Let's get one thing out of the way first of all. Rightly or wrongly, the Northern Rock saga has damaged the Government's reputation, and no-one is seriously claiming otherwise. But I do wonder whether the Tories' decision to take an opportunistic approach, and not support the move to nationalise the bank, combined with their "back to the 1970s" rhetoric is a rather large mistake.
For one, there have been plenty of sensible, non-Labour voices calling for nationalisation for some time. It's not a 'left-wing' or 'Old Labour' response to the problem in any sense. As such the argument that it represents a return to the 1970s shows that people using it either don't know what they are talking about or are being deliberately devious. As the FT has pointed out there were broadly similar banks rescues under the Tories in the 80s, and it is a tactic used elsewhere in the world. Add to that the Government's obvious desite to avoid public ownership if possible and it's obvious to anyone that this is nothing like British Leyland. I think the Tory line on this just comes across as dishonest.
And who exactly are the Tories trying to woo by saying they will oppose nationalisation and would rather let the bank go into administration? Superficially the anti-nationalisation bit might look like a pitch to the shareholders but a) a quick read of the business pages shows everyone thinks current NR shareholders were taking a risk and now that risk has turned out bad that is their problem and b) more importantly if NR goes into admininstration the shareholders might not get anything. Maybe it's supposed to demonstrate the Tories' free market credentials but, as Labour's stumbling but correct response demonstrates, this is a real problem that needs solving, it's not a test of ideological fidelity.
If anyone has come out of this well it's probably Vincent Cable. Regardless of what you might think of him I suspect that punters will think he is someone who has been saying broadly the same thing all the way through, and has been willing to give the Government a bit of credit when they have done the right thing. So it wasn't surpising to see him stick the boot into the Tories for their politicking yesterday. In contrast Osborne came across as a sort of anti-Pangloss - everything is for the worst in the worst of all possible worlds. It might rally the troops but it looks a bit, well, juvenile given the importance of the issue. I think maybe, just maybe, the Tories have managed to do themselves some damage.