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The Government's rescue of the banks has heralded the return of a more positive era of administration, says Jim Brooks. Ex-PM, Margaret Thatcher, and former US president, Ronald Reagan, ended a long period of ‘positive government', which had endured since at least the Second World War. Their shared philosophy was that too much government was a bad thing. It distorted free market activity and encouraged a ‘nanny state'. This change was dramatic in the UK. It was only 15 years since [ex-Labour prime minister] Harold Wilson had come to power with a programme of nationalisation. It is remarkable how alien a concept nationalisation has become since then. No-one blinked as Tony Blair's Government sold off G3 mobile phone licences and continued along a similar path in terms of the apparatus and size of the machinery of state. Collectively, we accepted the argument that the private sector knew best. But the banking system has just collapsed on a world scale, requiring the concerted intervention of governments across the globe. Just as vested interests helped produce the crisis, so banks' individual vested interests will delay the recovery, such is the extent of the collapse in trust in established mechanisms. There is a possible conclusion that, in this case, the private sector has failed, and worse, that capitalism has no real answer to this crisis. The action taken by the G7 nations is positive, practical and sensible. It is sufficiently radical to deserve to succeed. But it is a rescue plan – nothing more, nothing less. It has no parallel with the 1930s' reconstruction plans set by US president Franklin Roosevelt. There is no redolence here of Keynesian economics, of investment in public works to counter a depression. In the UK, the rescue plan is the nationalisation of key financial institutions in the economy to address the problems of banks being so concerned about credit that they are frightened to lend even to each other. By taking a stake in high street banks, the UK Government is signalling a determination to address the outfall from the failure of financial markets, on behalf of its citizenry. The country is investing in banks which might otherwise fail in the current climate of toxic loans and asset-backed instruments which are dramatically reduced in value. Collectively, we are trying to force cash and credit to start to circulate again. This is unprecedented in recent history, and is a renaissance of what used to be called positive government. So, if our Government has accepted a more positive approach to the credit crunch, then local government and other areas of the public sector need to be asking themselves whether there is an equivalent need for action at local level. Should it now look more closely at the balance between the public and private sector? If we accept that the private sector doesn't hold all the answers, then there is a debate to be had. And there are legitimate questions to be asked about the speed of response to issues of growing importance to society. For example: * can we respond to the challenge of climate change more rapidly? * can we do more to care for the environment? * how can we become greener, cleaner and more sustainable? * can we do more to encourage a safer, cohesive and caring local community? * how can we encourage healthier lifestyles? The private sector will always have much to offer, in terms of support to the public sector in expertise and direct delivery. But we may need to reassess the leadership role which the public sector has in encouraging sustained collective action. It is the big issues which help shape places, and we may need to think of ‘place' on a bigger scale. The credit crunch may offer an opportunity for the public sector to show leadership, and to be more assertive in not accepting too easily the commercial reality which the private sector sometimes tries to impose. After all, our horizons have changed in a short time. I doubt a plan to nationalise major UK banks would have met with any degree of support six months ago! Jim Brooks is executive director of Sector Treasury Services

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WHITEHALL

Riding out the gathering storm with positive administration

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