Margareta Pagano: For Labour's sake, it must try to sell the Rock

Let's have no illusions about why Gorden Brown is so desperate to pull off a private sale of Northern Rock: this is pure politics. The bank employs 6,400 people in the North-east where Labour has 28 MPs, one of the party's strongest areas of support. Northern Rock has its roots in two mutual societies going back to 1850 and, as one shareholder said at last week's extraordinary meeting, was built on "steel and coal". Staff and small investors control 12 per cent of its shares, while the Northern Rock Foundation has given £190m to local charities over the past decade.

Some of Labour's richest donors also come from the region, which has done so well out of generous grants from Labour. Remember David Abrahams, who anonymously donated so much to Labour and won planning permission for a big industrial site outside Durham, and who has mysteriously disappeared from our news pages?

The Government can't afford to wipe out voters' goodwill by destroying jobs and their shareholdings. You can see too why letting Northern Rock go bust – which is what would have happened to any other flawed business in any sector other than banking – would be untenable.

However, a private sale is more likely. Sources close to the Treasury suggest that Brown might even be pushing nationalisation as a way of bouncing shareholders into accepting a less generous offer from private buyers. Many of the bankers I spoke to last week still think that Number 10 and the Bank of England could bang heads with a group of the City's most senior bankers to see if an old-style rescue deal can't be hammered out. Virgin Money and Olivant are still willing to discuss takeover terms and there are other banks that say they are interested. Just because the Lloyds TSB deal was blown doesn't mean others can't have another go, either for all of the bank or bits.

If a sale can't be achieved, what sort of nationalisation will it be and can shareholders be compensated? Will there be a temporary run-down or will Northern Rock be pumped up to sell in a few years? Even if you are ideologically against nationalisation, it doesn't have to be a disaster. Look at Rolls-Royce, nationalised for £1 in 1971.

But unless it wants to upset investors and face lawsuits, the Government will have to find a way to pay the shareholders.

Even Labour must be nervous about a nationalisation. Imagine a situation in which it goes down this road, pays investors 10p, makes money on its loans and then sells the bank on for a few billion in a couple of years' time. Who would this money go to – taxpayers or shareholders? Contrary to reports, taxpayers have yet to lose any money in this affair. Indeed, the Bank of England's £24bn loan to Northern Rock is said to be on such penal terms – 100 basis points above rates – that it is making money on the loans. Finding a private buyer is still the best way for all concerned to get value.

Rose and the three Rs

Sir John Rose, chief executive of the aforesaid Rolls-Royce, the aerospace-engines business, brilliantly describes how wealth is created: you either dig it up, grow it or convert something in order to add value. Anything else is merely moving it about. To prove his point, he points out that, pound for pound, an aircraft engine is six times more valuable than silver – whereas, pound for pound, a motor car has the same value as a hamburger.

But Sir John is worried we are losing our ability to convert wealth because of woeful education. When you have one in 12 young people neither in education, training or work, and seven million adults who struggle with numbers, then that's a crisis.

A look at Rolls-Royce's Derby plant shows just how much value comes from having a hi-tech manufacturing business: more young people in Derby get five good GCSEs than in any of the cities around, average salaries are higher than elsewhere in the Midlands, and its apprenticeship and graduate schemes are oversubscribed. But Sir John has had to go overseas to find people to work in his fuel-cell business – because people with those skills just can't be found here.

His stark prognosis was borne out last week by the Institute of Civil Engineering, which forecast that the construction industry would need 12,300 new professionals to join each year, until 2011, to meet building demands. The institute blames the dreadful level of maths and science teaching in our schools for putting people off wanting to train.

You can't expect teenagers to want to become engineers if they have lost interest by the time they reach 13. Culturally – and for this I blame teachers and parents – we just don't seem able to show how exciting and creative the sciences can be. That's hardly surprising when not even a fifth of physics teachers in the UK have physics degrees.

Finding inspirational teachers is part of the solution. The other is salaries. So long as the City grabs the brightest brains – and most of our engineers – by paying them up to 10 times more – there will be shortages. What should our industrialists do? Either they will have to pay more or send more work off-shore. Or maybe Rose should launch an X Factor-style show – as the Indians have done – to propel young people into engineering.

News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
Sport
footballStriker has moved on loan for the remainder of the season
News
people Emma Watson addresses celebrity nude photo leak
PROMOTED VIDEO
Sport
footballFeaturing Bart Simpson
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Planning Manager (Training, Learning and Development) - London

£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering