Northern Risk

The joke is that Northern Rock is now known as Northern Risk or Northern Wreck. But the Government's plan to see the Bank of England's £28bn loan to Northern Rock replaced by bonds backed by Rock assets and guaranteed by the government is no laughing matter. Gordon Brown insists that the taxpayer will be quids in, but it could be Richard Branson or some other private sector bidder that is laughing all the way to the back.

Vince Cable launched into the Goverment's plan with forensic skill, claiming that the prime minister had decided that the losses of Northern Rock should be nationalised, but the profits should be privatised. In his view it's nationalisation without the potential benefits.

So why is the Government breaking its own sustainable investment rule and pushing debt above the 40 per cent of national income rule? It seems very scared of the N-word. Philip Stephens suggests in the Financial Times that Teflon Tony could have got away with it, but Mr Brown still carries Old Labour's political baggage.

Since the bonds will have at least a three year life and possibly five, if there is a mess to clear up it could be the responsibility of Mr Cameron and Mr Osborne. In the short term, however, it hands them another stick with which they can beat the Government.

Although the Commons committee report has placed quite a lot of the blame for last autumn's mess on the Financial Services Authority, it was the Government that created the tripartite structure that led to many of the problems in stopping what was reckless behaviour by the bank turning into a more general crisis.