It's not the economy, stupid. It's a reputation for competence in running it that matters. So the new year brings good news and bad news for Gordon Brown.
The good news is that Northern Rock is like Sars. Some people may not remember severe acute respiratory syndrome, a curiously named disease that killed nearly 300 people in Hong Kong in 2003. Four years from now, many people may not remember Northern Rock after all, the total death toll from its collapse, even if things go very badly this year, is most likely to be zero.
But in the few months that Sars was knocking down little old ladies with a mortality rate of one in every six that caught it, people all round the world were worried. Although it never arrived here, British newspapers were alarmed, in the way that only British newspapers can be, at the prospect of the bug being carried across continents by plane.
In the middle of the panic, I recorded the phlegmatic judgement of one of my colleagues, intending to quote it back at him later. "It's completely trivial," he said. Well, that was a little callous set against the grief of the families of those who died in Hong Kong, China, Taiwan, Singapore and Canada you see, it did spread to the West; 38 people died in and around Toronto. But his verdict proved accurate. Sars was declared contained by the World Health Organisation in July 2003, and we all went back to worrying about bird flu a theoretical rather than actual threat.
It may seem reckless, therefore, to dismiss the implosion of Northern Rock as "completely trivial". It was certainly unwise of Gordon Brown to say, as he did in an interview last month: "Whatever else, nobody has lost their money." He meant the depositors, whose savings accounts have been guaranteed by the Government. But the shareholders in Northern Rock have lost most of their money, and have no prospect of getting it back. That is, in fact, how it should be. They have to pay the price for the mismanagement of the company. But it was a little heartless of the Prime Minister to forget them altogether.
The impact of the failure of Northern Rock in the long term, however, is likely to be trivial, when measured against the British economy as a whole. That is good news for Brown, considering the Sars-like panic that briefly infected British newspapers last year, but which is already receding. Vince Cable, when he was acting leader of the Liberal Democrats, tried to frighten the middle classes by asking awkward questions about how many billions the taxpayer had lent to Northern Rock.
Cable took me to task, justifiably, when I said that his questions implied that the Government was wrong to bail out the depositors. And he may be proved right that temporary nationalisation is the answer. But he was wrong to imply which I think he did that billions of public money are at risk, because, as my esteemed colleague Hamish McRae has pointed out, Northern Rock's mortgages are secured against British houses.
The company's name is obviously worthless, its branch network is not worth much, and it may take two or three years to re-engineer the business, but, as the Prime Minister meant to say, neither the depositors nor taxpayers are likely to lose significant amounts of money. The whole business will be largely forgotten by the time of the next election.
So to the bad news. It is a while since British political commentators have had to pay much attention to economics. It is a long time since I have cited someone such as McRae as an authority rather than, say, Alan Watkins. There was a time, running roughly from the Dissolution of the Monasteries to 1997, when the phrase "political economy" meant something and was the core business of columnists. James Callaghan, Margaret Thatcher, Nigel Lawson and John Major were all made and broken on the machinery of public-sector borrowing, inflation, exchange rates and interest rates. When Tony Blair and Brown came to power, a whole language and way of thinking about politics fell into disuse.
The public finances were sound. So sound that the Government raised 22.5bn from the sale of 3G mobile phone licences in 2000 and used it to reduce the national debt. Inflation has not been an issue since the end of Lawson's long "blip" in 1991. The exchange rate ceased to matter after the pound left the Exchange Rate Mechanism the following year. And decisions over interest rates have been contracted out to the Bank of England.
This year, they are likely to be back. Not in a big, ERM-disaster way. But in a way that could further erode Brown and Alistair Darling's reputation for competence. That reputation has suffered in recent months, partly because of the unwarranted panic over Northern Rock and the problem of HMRC's data security (which should not affect anyone's view of Brown and Darling's ability to manage the economy).
Normally, you would expect their reputation to recover. Except for one of the old acronyms that used to dominate political debate: the PSBR. It is called something else now, but the amount the Government has to borrow to cover the gap between what it spends and what it raises is high and rising. It is more than 3 per cent of national income, which is, in old money, the Maastricht criterion. In new money, it is the generally accepted limit for the developed world.
Which means that Darling may have to raise taxes or cut spending. Labour has raised taxes before, but the big rise, in National Insurance in 2003, was presented as a one-off to lift the NHS to a higher level. And the efficiency gains in public services that are needed to win support for further rises have simply failed to materialise. Nor is a slowdown the best time to raise taxes. And, although Labour held public spending down fiercely in its first two years, it has not had to make real cuts. To make matters worse, slower growth may reduce tax receipts while higher inflation will increase public spending. That is because state pensions and benefits are linked to the old RPI, which is rising at 4.2 per cent, while the new CPI, which is what the Bank of England tries to control, is rising at a modest 2.1 per cent.
Worst of all, from Brown and Darling's point of view, Labour faces, for the first time since 1997, a shadow Chancellor of whom it should feel a little afraid. After Francis Maude, Michael Portillo, Michael Howard and Oliver Letwin, George Osborne is a serious opponent. He may be young, with an arrogant manner, but his proposal to cut inheritance tax at last year's Conservative conference shifted the plates under Brown's feet.
It's not the economy as such, stupid. But this could be the year when Brown loses the hard-won reputation, which took him 10 years to acquire, for economic competence.