Until yesterday it had been just about possible to pretend that the run on Northern Rock had been an aberration and that Global Meltdown Central was to be found only and exclusively on Wall Street. That illusion was exploded yesterday, with the disclosure that Britain's biggest mortgage lender, HBOS, was in "advanced merger talks" with Lloyds TSB. Speculation that HBOS could fail had before then been discounted as ridiculous scare-mongering. As it was, news of the possible merger came just in time to prevent a total collapse in the share price. It was subsequently made known that both the Treasury and the Financial Services watchdog, the FSA, had been encouraging the talks.
Two questions arise from all this: one relatively small; the other big. The small question, which is small only in comparison with the scale of the overall crisis, is how and why news of the talks came to be broken at such a particularly fortunate juncture by the BBC's business editor, Robert Peston. Mr Peston has a string of scoops to his name, including the Government's bail-out of Northern Rock, and clearly has his expert ear to the ground. But it is hard to resist the conclusion that his authority was co-opted in an attempt to halt the share slide. So were government ministers or their agencies seeking to buck the market and compromising the terms of commercial bargaining? Furious contributors to the BBC and City websites, quite understandably, demanded an explanation.
The bigger question is, it turned out late yesterday, not unconnected. Until it emerged that the HBOS-Lloyds talks had been "personally overseen" by the Prime Minister, the Government had been distinguished by its almost total absence from the disastrous economic scene. On the few occasions when ministers, or even the Prime Minister, had shyly raised their heads above the parapet, it was to adopt the tone of bystanders marooned by a global storm.
Take the Chancellor, Alistair Darling. He distinguished himself in previous jobs by his uncanny ability to shut controversy down and keep embarrassing headlines far away. As Chancellor at a time of economic crisis without precedent in recent years, however, a higher profile would, surely, be in order. In the event, his most memorable (and pessimistic) pronouncements came in a magazine interview he gave while on holiday. On the BBC Today programme earlier this week, he spoke about tightening bank rules – in the indefinite future – and promised "whatever is appropriate and whatever is right to ensure the stability of the banking system here".
Meanwhile, the Prime Minister – and arguably, as Chancellor, an architect of our current difficulties – said all he apparently wanted to say in the course of a speech in Northern Ireland, about as far from the turmoil in the City as it was possible to be. Briefly digressing from his theme of confidence and achievement to the "credit crunch", he insisted that the UK was better placed than ever to weather the "global downturn". Yet his boasts of low inflation and flexible labour markets sounded particularly hollow on a day when the inflation rate reached 4.7 per cent and long-term unemployment was forecast to double.
For their part, other ministers and MPs seemed even more remote from reality. Their entire pre-conference focus has been not on the credit crisis, global or local, but on daring each other to come out against Gordon Brown. Have they nothing better to do – what was that about fiddling while Rome burned?Reuse content