23rd February 2008

Raw deal for city but now we have to make best of situation  

(This article originally appeared in the Newcastle Journal on the 23rd of February.) 
   
Alan Duncan MP  
575 words
Publication date: 23 February 2008
Source: The Journal, Newcastle
Page: 9
(c) 2008 The Newcastle Chronicle & Journal Ltd  
   

           
NEWCASTLE has every right to feel that it has had a raw deal. Its economy and society were ripped apart by the demise of mining and shipbuilding in the 1980s.  
           
Now, 20 years later, the credit crunch in the USA has pulled the rug from beneath its most cherished modern success story.  
           
Northern Rock is not just a symbol of local economic pride; it is the very heart of its economic soul.  
           
The collapse of Northern Rock is a colossal financial failure and even its most ardent and sympathetic supporters, either in Government or in the City, cannot just wave a magic wand or resuscitate it. It now depends on the Government for countless billions to underpin it, and it has become a major item on the national debt.  
           
A major economic crisis on this scale needs honest politics and decisive action.  
           
Anyone who says that Northern Rock can get back to where it was is not being honest.  
           
Anyone who says that every job can be safeguarded as before is being either selfdeluding or unforgivably deceitful.  
           
The challenge we face is now to make the best of a difficult situation, and not to grandstand with unrealistic attitudes just to win temporary approval when you know in all honesty that things are going to turn out much worse than you say. That's when politicians get a bad name.  
           
When Northern Rock first came unstuck, everyone - and all politicians - agreed that people's deposits in the bank should be protected. They have been and they will remain so.  
           
The Government felt unable to pursue an approach from Lloyds TSB; it was terrified of the political cost of nationalising it; it tried for a private sale; and then felt forced to nationalise it after all. The Liberal Democrats, after supporting the protection of deposits, paused for a bit and then called for temporary nationalisation.  
           
The Conservatives similarly wanted to safeguard deposits but were - and are - against nationalisation, preferring instead a form of administrative reconstruction a bit like Chapter 11 in the USA, led by the Bank of England.  
           
The attraction of nationalisation is that it is thought to guarantee the future of Northern Rock and put a permanent end to the danger of its collapse.  
           
I am concerned that the opposite is true.  
           
The taxpayer still faces massive risk running at tens of billions. Our solution - the Conservative solution - would handle that risk better than nationalisation.  
           
The problem is that nationalisation does not address the relationship between Northern Rock and Granite, the offshore trust which finances it. There is still a massive danger that this financing structure will implode.  
           
Conservatives have proposed a sensible alternative way forward. We've done so because we care and because we are being honest about the bank's prospects.  
           
By all means disagree with us - that is what politics is all about - but any comment about us should be made without hatred and vitriol. We are treating this massive issue responsibly and realistically.  
           
We've made some mature proposals; all reaction to them should display that same sense of maturity.