election result will be for him . At least he won’t have been humiliated as the shortest serving Prime Minister !!

  8. I think, with the benefit of hindsight, there would have been a minority Conservative government or even a small majority ie less than 10. It would depend on when and if the Conservatives deployed the IHT bombshell and how Gordon Brown would have reacted to it. And, Ming Campbell would still have been in charge. I would have liked to see how he would have done in an election campaign. If the Libdem vote goes up during elections, does it come from other parties, or elsewhere?

  9. And Scotland would have had how many Conservative / Labour MPs?

  10. Keith – the IHT bombshell was already deployed before the election would have been announced. Much of the campaign on that would have been about the reliability of the costing proposals re non-doms.

  11. I think Nick Keene is right in that there would not have been a uniform swing even in Englandshire. But I’m not sure about an complete unravelling of the anti-Tory tactical vote. My guess is that while there would be fewer Liberal-minded voters voting tactically for Labour candidates (thus allowing the Tories to pick a number of suburban seats), the tactical vote in favour of the Liberals (esp. by Labour sympathisers) would have increased. How much this would have helped the Liberals, and how much misplaced tactical votes would have helped the Tories (as in 1983) is another question.

    Oh, and is it actually possible to get any reliable information on tactical voting information from (standard or special) opinion polls?

    Christian Schmidt

  12. “When and if the Tories deployed the IHT bombshell” is not a question. This happened on day 1 of the Tory conference, before the non-election decision was made. An election today would have been called after the Tory conference anyway, the non-election decision was made on the back of the Tory 6% lead in the News of the World poll.

  13. From events that have happened anyway, it looks as though a General Election campaign ending today would have been a pretty nasty business, with immigration and Europe as major issues. This would have done the United Kingdom lasting damage. Let us hope things can be done to defuse these problems by 2009, although I rather fear these issues will not be addressed adequately.

    It is not clear what the result of an election today would have been, but there seems to be a consensus that there would have been either a reduced Labour majority or a “hung” parliament. But there is less comment that in either case the Tories would probably have got substantially more votes than Labour, but fewer seats. And Labour would have become dependent on its Scottish and Welsh MPs to get through English business. All this could have led to constitutional crisis, particulary with the Tories claiming that the result gave Labour no mandate not to hold a European Referendum.

    All this looks to have parallels with (both the) 1910 election results. As Dangerfield’s “The Strange Death of Liberal England” pointed out this led to major unease, with the Tories going close to unconstitutionality in Ulster, which might well have led to major unrest except for the First World War.

    1912 – 1914 also saw major industrial unrest, which may again have parallels in the near future as oil revenues decline and if there are crises in the financial sector.

    The non-election has highlighted issues about pre-election funding. BBC Newsnight has also pointed out tghe scandalous insecurity of postal voting and electoral registration, and the possibility that the Council of Europe will feel the need to send in election observers as though the UK were a “banana republic” (indeed they would be wise to do so). This problems could be exploited by people unhappy with an election result and it is important they should be sorted out by 2009.

    Altogether, a 1 November 1007 election result could have had very unfortunate consequences. Let us hope the politicians heed the warning so that such problems do not happen in 2009 or 2010.

  14. If there were no opinion polls we would say: low inflation + low unemployment + uninterrupted economic growth = incumbent government re-elected.

    Putting the turbulent opinion polls, Labour gaffes and media hoohah to one side, without a major economic problem actually manifesting itself in real pain for the public (rather than merely being predicted), it seems inherently unlikely that the Tories are going to win an election with minor policy initiatives like IHT.

  15. NewsElephant
    In which case John Howard must be a shoo-in down under in Australia…..

  16. Nick

    I was about to say precisely the same thing. As a Labour supporter I wish it were true that a good economy guarantees re-election but it does not necessarily follow. It certainly helps and unless and until Cameron is trusted to run the economy, I would still have Labour as favourites. The point is that, like Rudd in Australia, Cameron has every opportunity to play it safe and match Labour’s commitments and get in under the banner of “time for a change” provided that in 2009 people are as sick and tired of Brown as the Aussies are of Howard.

    On the issue of Australia, I still would not write Howard off just yet. He has been consistently behind in the polls by between 6 and 12 points but the guy is more cunning than a fox with a degree in cunning at Oxford University (if I can quote Edmund Blackadder). That said, I think he will lose but only just.

  17. Frederic – interesting to hark back to the first decade of the last century. What worries me is that history could repeat itself in an “entente cordiale” atmosphere. Lots of unsteady alliances formed after the dissolution of the UK, and our potential departure from the EU, leading to us being dragged into conflict in Europe before 2020.

    Newselephant – I hope that’s correct (I’d have voted Conservative in 1992 if that was right), but you’re missing one factor – the “time for change” one that means Labour might well lose eventually on the back of sound economical performance.

  18. NewsElephant.

    So if I understand you then…If Brown’s Labour wasn’t doing whatever it is that has cast it back to its popularity levels during Blair’s last months..and there were no Opinion Polls to tell us that the voters have made such an assessment…and the media hadn’t made any political comment adverse to Labour….then the Tories wouldn’t win the next election.

    ummmmm-I suppose so ??

    But there have been Labour “gaffes”, as you so quaintly describe the mounting evidence of incompetence, and the media have reported them, and the voters are losing confidence, and the opinion polls are telling us that is so.

    By the way ref “economic problem”-just have a look at today’s news re Darling’s largesse with our money, to prop up a building society which GB’s much vaunted new regulatory regime failed to notice was getting into trouble.
    To date it has had £25 billion of taxpayers’ money-thats around £500 for each person in the country-or around a third of the total spend last year on the NHS.
    Will the Treasury get it back?-you tell me but this must be the first Nationalisation of the Brown era.

  19. Interestingly, John Major put his huge victory down to the uncertain economic climate prevailing at the time [the better the devil you know theory] and his huge defeat down to the fact that although they had taken a hit on economic credibility, the economic outlook by then was quite peachy and therefore the electorate could afford to take a chance.
    However, although Major was Chancellor, we have never had one individual attatched to the “economic narrative” so firmly and for so long, nor have they been THE defining personality of their party. Brown has built up high expectations of himself as an ecomomic manager, partly as a sensitive reaction against Labour’s former negative image. As a result, I believe they are unusually susceptible to economic changes.

  20. Colin
    The government has guaranteed the deposits of Northern Rock savers, not all loans to Northern Rock from the Bank of England. Presumably these loans are secured, but they are not secured against the taxpayer, and not secured against the savers’deposits, which are safe.

  21. Sally C
    Very interesting – and so far he has been a “lucky general”, if you believe UKplc has done well since 1997.

    I would certainly blame Brown myself if the wheels came off any time soon.

    Ironically, it was a combination of Maastricht rules and Ken Clarke’s spending plans that set the scene for “prudence”. Under the rules, Brown had to stick to the Tory spending plans for two years , plans which Clarke admitted were far more stringent than he would have made if he’d had to carry them out himself.

  22. John T
    Northern Rock made the cardinal error in Banking-lending long & borrowing short. It borrowed proportionately much more than is normal in the industry from the short term money market.THe Credit Crunch caused that source of revenue to contract-allied to which its depositors withdrew funds on a large scale.
    Northern Rock has found it increasingly impossible to roll over its short term funds with the money markets because wholesale lenders dont want to lend to it anymore.

    THus Alistair Darling via The Treasury is pumping cash into Northern Rock to help it repay its market based funding as that comes up for repayment.To date that totals £24 Billion. THe figure will rise to £32 billion if all NRs market based funds are unavailable for renewal in the market-as seems likely.
    So NR will owe the Treasury £32 billion in CASH.
    The Treasury is trying to engineer a sale to another bank , but the weight of the rescue funding is currently a major stumbling block with prospective bidders.Prospective buyers want to take advantage of the collapsed share price-but that produces the spectre for Darling of another Railtrack & associated nervousness in the sector.
    Prospective buyers will want economies of scale ie NR branch closures & redundancies-mostly in Northern constituencies.
    NR’s borrowing from official sources is already equivalent to more than 50% of this year’s projected public borrowing, and equivalent to around 10p on income tax.The sum it withdraws could eventually represent the whole of the central government’s net borrowing for 2006/7.

    If there is no sale of NR, the sum will have to be covered by public debt issue – politically difficult for a Chancellor who has promised to obey the ‘golden rule’ of borrowing only for public investment.
    To concentrate minds, the Bank of England has said NR’s unlimited credit facility will run only until February 2008. And presumably the last thing Darling wants is to be running a building society for decades in order to get his money back.

    It’s a mess-and as you rightly say excludes the Government underwriting of depositors money.Whilst this is not a cash outflow to the Treasury & therefore not in the same league as the rescue funding-the two together represent an extraordinary commitment on the Governments part of up to £40 billion-to keep afloat a Building Society with a flawed business model , which was not detected or reigned in by the Banking Regulation Regime designed by Gordon Brown.

  23. Thanks Colin – you’ve filled in nicely. The expected £500m profit this year probably is what the bidders are focussing on, and the opportunists out there see a branding-only basket case, plus a Chancellor keen to get out of a hole. The margins are now less favourable for NR, but they’ll still make a profit, unlike Network Rail or British Leyland! Their motgage book is one of the least “sub-prime” in the market, but they ought to have foreseen the problems of illiquidity.

    I’d be surprised if many Tories think that regulation is the answer to anything, and anazed if this issue had been a Tory seat-winner in a Nov 1st election.

    I reckon Northern Rock will end up in the hands of a private equity company, which if they get a good deal will be very embarrassing for Darling.

    Quite where we would be under the Redwood proposals which came before the debacle, who knows?

    A similar German lending institution managed to get out of trouble “discreetly” in August, whereas we “played by the EU rules” and went disastrously public.

    The real losers here will be the shareholders of Northern Rock, not the taxpayer, as the company is still profitable, even on a lousy model.

  24. Given that the opinion polls have been all over the place this autumn and given that no economic problem of the scale of a recession has occurred (yet), I’m sticking with my instinct that in an actual election campaign, Cameron will not beat Labour.

    Obviously, if we go to war with Iran or a full blown recession occurs or a scandal engulfs Brown then the result may be different.

  25. Here’s my prediction (BBC NEWS STYLE) NEWS AT 6 2nd November, 2007.

    “After a long campaigning period, the result of the General Election is not clear cut. With 600 seats declared, Labour has won 293 seats, the Conservatives 281 and the Lib-Dems 26 seats. The SNP achieved a good result taking 7 seats and Plaid Cymru have taken three so far. The has been a recount in Stockton South three times after tiny Conservative and Labour victories were announced. The Lib-Dems lost a lot of support in the South West including former Lib-Dem leader, Paddy Ashdown’s Yeovil seat to the Conservatives.
    It is unclear what will happen now due to possible Lib/Lab or Lib/Con combinations not enough for a majority. David Cameron increased his majority in Witney and took over 60% of the vote. Sir Menzies Campbell lost a lot of ground in North East Fife after a surge in SNP support. A full picture of the results should be known by 10 tonight, but most analysts claim a hung Parliament is most likely. Goodnight”

  26. John T

    Darling guaranteed NR deposits, whereas BoE has – on Darling’s instructions, lent NR £24bn in CASH.

    If no buyer is found – and that is by no means guaranteed – then, when the BoE loans fall due for repayment, NR will have to find the money from somewhere else – at which point, if they cannot, they go bust.

    Then Darling has to fork out for depositers under his unlimited guarantee, AND the BOE makes a loss on any unpaid amounts.

    How stupid is that for a Chancellor ?

  27. Paul H-J
    I’m not here to comment on relative degrees of stupidity, I’m afraid, but you’re welcome to your view.

    One thing that won’t happen is that a £500m profit company will “go bust”.

    The buyers are queueing up – or is that “circling”?

  28. John T,

    Don’t count on it, the bidders will try to get it as cheap as possible and that means balancing who gets it till waiting till NR is desperate. I that situation it could still go down the tubes.

    In addition if someone could pick up a slice of the mortgae book cheaper in a fire sale or from a liquidator that buying the whole bank then seeing it go under is an atractive business.

    Then of course there is defacto nationalisation to consider if the BoE is the biggest debtor.


  29. I’ve just been elected as OMRLP MP for Croydon Central with a majority of 68,537. It makes a change from having to wait until 7am last time.

  30. The idea that Labour would have won the campaign is highly improbable Previously Brown was doing the election tactics but had a plausible voter-friendly front-man who would take the ultimate decisions.

    What I don’t think will ever happen is that the Coneservatives will get substantially more votes than Labour (say a 4%+ lead) but not a majority. I know that’s what the electoral arithmetic suggests, but in practice the British people have a keen sense of fair play and if the electorate decides that it’s time for a change I think in practice voting patterns would be such as to achieve it.

    BTW the historic “profitability” of a company is irrelevant to whether or not it goes bust. During the first nine months of 2000, Enron’s profits rose by 45% to $919m. NR is not actualy “bankrupt” today only beause it has been given a £25bn Treasury Guarantee on all depositors AND lent £25bn by the Bank of England. The only reason the market values it at more than £1 is that they suspect that these enormous subsidies will probably be extended to any buyer.

  31. NBeale and Peter –
    The £500m profit this year should lead to more than one company being interested (that was my point, rather than anything about “historic profitability”, although Enron isn’t a good comparison)- rival bidders wouldn’t risk missing out to others in a “fire sale” but of course there’s some brinkmanship.

    A loan isn’t a subsidy, but again the terms of the loan would be part of the negotiations and any self-respecting bidder would be daft to offer to take on the same loan at the same interest rate as the current emergency rate.

    I don’t think the public would buy the conflation of the £25bn underwriting by Darling and the £25bn BofE loan. Trying to make it look like the tax payer has been asked to contribute £50bn isn’t credible, and (to keep to the subject) i doubt very much if Cameron would have made an issue of financial regulation in an Oct 2007 campaign.

  32. Sally C,

    Very good point, but we shouldn’t forget that politics is a zero sum game, that is in 1992 Major was only able to pull of the trick because Labour wasn’t quite there yet when it came to trust in its ability to run the economy, while in 1997 Labour was trusted. And this surely had something to do with Kinnock and Blair/Brown, and not just with John Major.

    I guess for the next election the question for the Conservatives will not be whether they are more trusted than Labour (in running the economy), but whether they will be trusted enough to make that question less relevant and others (like ‘I’m just sick of the sight of the Labour spin-meisters’) more relevant. I haven’t followed Australia much, but my guess is that is exactly what happens. If voters are relaxed about Labor’s ability to run the economy, they might just want to get rid of Howard because they had enough of him.

    What I like to see is an opinion poll that does not ask which party is trusted most to run the economy, but one that asks, for each party, do you trust them a lot/ a little/not much/not at all (and for other subjects too). Anyone knows of a recent one?

    Christian Schmidt

  33. Loans and guarantees are both subsidies unless they are given on fully commercial terms. It is almost certain that NR could not obtain a £25bn guarantee and a £25bn loan on any terms at all, but I suppose it just might if it agreed to pay 15% for the loan and 10% for the guarantee. This means that the loan & guarantee are effectively “worth” £6.25bn pa and since the Bank is probably not charging more than 7% on the loan and 1% on the guarantee the subsidy is about £4bn pa. Which is considerably more than the cost of the Conservatives CGT plans.

  34. Nbeale – I don’t agree with your interest rate figures – they’re reminiscent of the post-BlackWeds. fall-out, which is why Cameron wouldn’t be running with this. There’s no money come out of taxpayer funds, as its an underwrite which is unlikely to be called, so no actual loss there. There’s no charge by the taxpayer for the underwrite.

    I think the BofE emergency rate is certainly not much more than 6-7%, but the reason it was untouched for a while was that the available market rates were only marginally higher.

  35. Apologies to NBeale

    This from the Treaasury website:
    “Northern Rock plc will pay an appropriate fee for the extension of the arrangements, which is designed to ensure it does not receive a commercial advantage.” Of course it does have a “special status” which feeds your argument that it’sa “subsidy” of sorts.

  36. Lets be clear on NR
    The loan of £25bn is cash-it is forecast to go to £30bn.That is an exposure of taxpayers funds until repaid.If it is claimed that the advance is backed by the mortgage book-then it must be foreseen that this security will have to be called in.If HM TReasury comes anywhere near having to manage a mortgage book to reclaim these funds that is the end of Brown & his Government.
    So it isn’t going to happen.
    THe guarantee of depositors funds is cetainly as much a charge on state funds as the billions of state guarantees in PPF contracts-but like them it is assumed the charge will not crystalise.
    But it would crystalise if NR goes insolvent-so they can’t let that happen either.

    But there is a twist to this tale. Today it was revealed that of the £25 billion loan. £8 billion was not in fact to repay banking market funds due for repayment…but to replace depositors withdrawals. This is a sum which far outweighs the £2.5 bn withdrawn in the run on the Bank.
    What this means is two things:-
    1) Depositors are continuing to withdraw large sums DESPITE the Treasury guarantee
    2) The Treasury Guarantee is beginning to crystalise in fact because depositors withdrawals are being replaced by Cash Loans from HMT

    As depositor withdrawals continue then the Guarantee is effectively converted to Loan ( because NR has no other source of funds available to it currently) If all deposits were withdrawn then the TReasury would indeed have a cash loan exposure of upwards of £40 bn.

    AS Banking shares crash today-including at least one potential bidder for NR, the Governments exposure to this chancer of a Building Society does not diminish at all. It is a serious situation for the Government.

  37. The real figure for NR is £18bn,not £25bn, and it’s coming at a penal rate from the BofE not the Treasury. The other £7bn borrowed from Bof E went to other institutions.

    THe “guarantee” will only kick in in the event that the bank goes bust, and a fee is being paid for that guarantee. The taxpayer has not had to “give” a penny yet.

  38. A “penal rate” by the BoE != a commercial rate.

    New Ipsos-MORI poll in the Sun apparently. Topline: 40/35/13. 8 in a row in the 40s now? That’s easily a record since 1992 at least I imagine?

  39. John T-
    The figure -according to BoE is £23bn-required by NR for these purposes :-
    To fund new mortgage busines ( !!!!!!!) £3bn
    To repay wholesale banking credit lines at renewal £13 bn.
    To fund depositor withdrawals. £7bn

    Since depositors are currently withdrawing net, and wholesale banking credit lines are closed to NR it is anticipated that the final loan debt will rise to £30 bn.

    I wasn’t aware that the BoE was somehow distinct from HM Government.

  40. Colin

    It is independent and supplies emergency loans when requested, provided it is satisfied that such loans make sense. They don’t publish exactly who gets what ; it was their “other assets” figures from which people deduced that NRock had borrowed £23bn. They have actually borrowed £18bn, according to Northern Roack (who presumbaly would face prison for lying about ir if they are lying.) Their anticipated top amount is £25bn.

  41. In contrast, Lamont was charged with instructing the BofE after Black Weds, and blinked into the headlights while the ERM slowly collapsed, allowing currency speculators to make as much money as the speed of their button-pressing allowed. I wonder how long he’d have waited before halting the run on Northern Roack? I suspect Osborne would have let the market and the emptying of the deposits dictate its fate, and the panic would quickly have spread.

    The reason why NR is continuing to sell mortgages, albeit at higher rates, is because they are a going concern and run a profitable business. A collapse in the banking system has been on the cards bercause of imprudent, free-market lending in the USA, and a lack of scrutiny by global credit agencies. Not NRock’s fault, noit their savers’ fault, and if they had been left hgh and dry, I’d have thought that Darling had morphed into Lamomt/Redwood.

  42. Christian Schmidt
    I fully accept your comments regarding my previous post. Clearly the public’s assessment of the risks involved in incertain economic times have to been seen “in context” [ eg. the Kinnock effect]. My point I tried to make was that a good/poor economic climate can be too simplistically translated into voting intentions.
    The Clintonesque “its the ecomony stupid” should not be read as, good = vote for the Govt/bad = vote for the Opposition. The effect of the publics reation to economic changes has to be set against the unique condtions of the time.
    With regard to the current time I believe Labour has overcome the issue of economic competence. I believe that to be wrong. The legacy of Labour’s past hangs over them in that they have had hard to work particularly hard in stressing their economic credentials. The electorate falls into three catergories [forgive the terrible over-simplifaction].
    Firstly, those who have some memory of the boom and bust economy but who also remember Labour tax and spend reputation. These people are beginning to feel the stirrings of uncomfortable memories. They have heard the allegations that GB is a high tax man of old and is a “lucky general” as in John T’s post above [ though I make no implications about the gentlemans age!]. If they pay high taxes and the economy goes off the rails, they will abandon Mr Brown, holding him personally responsible.
    Secondly, there are those who do not remember the tax and spend Labour Party, but have heard a sensitive Mr Brown stake is reputation on a “trouble free” ecomony. This group are also unencumbered by the memory of the boom and bust economy. We have started to hear pleas from Labour ministers about the problems that people have forgotten.
    There is of course a middle group who do not remember the economic incompetence of previous Labour administrations but who do remember Black Wednesday. It is this group that Mr Brown has most chance of hanging on to in difficult times.
    The trouble for Mr Brown is that with new voters coming on to the electoral role and an ageing population,he is facing a squeeze between those whowill punish him for their bad memories of Labour and those who have no bad memories of the Tories.

  43. Sorry – accidently pressed too early by accident… along with other errors
    … PARA 3 should read
    “MANY believe Labour has overcome… I believe this to be wrong.”

  44. Caa’t believe I did it again! Will come back after typing lessons.

  45. John T

    The Bank of England is wholly owned by the Government.

    NR is not a “going concern”-it is technically insovent because it cannot meet it’s liabilities as they fall due.

    The Banking system is not on the point of collapse.

    Northern Rock’s generally criticised business model( excessive use of short term money market funding/100% plus mortgage loans/6x multiples/higher than average deposit rates) should have alerted the FSA ,to whom GB transferred banking regulation , when NRs market share & growth rocketed.

    As we now know from the Select Committee hearings, FSA’s Chairman admitted they didn’t even follow NRs accounts.

    When asked at the Parliamentary hearing about (GBs) Tripartite structure of National financial surveilance & regulation -“who is in charge?”-the Governor of BoE replied that he didn’t understand the question.

    Whose is responsible for that shambles-you tell me?

    NR most certainly are at fault for their failure -their board bears full responsibility.

    THe Government designed the Tripartite regulation system & it failed in the first crisis it encountered.The result is that the Government is funding -in cash-to the tune of some billions of pounds, a mortgage company which it must now engineer a sale for in order to retrieve it’s loan and avoid honouring it’s guarantee to repay all depositors ( those that are left that is !!)

    I can see little connection between this failure of Banking Regulation , and Black Wednesday. The latter was a prime example of the dangers inherent in a “one size fits all” interest rate/exchange rate policy applied to a bunch of disparate sovereign nation states.

    I have no doubt that whilst it features highly in Labour’s catalogue of “bad things the Conservatives have done” it featured equally highly in Brown’s determination to keep UK out of the Euro.

    The cost of Black Wednesday is estimated by The Treasury at £3.4 bn in 1992 .Following UK’s withdrawal from ERM the performance of it’s economy has been significantly stronger than that of the Eurozone , despite the damage caused to the economy in the short term.

  46. The connection with Black Weds is in the decisiveness of the response.

    NR’s funding comes fromo wholesale money markets whose supply has disappeared along with the profits of the world’s major banks. It is this approacjh to a banking collapse that has caused NR’s problem, not profligate lending. NR relied almost entirely on borrowing to fund its lending, whereas others rely on depositors’ accounts more.

    Only increased scrutiny by the Govt/Bank0f E, FSA could have prevented NR getting into trouble over this, but they would have had to take action many years ago to prevent over-reliance on wholesale money markets. That level of scrutiny and control is anathema to Tory ethos, and that’s why Cameron is banging on about other matters and not this.

  47. By the way, I accept that the Board is ultimately responsible. I suspect you don’t have much sympathy with the shareholders, who should before investing ascertain what sort of business the company was involved in, and how it operated.

  48. John T

    Northern Rock didn’t convert to a Bank until 1997, when it was listed as a PLC…by 1999 it was quoted on FTSE100!!

    Its growth rate was double that of the sector. None of it occurred under a Tory Government-all of it under the Tripartite regulation system introduced by Brown when he gave BoE independence.
    The FSA is badly at fault here-presumably Darling will review this aspect when he has offloaded NR’s debt.

    Yes I agree that shareholders should accept the risk associated with their reward levels. I think they will suffer badly in this case.

  49. Colin – we have common ground at last! You are right that a more controlling watch over Northern Rock’s business model would have prevented this, and the “Tripartite system” wasn’t up to that task.

    The shareholders are mostly opposed to a sale because they know the discount to value which will be gained by the buyer at their expense.

    The view I continue to hold is that a free-market Conservative chancellor would not have put a more watchful regime in place, and I believe would have allowed the depositors to continue to queue. Not that that would have led to NR collapsing – it’s £100bn assets (mortgage book) prevent that even now – but a free-market approach wouldn’t have improved things.

    It remains to be seen whether the BofE’s reserves are permanently depleted by this – I think not; you think so, and I think we understand each other’s view. In any event it’s hard to imagine the deposits being used to credit anyone other than the depositors, so I think the taxpayer’s fund is safe.