No doubt I am not the only Conservative to feel deep misgivings at this morning’s news of a £50billion Bank of England intervention to kick-start the high street mortgage market. Not content with nationalising Northern Rock, the government that had “ended boom and bust” now under the auspice of the Central Bank seeks to build up a mortgage and credit card debt portfolio on an unprecedented scale.
Naturally this will be supported to the rafters by many amongst the banking fraternity; but it is worth remembering that it was the reckless lending and trading in complicated derivative products by the self-same banks that led to the credit crunch in the first place.
The effect of today’s initiative is further to conjoin the fortunes of this and any future UK government with the financial services sector.
But what happens if this massive cash injection fails to achieve its goal? Will we then be expected collectively to double our money and take £100billion or more of sub-prime debt off high-street lenders’ hands?
I fear that government intervention at a time like this – just ten days before crucial local elections, remember – looks more like a panic measure than a means of restoring confidence to the battered financial markets. As history tells us, even Central Banks cannot always buck the market.
