ConservativeHome's ToryDiary

Saving small shops: Use 'em or lose 'em

David Cameron has welcomed the interim findings of the Party's Small Shops Commission:

"Small shops are the lifeblood of local economies and provide a lifeline to local residents – and their survival is vital. The problem today is that the Government doesn’t seem to care. The rising burden of tax and regulation is forcing many of our local shops into the ground. And Labour now intend to remove the ‘needs test’ from planning rules. This was crucial in safeguarding local shops, as it forced out-of-town shopping developments to show there was a real need for them in the area. With this gone, local shops will come under even more pressure.

We need less of Labour-controlled Hackney council, who sold off the freeholds on many of the much-loved local shops and cafes in Broadway Market to property developers. And more of Conservative-controlled Wandsworth Council, which took a landmark decision to support shops in Northcote Road near Clapham Junction after several long-established businesses were forced out.

It really is that simple when it comes to local shops: use them or lose them. If we care about our communities, and the local, independent retailers that give them their character, then it's our responsibility to support them - not just by signing petitions and joining campaigns, but with our cash."

Click here to download the Disappearing Britain report.

Update: WebCameron now has a video of Cameron meeting the organisers of WedgeCard...

McCain's economic prescription puts George Osborne to shame

The Sun gives a thumbs up to an article by George Osborne in today's Sun; The Shadow Chancellor outlines how he'd stop the credit crisis.

George Osborne offers good ideas (all from Monday's speech) but ConservativeHome continues to be struck by the tortoise posture of our frontbench team (and all UK politicians) in comparison with the hare-like boldness of American politicians.

Republican nominee John McCain set out his own economic plans yesterday:

"The McCain campaign put the cost of his tax cuts at roughly $200 billion a year, but its estimate did not include the cost of making the Bush tax cuts permanent, which would more than double that figure.  The campaign said it would offset the lost $200 billion by eliminating from the federal budget earmarked pork-barrel projects; putting a one-year freeze on discretionary spending in most federal agencies, later eliminating wasteful programs; broadening the tax base by eliminating loopholes; and spurring economic growth."

If only we had a politician in Britain willing to offer a similar remedy to Britain's (greater) economic woes.

Bribery is sometimes necessary, says Tebbit, when British jobs and security are at stake

Last week the Editor of ConservativeHome celebrated the Court's criticism of Tony Blair's decision to halt the SFO probe into the BAe-Saudi arms deal.  Lord Tebbit offers an alternative view in The Daily Mail.  Here are highlights from the former Party Chairman's piece:

Bribery is unfortunately necessary for British jobs and security co-operation with Saudi Arabia: "To paraphrase Rudyard Kipling's poem, Mandalay, "somewheres East of Suez, where the best is like the worst/where there ain't no Ten Commandments", they play by different rules to the ones we stand by here. I thought of this again when the High Court last week wrongly denounced the Government for abandoning the bribery investigation into the massive British Aerospace arms deal with Saudi Arabia... This is Britain's biggest-ever arms deal, signed more than 20 years ago and worth £43billion - yes, £43billion.  If we abandon it, we will put thousands of British jobs on the line and jeopardise relations with Saudi Arabia, a vital ally in the struggle against terrorism.  At the bottom line, without Saudi's cooperation, British lives could be lost to jihadist terror.  I have personal experience of this affair.  As a junior trade minister and then as Secretary of State for Trade and Industry, under Margaret Thatcher, I had the job of promoting British exports - whatever they were.  The driving principle of the task was relatively simple: no one has to buy from us, but unless they do, we are unable to pay for the food, oil and raw materials we need to survive."

We should aim to eliminate corruption in the long-term: "Eliminating bribery throughout the world should of course be a priority, and it is utterly wrong to use it here in Britain or in other countries where it has been largely eradicated.  But let us remember that some British companies have to operate in places where the world is not as we would like it to be."

Our judges' double standards: ""No one, whether within this country or outside, is entitled to interfere with the course of our justice," they said.  Come off it. Which of them stood up and objected when the Government let out of jail IRA/Sinn Fein and Loyalist terrorists by the busload, claiming that the bombings and killings would start again if they were not released?"

Judges are increasingly behaving as lawmakers: "More and more judges are being tempted to find not according to what the law is, but according to what they think it should be.  And more and more they are using foreign law - whether from Brussels or so-called International Law - to impose their views.  As far as they are concerned, national security can take a back seat.  It seems to me that the judiciary is in danger of forgetting that policy and law are made by politicians.  And for good reason.  If politicians get it wrong, we can sack them at the next election.  They are accountable. Not so the judges."

Nick Herbert MP, Shadow Secretary of State for Justice, will be writing for ConservativeHome on these subjects in the next few days.

Related CentreRight links: Samuel Coates wonders what Tebbit would have said to Wilberforce, Matt Sinclair on the 'judicial aristocracy' and Peter Franklin on Britain for sale

George Osborne: I can't promise any quick fixes for UKplc

Anthony Browne of Policy Exchange introduced George Osborne at 11am this morning.  Anthony noted that he was an economic correspondent ten years ago but gave it up - in part because economic journalism had become boring.  It isn't boring anymore, he noted, as he invited George Osborne to set out An Alternative Vision For The Economy.

Most of the Shadow Chancellor's speech was a well-crafted attack on Labour's failure to deliver stability, prudence or improved productivity - the three pillars of economic success, said Osborne.  The final section sketched out An Alternative.  Here are its key themes:

On stability...

• "A broader collateral swap programme supported by the Treasury could help. This would allow banks to swap their illiquid mortgage backed securities for liquid government bonds."
• Stronger Bank of England independence by giving the Governor a single, longer term.
• The Bank to lead on rescuing troubled banks.
• New capital adequacy requirements for banks that would include an extra restraint for banks to abide by in boom times as well as standard prudential requirements.

On prudence...

• The fiscal rules will be independently verified under a Conservative government.
• Over an economic cycle the proceeds of growth will be shared between taxpayers and the public sector.
• There will be no upfront, unfunded tax cuts.

On productivity...

• Tax relief over time for businesses and first-time homebuyers and a simplification of the tax code.
• Laissez-faire economics isn't enough anymore. A Conservative government will actively improve transport infrastructure, invest in skills, and provide active support for businesses.
• Plus education and welfare reforms that will prepare a new generation for work.

Anyone wanting thoughtful ideas for addressing Britain's immediate economic challenges would have been disappointed by this speech.  It was all long-term thinking on how a Conservative government would fix Britain's broken economy.  The long-term ideas are all sensible but there were, for example, no ideas to help businesses now or to relieve the low income families hurt by Labour's abolition of the 10p band.

Read the full speech.

Related link on CentreRight from Andrew Lilico: Why Price-Level Targeting would have been better than Inflation Targeting at addressing the consequences of asset price misalignments

The debt bomb ticking underneath Gordon Brown's electoral hopes

George Bridges, until recently David Cameron's campaign director, has a must-read article in this week's Spectator.  George has been mining the records of Experian, the credit rating agency.

He discovers that 5.1 million households have 'sub prime' credit ratings and these are overwhelmingly concentrated in the seats that we need to win in order to oust Labour:

"Labour won its 20 most marginal seats by a combined total of just over 9,000 votes. And - crucially - there are almost 100,000 households in those 20 marginal seats that are in the subprime category. Several Cabinet members may find the repo company - rather than the local Tory candidate - to be their greatest political enemy. In Bolton West, Ruth Kelly's seat, some 7,200 households are in the high-risk group, a figure which dwarfs her 2,060 majority. In Jacqui Smith's seat of Redditch, Experian places 10,800 households at risk. The Home Secretary's majority is a mere 2,720."

This is George's conclusion:

"Ever since the Conservative leader worked in the Treasury, watching the pound fall out of the European Exchange Rate Mechanism, Conservatives have shied away from focusing on the economy. Now they must do so with a vengeance. An attack narrative must be formed: Gordon the stealth-taxer, serial spend-and-waster, the man who jilted Prudence and led the nation into an asset bubble. The man who inherited an economic boom, and went on to oversee the largest orgy of property speculation and debt creation in British peacetime history - how can you trust him again?  Whatever the results of the credit crunch, it is fairly clear that its first casualty is the feeling of prosperity. It is giving way to something that we have not seen in politics for some time: fear. Fear that the bills will keep on rising faster than one's salary. Fear of the day when your mortgage comes up for renewal. After an absence of 15 years, economics is back at the heart of politics. People are looking for assurance. And the next election will be won by the party that is most trusted to provide it. For millions of voters and David Cameron, it is payback time."

Is George right?  Is the economy about to become issue number one?  It might be the only issue that could give the Tories a working majority.  Despite recent double digit opinion poll leads the consensus within the Westminster village is that Britain is heading for a hung parliament. 54% of the political insiders who contribute to the new PoliticsHomeIndex are currently predicting a hung parliament as the most likely outcome of the next General Election - with the Tories the largest party.

The right economic strategy may be the difference between being the largest party and the majority party.  As Fraser Nelson points out, elsewhere in The Spectator, the electoral mountain is still a huge one for the Tories to climb and he notes the various attempts by Team Cameron to stay close to the Liberal Democrats.

The double whammy has landed

We're all familar with Labour's higher taxes.  The second punch of Labour's double whammy is now being felt across the land: Higher prices.

Campaigning in London today, David Cameron has published a dossier detailing Labour's failure to protect families from the pincer movement of restricted earnings and higher prices (already documented by Charlie Elphicke).  The Conservative leader issued this statement:

"When Gordon Brown and Alistair Darling claim that inflation is running at only 2 per cent a year, you have to ask where on earth they do their shopping. For most families in Britain, the real cost of living is going up and up. Since Gordon Brown became Prime Minister, the price of basic foods like bread, butter and eggs has gone up by around 30 per cent, while petrol has gone up by eight per cent, and electricity and gas bills have gone up by 10 per cent.

Of course in a modern market economy the government can't control the cost of living directly. But it can avoid making it worse. Sadly, Labour now seem so out of touch with the lives of working people that they keep on making things worse, with an extra £110 of taxes a year in the Budget for the average family. Why is Labour kicking families when they're down? Why won't they understand that life is getting really tough for people - council tax has doubled since Labour came to power, train fares have gone up by a third and the cost of running a car has risen by a half. On top of that we have the highest interest rates in the developed world, making mortgages, student loans, and business credit more and more expensive. The last thing Britain's families need now is more tax from Labour.

Everyone can now see the truth about Labour's economic incompetence. They took our money and they blew it. They didn't put enough aside in the good times to prepare for a rainy day. And they didn't do enough to improve the way public services are run, so we're not getting good value for all the money we've put in.

I won't make short-term promises to cut the cost of living - that's the kind of old-fashioned spin that undermines trust in politics. But I can promise this: a new Conservative government will be on the side of working people, with a long-term plan to fix the country's finances and make sure public money is spent properly. That way, over time, we can cut taxes and the cost of living."

Download a PDF of the Tories' full Cost of Living Report.

Tories appoint former MEP as envoy to Britain's union movement

The Independent on Sunday reports that former MEP Richard Balfe has been appointed as David Cameron's personal envoy to the trade union movement.  The IoS reports that Mr Balfe has a remit to talk to union leaders and to develop links with the co-operative movement.

Mr Balfe told the IoS:

"Around 30 per cent of trade union members vote Conservative, and under David Cameron's leadership the Conservative Party has shown that it has the ideas and vision to harness the co-operative movement in a way that can really benefit society. I want to show that we in the Conservative Party want to listen to and learn from these two valuable partners in society."

Mr Balfe has been a union member since 1983.  He was a Labour MEP from 1979 until 2001 when he defected to the Conservatives.

There was once a "Conservative Trade Unionists" group within the party - Margaret Thatcher addressed it in 1975.  Ahead of the 1997 General Election the Tory Chairman Sir Brian Mawhinney placed an advert in the New Statesman encouraging union members to support John Major.

8.20am: CTU has now been replaced by Conservatives at Work.

A very political tax policy

The other day we described the Tory policy on tax as economic disarmament - conceding at the same time that the policy might work politically.  The Conservatives believe that neutralising Labour's fifteen year long advantage on economic competence (plus their traditional advantage on the NHS where we have also 'disarmed') might be enough to persuade voters to be tempted to vote Conservative - because we have other attractive policies on crime, welfare and schools, for example.  George Osborne has decided that the lesson from last year's inheritance tax cut isn't that tax cutting is necessarily popular again but that a relatively inexpensive but well-targeted tax cut can have all the political advantages of a much larger tax cut without the danger of being accused of wanting to slash public services etc etc.  All this does, we concede, amount to a credible political strategy.  It will only work, however, if we are hare-like in other policy areas.  Over at The Spectator, James Forsyth agrees.  Winning the next election remains a big ask.  Voters unhappy with Labour need potent reasons why they should choose us rather than stay or home or vote for 'that nice Mr Clegg'.  We still believe that a low tax policy can work electorally but respect the politics of George Osborne's position.

But if the Tory policy on tax is politically understandable it remains wrong for the economy.  On Monday Danny Finkelstein had fun pointing out that Margaret Thatcher wasn't the big tax cutter that Ben Brogan and Stephen Pollard had suggested.  She was a tax reformer, he noted.  Putting aside the obvious question as to whether George Osborne is anything like as seriously committed to tax reform as the Iron Lady we are left wondering whether comparisons with Margaret Thatcher's time are besides the point.  The real issue is comparing Britain's tax burden with those our competitors today.  In 2001 the combined corporate and income tax rate across major economies was 32.5%.  It was 4.1% lower at 28.4% in 2006.  Britain's rate stayed flat over that period at 30.0%.  In a difficult global economic environment stressed businesses are likely to be  more and more sensitive to advantages that they can gain by moving to lower tax jurisdictions - like Yahoo!.

Matthew Sinclair, Policy Analyst at the TaxPayers' Alliance, told ConservativeHome:

"Britain has done extremely well out of cuts in corporation tax in the past and could see huge returns from moving towards Irish rates today.  Other countries have learned that lesson just as we appear to have forgotten it."

John Redwood's indispensable blog

If you want to know what is going on in the world economy at the moment we recommend one source of analysis above all others: John Redwood's blog.

On a daily basis Mr Redwood is dispensing wisdom of the highest quality.  Here's a selection of his posts from the last few days:

Saturday 15th March: "Listening to the deafening silence of the Chancellor this week, I was left asking myself “Doesn’t he know there is a credit crunch?”. Yes, he said he understood there were storms in the world economy, but then he raised a children’s umbrella and plodded on. He should show some urgency in tackling the overspending and overborrowing in the UK public sector. He should produce a statement on how the Bank of England’s powers in money markets will be urgently restored, learning the hard lessons of the combined failure to avert the Northern Rock crisis last summer. Behind the scenes, instead of playing silly politics with drink and green issues, he should be devoting his sole attention to international collaboration, to make sure the world authorities get ahead and remain ahead of the pack of bears seeking to make money out of bringing down other financial institutions and financial products."

Monday 17th March: "A quick haggle, a visit to the lawyers, and a bank is bought and rescued over a week-end in New York. That’s the way to do it. It makes the UK’s attempted private sector rescue of Northern Rock look ham fisted, long winded and ultimately unsuccessful in comparison. The US authorities have once again acted decisively, with vigour and purpose, to prevent the banking collapse getting out of control.  This week we can expect further interest rate cuts in the US following on the 25pt reduction in the discount rate announced overnight."

George Osborne sets out five hopes for Darling's first Budget

In an article for The Sunday Times, George Osborne sets out his five hopes for Alistair Darling's Budget, due to be delivered in three days' time:

1. A restoration of stability to the public finances.  This will necessitate independent evaluation of tougher fiscal rules and spending control over the course of the whole economic cycle.
2. Lower taxation of businesses.  Britain has slumped from the 4th best corporate tax regime to a lowly number 19 in Europe.  Corporation tax should be reduced to 25p; paid for by scrapping complex capital allowances.
3. A reversal of course on CGT and non-dom taxation.  Instead, Darling should adopt the less intrusive Tory plans for the taxation of non-doms and eliminate stamp duty for nine out of ten first time homebuyers.
4. No more stealth taxes.  We need an end to the Budgetary small print that is corroding public trust in politics.
5. Fund welfare-to-work programmes.  This will deliver long-term savings to the taxpayer and reduce child poverty.

Mr Osborne does not mention his proposal - from Friday - of a shift in duties on alcohol or ideas on green taxation.  Other Sunday newspapers are reporting that Mr Darling intends to raise the overall taxation of alcohol and on gaz-guzzling new cars.

11.45am: Just caught up with George Osborne's Andrew Marr interview from this morning.  Mr Osborne said that he didn't have a principled objection to higher taxation of dirtier cars and alcohol but these should be 'replacement taxes' that would fund other tax cuts of equal size.  Stephanie Flanders, the BBC's new economics editor, offered a depressingly biased comment at the end of the programme - offering sympathy to George Osborne for his difficult task of controlling spending as tightly as Labour.  Margaret Thatcher struggled to match such stringency she told viewers.  No Stephanie.  The TaxPayers' Alliance have already shown that the Iron Lady was very good at controlling spending.

The Tories are still to choose a big theme

This morning's Independent wonders if there might be a June 2009 "double election" - with voters asked to choose their MEPs and MPs:

"The idea was discussed in the margins of Labour's spring conference in Birmingham last weekend and has won the backing of some party officials. Although allies of Mr Brown said it was "very premature" to talk about the date, party sources said he did not want to delay polling until the last possible moment in the spring of 2010."

This is the second recent story of its kind.  Monday's FT got there first.  The key factor in Mr Brown's mind appears to be the economy.  If the economy is picking up next year he will be able to go to the country and invite voters to stick with him as the best person to steward Britain through global economic turbulence.  Brown believes that the economy will remain the decisive electoral issue and that the Tories made a strategic mistake in their first two years by emphasising social rather than economic issues.  Oliver Letwin famously wrote of a movement away from an econocentric worldview to a sociocentric worldview. 

Up until now the Tory approach has been to adopt a very similar economic policy to Labour (matching Brown, for example, on spending - an approach endorsed by Daniel Finkelstein in today's Times).  This 'reassurance, reassurance, reassurance' tactic - neutering Labour's fifteen year advantage on economic competence - will only work if the Tories give voters other potent reasons to choose them.

The last week alone has seen frenetic activity from the Tory leader:

• At last week's PMQs he launched his anti-politics drive - followed up by a big speech on Saturday that listed what he would do to restore trust in politics.  27 of the newest Tory MPs joined in with a campaign to allow failed MPs to be sacked by constituents mid-term.
• He has announced an aspiration for a third of ministers to be women.
• He has promised to equalise the size of Westminster constituencies - a major reform necessary to eliminate the system's bias against the Conservative Party.
• A major prison-building programme that will create the space for 'a rehabilitation revolution' - with prisoner governors incentivised to reduce reoffending rates.
• A Military Covenant Commission to investigate ways of improving care of servicemen, their families and veterans.
• A strong attack on 'state multiculturalism' and criticism of Labour's handling of Muslim extremism.

The announcements and initiatives are coming so fast that it is difficult to keep up with them and there is a danger that they are not producing any defining picture of what a Conservative government would look like.  Last week's £0.5m Tory advertising campaign confirmed that the Tories are still keeping their options open in terms of 'a big idea'.  The campaign included ten messages - all carefully targeted - but no overarching theme.  ConservativeHome continues to believe that crime should be the main Tory theme.  The Tory leadership, for the time-being, doesn't seem ready to choose and, to be fair, it still has time on its side.

51% agree that Brown is a ditherer

That's the good news from a Populus survey for BBC1's Daily Politics.  Asked if they agreed that the Prime Minister was 'indecisive' and a ditherer, 51% agreed and 38% disagreed.  That's a big victory for David Cameron and his repeated attempts at PMQs to paint Mr Brown as unable to take decisions.  For Mr Brown it's a big reversal from last summer when he was seen as strong and commanding.

The other Populus findings concern Northern Rock and they are less encouraging:

• Gordon Brown and Alistair Darling handled the Northern Rock crisis as well as they could under the circumstances... Agree 39%, Disagree 50%
• David Cameron and George Osborne would have handled the Northern Rock crisis better than the Government... Agree 28%, Disagree 52%
• I trust David Cameron and George Osborne more than I trust Gordon Brown and Alistair Darling to take the best decisions on tax and the economy... Agree 39%, Disagree 46%.

YouGov confirms disappointing week for George Osborne

A new YouGov survey for The Economist confirms that the gains made by the Tories at the end of last year are being eroded a little.  The party is 6% ahead according to YouGov and 5% ahead in ConservativeHome's poll of polls.  The average lead was 7.2% at the end of December.

Further to Populus for The Times, YouGov finds that Northern Rock has not been disastrous for Labour.  Only 5% blame the Government most of all for the bank's difficulties although a small majority (51%) think that the Government's handling has been poor or awful.  21% think the Tories would have handled Northern Rock better, 16% say worse.  47% think things would have been pretty much the same whoever had been in office.  59% think that the Tories were playing politics in opposing nationalisation.  29% of YouGov's sample of more than 2,000 voters thought the Tory opposition was genuine.

The Tory leadership will be disappointed with these numbers.  On Sunday George Osborne declared that Labour's reputation for economic competence had died.  The next day, appearing in a wood-panelled venue, Cameron and Osborne invited comparisons to Britain's exit from the ERM and called for Darling to be fired and the whole government reconstructed.  Many of the journalists thought that the two most powerful figures in the Conservative Party had overdone it.  One told ConservativeHome that they were being too political and insufficiently serious.  This impression wasn't helped by George Osborne joking about Channel 4's news budget during the press conference.  Try serious, serious, serious in future George when people's mortgages and shares are at risk.  Ben Brogan and Peter Riddell have both reached similar conclusions today about the Tory handling of the last five days.

There are real concerns about George Osborne's tendency to be too political.  We referred to them on 1st January.  But, in his defence, the Shadow Chancellor got the big judgment right: to oppose nationalisation.  The nationalisation of Northern Rock may not have had a dramatic impact on Labour's standing but there is likely to be a steady drip, drip, drip of bad new stories over coming months.  As an opponent of nationalisation, unlike Vince Cable (who Fraser Nelson praises a little too much here), the Conservatives are better positioned to exploit those stories.

49% of public back nationalisation of Northern Rock

...That's what a Populus poll for The Times suggests.  It has just been posted on TimesOnline.

Its key findings are:

• Voters back nationalisation by 49% to 40%:
• By 50% to 38% they think Darling should remain Chancellor;
• More voters blame the Bank of England, the City authorities and Northern Rock in particular for the bank's problems (rather than the Government);
• By 38% to 34% voters prefer Darling-Brown over Osborne-Cameron to shepherd the economy (other pollsters have recently suggested that the Tory team has a slight advantage).

The poll should carry something of a health warning, however: the survey size of 519 was only half of a normal UK opinion poll.  Despite that we can probably conclude fairly safely that Northern Rock has not done Labour serious damage.  Not yet anyway.

11pm: "These findings will disappoint those Tories who hoped that Northern Rock would shift public opinion further against Labour. This is nothing to do with the Tories’ own statements and alternatives. In these affairs, what matters is the Government’s policies and conduct. Voters do not pay much attention to what Oppositions say." - Peter Riddell, Times

Government suffers Lords defeat on Northern Rock

Lord Strathclyde, Opposition leader in the Lords, has issued this statement following Labour's defeat by 154-142 and 164-133 on provisions requiring publication of an independent audit of Northern Rock and for freedom of information to apply to nationalisation:

“The House of Lords is doing its proper job in revising legislation – and, under the most difficult circumstances, doing it well.
 
"The Government should now surely listen. It is inconceivable that any government worth the name would not accept these changes to protect the taxpayers’ interest.
 
"We need the transparency in government which the Prime Minister trumpets – and nowhere more than over this, the biggest nationalisation in British history. Fine words about liberty and transparency mean nothing unless they are matched with action.
 
"Parliament was faced, after the fiasco of Gordon Brown’s handling of Northern Rock, with a so-called “emergency” Bill giving it huge powers over banks and building societies. Five months dithering – three days for Parliament to rubber stamp sweeping Treasury powers.
 
"Now the Lords has inserted checks on the powers in the Bill, requiring independent audit of what the taxpayer is being expected to buy and giving freedom of information to the public about what is being done in their name. It’s time to let the people know the facts."

Darling appoints his Brown's former Chief of Staff to Board of Northern Rock

Shadow Chief Secretary to the Treasury Philip Hammond has just reacted to the news that Tom Scholar has been appointed to the Board of Northern Rock:

“This completely blows apart Alistair Darling’s promise to run Northern Rock at arm’s length. Now he’s got his former chief of staff on the Board, how can he claim that Northern Rock will be run free from political interference?  The truth is that the Prime Minister doesn’t do ‘arms length’. He clearly has every intention of meddling in Northern Rock’s affairs for as long as it remains in public hands.”

Earlier today we learnt that a clause in the draft nationalisation bill means that Northern Rock won't be subject to the Freedom of Information Act while under public ownership.  George Osborne found that decision unacceptable:

“The public is now paying for this bank. We are entitled to know what it is doing with our money. It is completely unacceptable to exempt it from the Freedom of Information Act.  The Chancellor of the Exchequer has been incompetent and now he’s trying to cover his tracks.”

It will be this steady drip, drip, drip of negative stories that will turn Northern Rock into an albatross around the Government's neck.

6.35pm update: CCHQ have issued a correction - Scholar was Gordon Brown's CoS not Darling's. The point stands.

Live blog: Cameron-Osborne press conference

David Cameron and George Osborne are about to speak at an emergency press conference on Northern Rock...

(Highlights - not verbatim):

Cameron: Northern Rock is a disaster for the Government, the country and the taxpayer.

The taxpayer now has responsibility for a mortgage book during a period of significant uncertainty for the housing market.

This ends a disastrous period for the Chancellor - he copied Tory inheritance tax plans, lost the data of 25 million people and has had to u-turn on the taxation of non-doms and CGT. But those errors pale into insignificance compared to this.

This is the biggest nationalisation ever.

Osborne: There are serious issues of unfair competition here with Northern Rock able to offer higher savings rates than other retail banks - all guaranteed by the taxpayer.

Cameron: Even before the run there were errors of financial regulation.  Decisions were also put off on Northern Rock because of dithering over the General Election.

Osborne: Government must publish advice that Goldman Sachs gave to Government.

Cameron: One of the lessons of the ERM episode was that there is no use in sticking with a Chancellor who has lost the nation's confidence.  There is no point waiting any longer.  The Prime Minister must fire his Chancellor and reconstruct his Government.

Osborne: We will vote against nationalisation but will not use every procedural parliamentary device to obstruct it.

Osborne: Labour are not proposing a simple bill to nationalise Northern Rock but to take on powers that will allow ministers to nationalise any financial institution into public ownership at any time in the next year by ministerial dictat.

Osborne: The difference between the Tory and Labour approach is £55bn of extra liabilities for the taxpayer.

Download a PDF setting out the full Conservative position on Northern Rock.

Fleet Street's swing voters divide on Northern Rock

As Gordon Brown considers the political fallout from his decision to nationalise Northern Rock he will be very concerned at the Daily Mail's negative reaction.  The Sun, in contrast, gives the Prime Minister the clear benefit of the doubt...

The Daily Mail: "The questions multiply. How long will this "temporary" nationalisation last?  How much will it end up costing the public purse? How will the bank be returned to the private sector? Answers come there none.  After six months of a crisis which the Government failed to see coming, we are no nearer a resolution.  Our economic problems are worsening. The credit crunch grows more painful. Now this.  Nationalisation may have become inevitable. But the public will take a lot of persuading that Northern Rock is anything but a shambles."

The Sun Says: "The Government tried desperately to find a private buyer for Northern Rock.  And they were right to do so.  No government should make a habit of propping up failed institutions with taxpayers’ cash.  But no private firm wanted to pay the right price. So there was no option but to take the bank into temporary public ownership.  It was the lesser of two evils, and the only sensible way forward.  Gordon Brown has been brave enough to get us out of the mess his Chancellor got us into.  The Prime Minister will have The Sun's support provided the nationalisation lasts no longer than is strictly necessary.  A good start has been made with the appointment of Ron Sandler to run Northern Rock.  There are some tough decisions ahead — and he is the only figure with the credibility to take them."

For today's best commentary read Anatole Kaletsky on page one of The Times:

"Why should a Government that has consistently refused to offer public funding for potentially viable commercial projects of real national importance - aerospace, public transport, nuclear power - now be spending tens of billions on supporting a bust mortgage bank? Is it because Britain is short of mortgage lenders, lacks employment opportunities for bankers or suffers a deficiency of financial innovation?"

In his reaction to the nationalisation of Northern Rock yesterday, George Osborne described it as "the day when Labour's reputation for economic competence died".   It's probably more accurate to say that it was the day when the decline in Labour's economic reputation accelerated.  The whole episode has exposed errors in Labour's financial regulatory regime and decision-making processes at the Treasury.  Now under Government ownership the problems of Northern Rock will provide a steady newsfeed that will remind voters of Labour's economic failures.

Final word to Robert Peston, BBC Business Editor:

"In nationalising, he has increased the liabilities of taxpayers from £55bn – in direct loans through the Bank of England and guarantees to other Rock lenders – to £110bn, or the entirety of the Rock’s balance sheet.  He has doubled the financial risk for all of us to just over £3,500 per tax payer."

Tories will vote against Labour's plans to nationalise Northern Rock

Robert Peston: "The decision will be a blow to the bank's shareholders - who will receive next-to-nothing in the short term for their shares.  Emergency legislation to nationalise the bank will be introduced into the Commons tomorrow afternoon."

Alistair Darling: "It is better for the Government to hold on to Northern Rock for a temporary period and as and when market conditions improve the value of Northern Rock will grow and therefore the taxpayer will gain."

George Osborne: "After months of dither and delay we have ended up with this catastrophic decision... We now have the situation where the government will be making decisions on whether or not to foreclose on people's loans in a falling housing market."

Mr Osborne confirmed that conservatives will oppose nationalisation.

Breaking news at the BBC.

5.55pm statement from George Osborne: "This is the day when Labour's reputation for economic competence died.  Gordon Brown has dithered his way to the disaster of nationalisation.  Now the taxpayer will bear the full risk of lending £100 billion of mortgages in an uncertain housing market.   We will not back nationalisation.  We will not help Gordon Brown take this country back to the 1970s.”

9.45pm: John Redwood offers ten reasons why Darling is wrong to nationalise.

YouGov: Tories 9% ahead

The Tory lead is up 1% to 9% according to a YouGov poll for tomorrow's Sunday Times.

The Conservatives have a 6% lead on who voters most trust to run the economy.  Economic pessimism is becoming deep.  50% of voters expect their incomes to deteriorate over the next year; only 12% expect them to improve.  Other highlights:

• By 44% to 27% respondents want Alistair Darling to quit as Chancellor;
• By 34% to 23% there is an expectation of lower house prices;
• Just 21% believe that non-doms should pay less tax because of the jobs they create;
• 73% say that MPs should be subject to the same surveillance/ bugging regime as the rest of us.

We don't want "massive spending cuts", Mr Osborne, just a little moderation

George Osborne was on Andrew Marr's programme earlier and quite rightly noted that Britain is one of the least-well prepared nations for the looming worldwide slowdown.  "Other Finance Ministers", to quote Mr Osborne, were discussing how to use their surpluses to help their economies negotiate the forthcoming turbulence.  That wasn't an option for Britain that ends its 'years of plenty' with horrendous levels of public and private debt.

Mr Osborne went on to defend the fact that the Tories are matching Labour on spending - at least until 2010/11:

"The options for dealing with the budget deficit in the short-term would either be massive public spending cuts or big tax increases and I don't think either of those are sensible given the economic downturn that the world is facing."

That's not a fair characterisation of the options.  Those of us wanting the Tories to constrain spending - like ConservativeHome, the IoD, the TaxPayers' Alliance and The Telegraph - don't seek "massive public spending cuts".  We do, however, believe that spending growth should be more modest.  Labour is planning 2% growth.  A 1.5% growth rate would at least create some possibilities for reducing borrowing and for economy-stimulating tax relief.

The growth of the state under Brown really has been "massive".  A table reproduced by Fraser Nelson over at Coffee House outlines its scale.  Britain's state has grown faster than every other OECD nation from 2000 until 2008, with the solitary exception of Korea.  Government spending as a percentage of GDP equalled 37.1% in 2000 and will be an eye-watering 44.8% this year.  If this spending had been used to lubricate necessary reforms to welfare or to our public services it would be half-acceptable but it hasn't.  We don't want "massive cuts", George - just a return to some moderation.  Is that so much to ask? 

Public increasingly unhappy with Labour's economic performance

The Tory lead is down very slightly in today's YouGov survey for The Daily Telegraph but the underlying numbers are much more worrying for the Government:

• 52% believe that Labour's handling of the impending economic downturn has been "poor" or "awful".
• 61% give the same verdict on Labour's handling of Northern Rock.

The Tories are also building tortoise-like leads over Labour on two of the three elements of the iron triangle of political success: Cameron leads Brown by 31% to 27% on the best leader for Britain and the Conservatives lead Labour by 34% to 30% on economic management.

Earlier this week this website highlighted the tortoise-versus-hares-debate amongst Tory strategists.  The erosion of Labour's economic standing may encourage the tortoises' wait-for-Labour-to-collapse tactics.  The Telegraph, however, makes it clear this morning that it wants more hare-like boldness from the Conservatives:

"In those areas where he has enunciated bold policies - inheritance tax, immigration, welfare reform - the public has responded warmly. But when it comes to education, for example, the Tories' sensible principle of expanding consumer choice has yet to produce proposals striking enough to (say) spark off a conversation in the pub."

In her column for the New Statesman Tara Hamilton-Miller seems to side with the tortoises when it comes to boldness on economic policy:

"The prediction is that interest rates will fall, so the Tories will be cautious. If interest rates are cut to below 4 per cent months before an election, the Tories would have to be prepared for the favourable reaction that would bring."

ON CONSERVATIVEHOME ON MONDAY: A PORTFOLIO-BY-PORTFOLIO GUIDE TO WHERE THE BOLDEST AND MOST TORTOISE-LIKE POLICY MAKING IS TAKING PLACE.

Brown failed to prepare us for the lean years

As fears grow about an economic downturn George Osborne releases this statement:

"Gordon Brown could have used the boom years to prepare Britain for the lean years. But thanks to his economic incompetence, he failed to take the tough long term choices and so we are not well prepared to deal with the difficult economic times that may lie ahead.

“He has given us no room for manoevre with the highest budget deficit in Europe. His part-nationalisation of Northern Rock is a 1970s solution that damages the reputation of Britain as a home for financial services. And his tax and regulatory rises have made our economy less competitive."

If Osborne succeeds in killing Brown's economic reputation, it's all over for Labour

On New Year's Day we identified George Osborne as the Conservative to watch this year.  He has the task of eroding Gordon Brown's reputation for economic competence - the one thing keeping Labour afloat in a sea of broken promises.

In a speech to the London School of Economics today, Mr Osborne will begin his campaign to kill Brown's reputation once-and-for-all.  He will accuse the First Lord of the Treasury of squandering ten good economic years and of failing to prepare Britain for the tougher times now arriving:

"Our competitors used the fat years to prepare for the lean years. Britain did not.  We are the least prepared country in the developed world to cope with the current financial turbulence.  [Gordon Brown] didn't fix the roof when the sun was shining. His 11 budgets have left us with the worst public finances in Europe."

In advance coverage of the speech the Daily Mail reports that Mr Osborne wants Mervyn King, Governor of the Bank of England, to have his appointment reconfirmed immediately.  The Mail suggests that Gordon Brown only wants Mr King to have another three years as Governor rather than the customary full five year term.  Mr Osborne thinks reappointment now will help settle jittery financial markets:

"There is plenty of uncertainty out there. There is plenty of uncertainty about inflation, there is plenty of uncertainty about the turbulence on the financial markets. One area of uncertainty you could end today would be to simply say Mervyn King is going to be reappointed."

According to The Times, "The Shadow Chancellor will issue an explicit pledge that a future Conservative administration would not run a deficit on the government’s current account during sustained periods of economic growth. “We must reform the failed fiscal rules so that never again do we borrow in a boom.”"

Related links: George Osborne was interviewed at 7.17am on this morning's Today programme.and yesterday, on Platform, 'Voice from the City' asked if the end is nigh for the lender of last resort.

11.30am: Download a PDF of George Osborne's speech.

This is the key quote: "Britain is not prepared if rainy days lie ahead.  And the blame lies squarely and fairly with Gordon Brown.  His eleven budgets have left us with the worst public finances in Europe. The system of financial oversight he personally insisted on left Britain as the only country facing a run on the bank. His taxes and regulations have left the British economy more inflexible and less competitive. Gordon Brown likes to quote the Bible.  But he obviously doesn’t know about the story in Genesis of the Pharaoh who was warned to use the seven fat years to prepare for the seven lean years – and did.  Well our Prime Minister was also warned in the fat years to prepare for the lean years – but he set nothing aside.  Now most say the lean years are here, the cupboard is bare and Britain is vulnerable. We’ve got used over the last decade to Gordon Brown boasting about his reputation for economic competence.  But his actions betray him.  It is his economic incompetence and fiscal incontinence that have left Britain more exposed than any other developed economy to the current crisis."

The Chancellor-in-waiting

George Osborne is David Cameron's most important colleague: William Hague may deputise at PMQs but the Shadow Chancellor is second only to David Cameron as the most important figure in the Conservative Party.  And It's not just because the Treasury portfolio is the most important of the three major offices in any leader's gift.  George Osborne was made General Election coordinator in last year's reshuffle.  He took the lead in handling the Tory response to 'Bottler Saturday'.  He has forced the gearing up of the Boris campaign.  With offices next door to the leader's, he is David Cameron's closest adviser on strategy and famously, with Andy Coulson (the communications supremo he recruited), led the charge against über-modernisation.  Before Christmas in their notable joint interview, in China, David Cameron made it clear that George Osborne will remain as Shadow Chancellor.  Already there is premature talk of George Osborne being Mr Cameron's natural successor.

2007 ended very well for George Osborne: Steve Richards of The Independent, not just one of the best reads in 'Fleet Street' but also one of the commentariat's nicest people, decided that Osborne was his Politician of the Year.  At the other end of the political spectrum he won the same accolade from The Spectator.  The Spectator's Fraser Nelson (now a father - Congratulations Fraser) judged that his inheritance tax announcement was "the single most effective policy ever announced by the Conservatives in Opposition"!  The Tory grassroots, who had become increasingly sceptical of George Osborne's qualities, decided he was as effective as the other top members of the shadow cabinet, David Davis and William Hague.

The Conservatives lead on the economy again: If 'it's still the economy, stupid' the Conservatives can take enormous heart from the finding that voters now trust the Tories most again when it comes to economic matters.  A 22% deficit at the last election has, according to YouGov for The Telegraph, become a slender 3% advantage for the Conservatives.  This, however, owes more to declining confidence in Labour's abilities than a transformation in belief in the Tories.  There has been a larger increase in the number of people who are unable to choose between the two main parties as to who is most likely to run the economy well.  Those people are George Osborne's opportunity and challenge in the next twelve months.

So, what are the big decisions awaiting George Osborne?

Will the commitment to match Labour's massive spending be rolled over? If the inheritance tax announcement was George Osborne's best announcement of 2007 most Tory members think that his September decision to match Labour's spending for the period up until 2010/11 was his worst.  With mounting evidence that Labour is spending very wastefully, and concerns growing at the socialisation of large parts of Britain, there must be room for more modest growth in public spending.  When George Osborne comes to review his spending decisions it must be hoped that if he chooses to match Labour's spending again that it will be for a much shorter period.  The danger is that the commitment to 2010/11 will become 2011/12 and then 2012/13.

Will George Osborne be able to deliver tax cuts?  Lower taxation became fashionable again in 2007 but George Osborne hasn't given himself much scope to respond to the mood that the TaxPayers' Alliance is championing so successfully.  He has largely rejected supply-side arguments for lower taxation, saying that all tax cuts must be fully funded.  His plans to fund lower family taxation through higher green taxation may, The Independent has predicted, be undermined by Alistair Darling's plans to raise green taxes in his 2008 Budget.  If the economy slows there will be little room for tax cuts from those famous proceeds of growth if the Tories continue to match Labour's spending splurge.  George Osborne got away with his dubious plan to fund the IHT cut with a raid on non-doms - largely because most economists see a £1bn  or £2bn tax cut as a rounding error - but other similar devices must be more able to withstand scrutiny.

Will George Osborne remain so political?  If there is a big political story in the news then George Osborne is at least as likely to appear on our television screens as Caroline Spelman.  There has to be doubts as to whether that's a sensible strategy.  It is clear that Mr Osborne will not be appointed as the powerful Chairman that ConservativeHome had hoped he would become.  He is going to remain Shadow Chancellor.  Fair enough.  But it is now important that many more voters want to trust him with the nation's finances.  He needs to look in charge of his brief.  Solid.  Reassuring.  With policies to reverse Britain's declining competitiveness.  He is pursuing promising ideas on tax simplification, IT's transformative effect on government and financial regulation.  We need to hear much more about those and less of what George Osborne thinks about Labour's day-to-day political woes.

2008 is the year in which George Osborne must become the nation's Chancellor-in-waiting.