Brian Monteith: Brown and Darling will pay at the polls for financial mess

I REMEMBER it well. Tony Benn, Eric Heffer and all the other Labour MPs that had just celebrated the 60th anniversary of the bloody Russian revolution in 1917 were demanding the nationalisation of Britain's banks. I was just a young pup, with a brand new student bank account, but the thought of the likes of Michael Foot and Neil Kinnock appointing the boards of the banks so that they might do the Government's bidding rather than behave like prudent bankers made me reach for my Campari

How ironic then that after 11 years of New Labour, Blue Labour or whatever pejorative term you choose to name Boom and Bust Brown's party, the least socialist of Labour governments should actually deliver the partial nationalisation of British banks.

We were brought to the brink of collapse by the Chancellor's inept dithering on Monday, when he summoned bank executives to a meeting and then had nothing to announce afterwards. Not surprisingly market confidence evaporated overnight and crashed to a point where shares were lower than when Labour came to power in 1997. And so the Treasury lifeboat was, grudgingly, built and launched within a day.

The scale of the rescue is vast; five times what the Government spends on the NHS in one year and bigger than the American rescue package voted through last week. The state purchase of preference shares in some banks might stabilise the financial sector – but it could hurt our pensions by reducing the dividends that help our nest eggs grow. Fortunately, not all banks are in trouble – HSBC looks imperiously safe – but sadly the Scottish banks are in dire need of help having left their balance sheets exposed through errant lending and funding gaps they cannot finance.

For years there have been claims that the rising tide of debt was a problem. Wrong. The problem occurs when debt is not backed by sound assets. In the next six months we shall find out if the value of properties we have bought or borrowed against are still greater than our debts.

The blame doesn't stop at the door of banking misjudgement – Gordon Brown and Alistair Darling have a lot to answer for. The culture of easy money was all of their own making and cannot be blamed on predecessors who had it measurably under control.

By rigging the measure of inflation so that it no longer included the cost of housing, Gordon Brown ensured that the rocketing increase in property prices would not affect the Bank of England's interest rate policy. While Gordon Brown allowed the amount of government money in circulation (the money supply) to expand, its falling value had to cause inflation somewhere.

So, because the Bank of England's responsibility is to try to control inflation – but inflation is rigged – our interest rates have consistently been at the wrong level and our money supply has encouraged – through the policies of Boom and Bust Brown – the creation of a property bubble that would eventually burst. Cheap Chinese goods masked the money supply/inflation problem – but it was always there.

Now we will have to pay a price. Not Gordon Brown, not Alistair Darling, but you and I to the tune of an estimated £19,000 each if their scheme fails. Forget the politics; let's hope it works. We can always kick out those responsible later.

Crisis? What crisis?
The melodrama of television news reports in trying to cover a complicated story such as the current financial crisis turns my stomach enough for me to reach for the Rennies.

Sir Trevor McDonald should be stripped of his knighthood or put out to grass (again). Suggesting that banking will never be the same again really is without foundation. The implication that seeking a loan, a mortgage or effecting a banking transaction will somehow be different because the Government has a stake is wide of the mark. I suppose they have viewers to attract, but such tabloid standards make me reach for the "off" button.

Still, it could be worse. The editor of ITN could be replaced by the chump that decides the front page of the Daily Mirror. On the day that practically every other paper covered the impending semi-nationalisation of some British banks with your money, the Mirror splashed with some B-Celebrity love fall-out. Words fail me – other than to note that, like Peter Mandelson, the Mirror is "joined at the hip" to Gordon Brown. "Crisis? What crisis?" anyone?