Given the socialistic leanings of our Prime Minister, it may well have been a move he undertook calmly and, quite possibly, with a little excitement
By Simon Heffer
A quarter of a century ago, in the era of the Labour manifesto that was dubbed (by a member of the Labour shadow cabinet) “the longest suicide note in history”, when one wanted to depict the absurdity of the view of the world advanced by Tony Benn and Michael Foot one simply had to say: “They want to nationalise the banks!” People fell about laughing.
Today, it is all considerably less funny. We are all socialists now.
For the Government to take stakes in our leading banks in order to re-capitalise them is not quite the sovietisation of Britain, but it is a pretty good start. Given the instinctively socialistic leanings of our Prime Minister, it may well have been a move he undertook calmly and, quite possibly, with a little excitement.
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Perhaps the consequences of his not having socialised our financial system in this way could have been catastrophic – a view taken not just by his closest Cabinet colleagues but also by the main opposition parties. Equally, the consequences of his having done so could be catastrophic, too, because the socialist experiment rarely ends up with people feeling happier, richer and more free until it has ended.
Anyone over the age of 40 will recall the abiding result of the days when we had a socialist economy in this country: poverty. We had better prepare for some more of that. The state does not have its own money to engage in stock market speculations, such as buying shares in clearing banks. It undertakes this gamble with our money.
That is the money we, as taxpayers, have involuntarily handed over to pay for the things we generally accept as being socially necessary: a health service, schools, pensions, a police force and the defence of the realm.
With anything up to £500 billion having been pledged by Alistair Darling yesterday to create a state-backed banking system, there is now going to be a struggle to find the money. Mr Darling hopes that most of that guarantee will never have to be called on. If he is wrong – if a substantial bank or banks go under, and the money is called upon – then the Treasury will be heading for bankruptcy. We have been there before under socialism, in the autumn of 1976.
Even the limited purchases the Chancellor is prepared to make of bank stock will be costly – a first tranche of £25 billion, with the same available later. Mr Darling says the banks will pay the Treasury a price for any such money. He perhaps hopes that, as with the Swedish bank rescue in 1990, he will be able to sell the shares at a premium a couple of years later. In the meantime, the loan has to be funded.
That means either public spending cuts or a rise in taxation, or even both. As with any other shareholding, the value of the investment can go down. The liability and risk to the taxpayer is terrifying. The political cost to Labour if all this fails will be as nothing compared with the cost to the British public.
This is what socialist economics brings. The intervention, or rather interference, of the state in financial and economic matters can only lead to sclerosis, the suppression of enterprise, the raising of taxes, starvation of investment, lack of innovation, technological retardation and the rise of the power of organised labour. Judging from yesterday’s interest cut, the much-vaunted independence of the Bank of England has already gone out of the window and state control of the central bank is back with a vengeance.
If you doubt this analysis, recall what happened in this country between 1945 and 1979, when such an ethos as we are now returning to existed unchallenged, even by Tory governments. The more the state intervened, the more it had to intervene: the appetite grew with eating.
By the 1970s the inevitable endgame of socialism was being played out: unions battling with government over rates of pay, prices and incomes policies, food subsidies, the three-day week, the winter of discontent. The state had to create jobs because there was precious little incentive for the private sector to do so. Investment was scarce. The state was everywhere.
The maxim of the American writer and philosopher Ayn Rand came close to fulfilment before the denouement of Old Labour on May 3 1979: that the difference between a welfare state and a totalitarian state is a matter of time.
With the Government about to take shares in banks – and substantial shares at that – the effect of the new socialism will be felt first of all by the customers of those banks. Perhaps again there will be money to lend. But the bank manager will have to lend in accordance with government policy.