I'm struggling to take in the enormity of today's intervention in the banking sector by the UK Government.

British politics had always been to the left of those in the U.S. In the UK, the Left argued for (and secured) state ownership of the means of production while the Right strove to safeguard its priorities through legislative intervention. By the end of the 1970s, Britain was a basket-case economy. The socialist experiment had failed, as it is bound to do. Economic reforms on the Friedman model saw the revitalisation of the UK economy at the same time as a new-found confidence in the concepts of freedom saw the triumph of the Anglo-Saxon democratic model while the Soviet bloc collapsed.

In the 1980s, the British Government gave up ownership of the manufacturing and service industries that it had run so badly. The benefits of this policy were unarguable. The Labour Party, the traditional party of the Left in Britain, finally abandoned its commitment to communist ideals in the early 1990s.

By 1997, the UK economic miracle was so firmly established that the people felt ready to elect a new kind of government. It chose New Labour, a party that claimed to recognise the error of its ways and that promised to run our economy responsibly. It undertook to match, but not exceed, spending limits inherited from the outgoing administration. In office, however, it subscribed to the new politics of the Left. Rather than own state industries, the new Government sought to secure the priorities of its class through legislation and massive spending programmes. There was a massive expansion of the unproductive public sector, with over 4,000,000 new jobs achieving precisely no economic benefit. Within ten years, the Government directly employed more of its citizens than it had done when it owned every coal mine, steel works, shipyard, car and aircraft manufacturer, railway line and telephone exchange.

Most of the rest of the country were caught up in a tax and benefits fiddle, where the poorest now had to pay income taxes but even the comfortably off could claim tax credits, provided that they were prepared to disclose intimate and personal details to the Government. No Western government has ever collected as much information on its citizens as the British Government does now. We have the largest DNA database in the world. We have the highest number of CCTV cameras per citizen in the world. Every car journey is logged and tracked through a number plate recognition system. Our people can be held in custody for 28 days without being charged with any offence, more than twice as long as in any other democracy, and the Government means to extend this to 42 days.

For over a decade, the British and European Governments have introduced more and more regulations designed to undo the freedoms that business had enjoyed in the 1980s in an undisguised attempt to engage in social engineering to ensure that the social priorities of the Left are implemented. Most governments pay off their debts and reduce their level of borrowing in times of prosperity, but the New Labour experiment has been to keep borrowing, in good times and bad. In recent weeks, governments across the world have struggled with a crisis in confidence in the banking sector. Despite claims to the contrary by the Rt. Hon. Gordon Brown, M.P., the UK economy is particularly vulnerable, as we have record levels of public debt, a sclerotic business sector, and a banking miracle that was no more than a house of cards built on sand.

In 1997, the Government imposed a "windfall tax" on the privatised utility companies. This retrospectively fined those companies that had made the biggest improvements in operating practices and profitability since being freed from state control, and raised £4,500,000,000 for the singularly unsuccessful Welfare to Work programme. In 1997, the UK had the best-funded private pension provision in the Western world. The Government abolished dividend tax relief at a cost to pension funds of £5,000,000,000 in the first year, and rising each year thereafter. This had an immediate and catastrophic effect on both share prices and pension provisions. Some 60% of pension schemes have closed to new members and many have closed entirely. Deloitte Haskins and Sells expects many more schemes to close in the next five years. This leaves millions of workers dependant upon the (unfunded) state scheme, but does not affect the arrangements of politicians or civil servants. The loss of confidence led to a drop in the value of shares, precipitating the crash of 2000 and prompting investors to find a new home for their money.

The then-Chancellor of the Exchequer reaped the benefits of economic reforms made in the 1990s, but soon started spending like it was going out of fashion, using sleight-of-hand to keep spending liabilities off the books. The Government has been funding new schools and hospitals through the Private Finance Initiative, whereby the state takes out a thirty-year mortgage with a developer, securing a new building today to be paid for by taxpayers in the future. This spending is off the books. In 2002, the Government confiscated the assets of Railtrack, acquiring the infrastructure of the rail network without compensating its shareholders. Its financial liabilities are kept off the books. In 2007, the Government nationalised Northern Rock, taking a struggling bank into state ownerhip without compensating its shareholders.

In his budget speech in 1997, the then-Chancellor said that he would "not allow house prices to get out of control and put at risk the sustainability of the recovery" but the man was never as good as his word. He had already destroyed the pensions sector and, by 2000, eroded confidence in shares. It seemed the only way to guarantee making money was to invest in property. The British have had a high percentage of property-owners since the 1980s, and there was a feel-good actor about seeing the value of your property rise. Both borrowers and lenders were encouraged to act irresponsibly. Where once banks had insisted that customers raise 10% of the deposit price before getting a mortgage, they now competed with one another to offer better and better deals. House prices soon reached such a level that new entrants were unable to buy a first property, threatening the house-price escalator. Northern Rock started offering 125% mortgages. Eventually prices were so high that people really could not afford to enter the property-owning market. A new generation of rentiers was born, as banks such as Bradford & Bingley made what were in effect business loans to people with no experience as landlords, who would buy properties, use rental income to pay the mortgage, and sell the properties at a guaranteed profit. Borrower and lender alike saw a win-win situation with no downside. The boom continued, and by 2007, house prices were estimated to be overinflated by 30%. Britons, meanwhile have run up a personal debt liability (on unsound mortgages and credit cards) of £1,440,000,000,000. Personal debt exceeds our gross domestic product of £1,410,000,000,000: we are broke.

The official national debt is £581,000,000,000, some 43% of GDP, up 25% from 1997 and due to reach £700,000,000,000 according to the last budget statement. Before the banking crisis, our debt was increasing at almost £1,500 every second. According to the Institute for Fiscal Studies, existing PFI liabilities (which are not included in the official figure) amount to £110,000,000,000. Network Rail carries a liability of £18,000,000,000. The extent of the unfunded public sector pensions liability has been estimated at another £1,000,000,000,000. Government debt exceeds our gross domestic product of £1,410,000,000,000: we are broke.

After years of borrowing to expand and encouraging irresponsible lending, each British bank knows it is in trouble. Each bank assumes, correctly, that every other bank is in a similar position. So they won't lend to one another. The Government has nationalised Northern Rock and its £91,000,000,000 liabilities. It has acquired the £41,000,000,000 liabilities of Bradford & Bingley and brokered the sale of the good bits to Santander, which has not yet completed the acquisition of Alliance & Leicester. This sale was in contravention of our rules on mergers and acquisitions, as was the sale of HBOS to Lloyds-TSB, also brokered by the Government.

Each week, the British Government spends more on supporting the banking sector than the recent U.S. bail-out will cost each month. The Bank of England has been pursuing an inflation target for 11 years, and a rise in the bank base rate was certainly due, but political intervention has seen an across-the-board cut of 0.5% in central bank base lending rates in an attempt to revitalise lending. There is a certain naive charm behind the idea of pouring unlimited amounts of cash into the banks in the hope that they might start lending to the individuals and businesses who need to borrow funds. In the medium term, banks need to recapitalise, to bridge the funding gap between assets and deposits on the one hand, and loans and liabilities on the other. In the short term, all major UK banks (save HSBC, which is foreign-owned) have an immediate need for funds to address their liquidity issues. Abbey, now part of the Santander Group, has shown the way, swallowing the 0.5% cut in the base lending rate and electing to use this to improve capitalisation and profitability rather than pass the saving on to the consumers.

Last week, the Government unveiled the next stage in its plans to save the banking sector. This was an undertaking to guarantee and extend existing bank lending (up to £450,000,000,000) and to buy into troubled banks (up to £50,000,000,000) in exchange for a seat on the board and the right to determine a bank's policies. Today we have the details: the Government is taking control (63%) of the Royal Bank of Scotland for £20,000,000,000 and a minority (41%) stake in the meged Lloyds-TSB-HBOS for £17,000,000,000. It has claimed to be planning an arms-length relationship with its new toys, but is appointing directors to the boards of both banks. My thanks, then, to Barclays, which has resisted the Government's overtures. When the dust has settled, it will be the only shareholder-controlled British bank left standing.

The Labour Party has never put its proposals for the creation of a totalitarian state to the British electorate, but it has been building one, incrementally, over the past 11 years. No serious British politician has ever gone so far as to suggest the nationalisation of the banking industry, but that has now been achieved, without scrutiny by our legislature. The Prime Minister gained plaudits from a grateful Labour Party conference when he had a go at greedy British bankers and promised to build supranational institutions to manage the global banking industry. This week, we have seen governments announce unprecedented measures, but only the U.S. has troubled its elected representatives to come in and debate the matter.

Where is the money coming from? From us, from our children, and from our children's children. Thanks, Gordon.