A leading economist has attacked the Government's handling of the Northern Rock crisis.
Baroness Hogg, chairman of venture capital group 3i, told the West Midlands CBI in Birmingham that it had been a mistake to allow the seizure of the inter-bank lending market which then led to the Rock's near collapse. And she implied that the Treasury and the Bank of England had not been fully on the ball in handling the affair.
They had "lost an early opportunity" to do a deal with Lloyds TSB to buy Northern Rock which then made it difficult to find a private sector solution.
With Northern Rock now nationalised, the Government was suggesting it was "business as usual". But Baroness Hogg, an economist and head of the Prime Minister's Policy Unit from 1990 to 1995 under the last Conservative administration, said: "I find it difficult to believe that."
The Government should be more concerned with the welfare of the rest of the financial services sector.
If a nationalised Northern Rock was to be successful it would likely be "at the expense of other mortgage lenders and depositors". Indeed she doubted it would pass European state aid tests.
Speaking at the Botanical Gardens in Edgbaston, Baroness Hogg said the Government should be running down the Northern Rock business in an orderly fashion before at the right moment selling off its mortgage book.
Turning to the wider economy, she said 2008 would not be an easy year for business or policymakers. It would require an export and investment push to overcome the difficulties. And she urged the Government not to impose new burdens on business.
Baroness Hogg defended 3i's decision to shut its Birmingham office some years ago. The decision to axe offices both in the UK and elsewhere had been taken in order to focus on business teams so as to better understand particular sectors.
But she denied it had in effect resulted in 3i's pull-out from the West Midlands.
"Our appetite to do business in the West Midlands is as strong as ever," she insisted.
