Labour give nationalised companies a bad name

There are many, particularly on the right of the political spectrum, who seem to think that there is some sort of unwritten law that states all nationalised companies makes losses, are badly run and cannot compete with the private sector. In truth, there is no reason why this must be so, and with good management a nationalised company could be run just as well as a private company with the profits returning to taxpayers rather then overseas owners or shareholders. So you would imagine that labour would want to set a benchmark by showing Northern Rock, now nationalised, to be the very example of a well run state owned company.

So why is it that they are reporting on TV this morning that Northern Rock are repossessing houses at twice the rate of other banks and building societies ? The reports on the BBC this morning suggest that it is nothing to do with Northern Rock having more mortgages in debit, but the fact that the nationalised Northern Rock is less willing to work with those mortgage holders to keep them in their homes.

When the government are desperate to stop the housing market spiralling downwards at a greater rate, the Northern Rock's decision to repossess homes at an increased rate throws more cheap houses on to the market and makes things worse.

So what is the governments response to the Northern Rock doing what it is doing ? Silence. Where is Gordon Brown, the saviour of the world now ?

The day the Tories hero nationalised a major bank

The Tories like to argue that they are strongly against nationalisation as a principle, and I would agree with them on this, but there are times when nationalisations are necessary and can work for the company, the customers and taxpayers.

Ignoring the Tories own nationalisation of Rolls Royce Aero Engines (now privatised, profitable and still British), one of the Tories heroes was responsible for one of the biggest nationalisatiions ever when in 1984 Ronald Reagan authorised the nationalisation of the Continental and Illinois Bank.

The Continental and Illinois had taken on too many bad debts, suddenly had a liquidity problem and $10bn was quickly withdrawn by account holders. This meant, in a strange parallel with the Northern Rock, that the Federal Reserve had to step in and act as guarantor to the C&I, for the very same reason that Northern Rock had to be saved, put simply it was too large an organsiation to let fail and the implications would have been massive for the US economy.

The US government at the time sought a private sector takeover and looked in to this for two months, again, another strange parallel with the Northern Rock, before it was finally nationalised.

The US government finally sold off all its interests in Continental and Illinois in 1994, although it had effectively sold out the majority before then, and what might be of interest to people is that the US government made back all its money and made a small profit too.

So there is some hope that this can be done with Northern Rock too and it shows that even Conservative free marketeers know that sometimes you have to do things that go against the grain for the better good.