Steve Richards: If Brown is dithering over Northern Rock, it is because of his fear of 'nationalisation'

Shelves creak with speeches from Gordon Brown and others about New Labour's approach to economic policy. Take any year from the past decade and the same themes recur with forbidding consistency. Economic stability comes first. The inflation target must be met. Golden rules must be applied over a (conveniently flexible) economic cycle.

There is, though, a gaping gap. Look through the collected works and there is little on the subject of ownership. This is strange, given that the defining element of the Thatcher revolution was privatisation of public services.

In the 1980s, Labour opposed every privatisation without any deep thinking as to why it was doing so. Subsequently, it supported every privatisation, again without much thought. Nowhere on the creaking shelves is there a persistent analysis about when the private sector works and when the state might have to intervene. Mr Brown made an attempt in his famous 2003 speech about the limits and opportunities provided by the market, but his words were aimed most of all at the raging internal debate at the time over the best way to reform the NHS. By his actions, Mr Brown has demonstrated the same level of confusion as the rest of them. He was responsible for the disastrous public-private partnership on the London Underground, a scheme in which the private sector is granted lucrative contracts for failing to get the work done within agreed time limits.

Tony Blair displayed a similar confusion when he summoned senior figures from Railtrack to account for the chaos on the railways. The executives who attended the meeting were genuinely baffled. They were accountable to their shareholders and not a mere Prime Minister, let alone the passengers who paid the rocketing fares.

On public spending, taxes, borrowing and other thorny issues, the Government has a route map of sorts. On the issue of ownership, it is all over the place – one of the reasons why it was thrown by the crisis that erupted around Northern Rock last September.

Or, to be more precise, the Government has an approach towards ownership but it is so defensive and fearful that it is a hopeless guide. The philosophy is more or less this: "We must do nothing that hints at a return to the 1970s. Anything else is better than nationalisation. Get in the private sector, appoint a regulator, appoint two regulators and ten other non-elected executives if necessary."

On this philosophy, at least, Blair and Brown were in total agreement. The idea of nationalising anything would be their ultimate nightmare. At no point had they considered the circumstances when it might be necessary to nationalise a bank.

Fear of the past means that, even now, Mr Brown cannot utter the word "nationalisation". Instead, he clings to the comforting words that he keeps all options open for Northern Rock. I am reminded of an interview with Harold Wilson, during a particularly nightmarish phase in the mid-1970s, when he was asked whether he would cap wages and provoke a series of paralysing strikes or increase pay and cause even higher inflation. Wilson lit his pipe and replied that he was keeping his options open. Soon afterwards, he opted to retire.

In relation to Northern Rock, Mr Brown's options, none of them attractive, are narrowing fast. Amid the explosive brew of vulnerable taxpayers, screaming shareholders, nervous depositors and the apparent lack of a credible private buyer, nationalisation looks increasingly likely.

If the Government had dared to make such a move earlier, the explosive brew would be a little calmer now. But with such big sums involved, the complexities of dealing with fuming investors and uncertainties about the housing market, no one can say for certain. Even so, in the light of the current febrile situation, ministers would have given a lot for a slightly less tempestuous scene.

One of the weaknesses of Mr Brown's current position is that, with good cause, he partly blames reckless managerial decisions at Northern Rock, yet he allows the management to remain in place while propping it up with billions of pounds. Meanwhile, as the Liberal Democrat Treasury spokesman Vince Cable never tires of pointing out, about £60bn of taxpayers' money is effectively in the hands of Northern Rock's shareholders, including speculative hedge fund managers who probably sense that a quick killing is on the cards. I suspect that Mr Brown and Alistair Darling were genuinely surprised when, very quickly last autumn, a range of specialists and pundits argued for temporary nationalisation as the best way forward. They included Hamish McRae and Andreas Whittam Smith (neither well known for their devotion to 1970s-style socialism) in this newspaper, Vince Cable and The Economist magazine. None of them were trapped by Labour's nightmares of the past and could see more clearly. Would Messrs Brown and Darling have opposed an early nationalisation if they realised that such a dream big tent would have supported their move? For all the practical difficulties, I doubt it.

Yet in spite of the Government's timid manoeuvring, the politics of the story remain as unpredictable as the economics. When the news broke last September, Mr Brown's poll ratings soared, to the surprise of everyone including him. Since then, the Conservatives have moved from giving the Government full support to their current position, which is to have no policy at all.

In justifying their stance, the Conservatives place another ingredient in the brew. They are convinced that the Government could have negotiated a successful sale last autumn, but dithered because it wanted to win an early election first. The evidence for this is inconclusive. At yesterday's Prime Minister's Questions, Mr Brown unequivocally denied that Lloyds TSB had made an offer. Perhaps a bid was being put together and then dropped as a result of discouraging noises from a government obsessed with calling an early election.

Even if this proves to be the case, the Tories cannot rely on their apparent current position: "We would not start from here". That is what Neil Kinnock used to say in the 1980s in relation to the various economic crises, and much good it did him. I doubt if the Conservatives' New Labour heroes from the mid- 1990s would have taken such an opportunistic approach as they have done. Instead, they would have recognised that the best opportunity for them would be to appear serious and credible by offering a sense of what they would do with the bank.

Mr Brown and Mr Darling will continue to fill shelves with speeches in which they challenge such opportunism by claiming to represent stability – not an easy claim to sustain in the current economic climate. The double act of Mr Prudence and Mr Stability would be a little more credible if they could purge their fear of "nationalisation", get to grips with the politics of ownership and calm the wild seas around Northern Rock.

s.richards@independent.co.uk