This wet and windy month of August 2017 is, if nothing else, awash in anniversaries – fifty years since the 1967 Sexual Offences Act; forty since Elvis Presley died; twenty since Diana died…and so on. Perhaps the focus on these anniversaries helps distract us from the imminent apocalypse courtesy of Mr Trump and Mr Jong-Un, though one anniversary was highlighted today that is hardly cause for celebration, even if it has not only dictated the global political landscape for the last ten years, but has also impacted upon all our lives in one way or another.
If we cast our minds back a mere decade (easily done when you’re over 21), we find Gordon Brown, the so-called Iron Chancellor as was, finally ascending to the position he always felt his predecessor had promised him during their legendary dinner at an Islington restaurant thirteen years previously. However, it was ironic that a man who supposedly had his fiscal finger on the financial pulse could be so short-sighted when it came to the inevitable bust of the boom he had been happy to take credit for. Perhaps the prospect of finally getting his hands on the key to No.10 was too great a distraction for Gordon Brown in the summer of 2007 and he took his eye off the ball; after all, the US housing market bubble had already burst by the time he succeeded Blair; surely, just as what goes up must come down, a boom must be followed by a bust?
Although he was obviously keen to put his own stamp on the role of Prime Minister, Gordon Brown didn’t initially show that his predecessor’s fondness for dishing out knighthoods and Peerages to prominent financiers was about to be discontinued. The bankers were still the bosom buddies of New Labour; the partnership they had entered into on the eve of the 1997 General Election retained its cosy nature and the likes of Peter Mandelson, poised to return to Government as Brown sought to shore up his fresh-faceless Cabinet with a few experienced old hands, was the embodiment of New Labour’s love affair with the wealthy, forever sighted on the yachts of Russian oligarchs or quaffing champers in the City. Should the Government be accused of giving the bankers too much leeway and allowing them to exercise too much influence over the economy, Labour could simply point to the population and their plentiful status symbols as evidence that affluence was now available for all.
However, the crisis arising from the inevitable collapse of the US subprime mortgage market – with America already borrowing heavily from China (which had saved its pennies as the west was recklessly throwing its own about like bloody confetti) and banks no longer lending to each other – began to seriously affect international finance in the summer of 2007 and the first British casualty was the high-street bank, Northern Rock.
Northern Rock had centred its financial practises on securitisation – borrowing both home and abroad to fund the mortgages it sold before re-selling mortgages in the capital markets internationally; but when investors’ demand for securitised mortgages plummeted, Northern Rock could no longer repay the loans it had acquired around the world when business was booming. Moreover, ever since being caught napping by the dot-com crash, the financial markets had tended to second-guess potential crises, and the ensuing publicity afforded Northern Rock’s shaky foundations only served to bring about the disaster that was being predicted. Northern Rock approached the Bank of England for a liquidity support facility to compensate for the sudden loss of the funds it had previously raised in the markets; this move, reported with sensationalist relish by the British press, triggered the first run on a British bank in over a century.
Further scaremongering reporting from the media as customers queued around the block to empty their accounts before (so they feared) their savings evaporated evoked the panic at George Bailey’s Building and Loan bank in ‘It’s A Wonderful Life’; it seemed as though the collapse of Northern Rock was becoming a self-fulfilling prophesy as the public believed the hype and sought to withdraw every penny they had stored in the bank’s coffers.
This remarkable event should have been anticipated by Gordon Brown; after all, he’d only ceased to be Chancellor for three months before Northern Rock’s dramatic downfall leapt from the financial section of the papers to the front page. But Alistair Darling was now in charge of the nation’s purse-strings and accusations of responsibility for a financial crisis that may have had its genesis on Gordon Brown’s watch were met with an effective ‘It weren’t me, Guv’. The Government observed from the sidelines as two unsuccessful attempts to rescue Northern Rock came to nothing and then belatedly intervened by taking the bank into state ownership. It was ironic that a party that had spent the best part of fifteen years dispensing with the nationalisation programme that had been integral to its constitution since its inception should have to end its days in Government nationalising the one industry that had always prided itself on its independence from the state; but once Northern Rock was pulled back from the precipice by nationalisation, the legacy of living beyond one’s means began to spread.
If Gordon Brown imagined slipping into Tony Blair’s shoes would be achieved without the need for a shoe-horn merely because he’d had his beady eye on those shoes for ten years, then the honeymoon period that had raised his popularity high enough for him to have won the autumn Election he’d baulked at calling was short-lived indeed. The Northern Rock debacle would act as the harbinger of an economic meltdown that would dog Brown throughout what would turn out to be the brief tenure of his premiership. Northern Rock was no one-off drama that could be glossed over as an aberration from the prosperous state of affairs Brown had overseen during his residence at No.11.
The global markets were sliding towards recession in 2007, and Britain, saddled with debts accumulated during the Blair boom years – a boom that had benefitted everyone from the million-pound bonus banker at the top to the designer-clad Chav at the bottom – was poised to pay the price for its reckless dependency on credit. A decade later, with the average British salary the same as the average British consumer debt per person (£28,000), the country is still paying the price.
© The Editor