The UK just bought itself a bank.

For a cool estimated £55-£100 billion of the taxpayer’s money, the UK government is to nationalise failing UK bank Northern Rock.

Northern Rock got into severe trouble late last year and had to borrow colossal ammounts of money from an emergency facility at the Bank of England. This in turn caused a failure of confidence in the bank by it’s depositors and a bank run.

The UK Labour government has now apparently decided that the taxpayer’s exposure to Northern Rock is so massive that they have no choice but to nationalise the bank in order to attempt to get back some of the money they have taken.

There had been various private takeover offers for the bank including one lead by Richard Branson’s Virgin group but they failed to materialise. It appears that the already hired former boss of Lloyd’s of London will be installed at Northern Rock to take control.

Whether there is any salvage to be had and whether the taxpayer will lose their money remains to be seen.

One would imagine that the UK chancellor, Darling, will now be about as popular with the British taxpayers as flatus in an elevator.

Update: Full details of the assets and shares nationalisation is to follow tomorrow (18th Feb)

Photo Credit: Alex Gunningham cc-by-2.0

The thing most likely to cause a change in texture of a Northern Rock shareholder’s undergarments today was the news that the UK treasury would prefer nationalisation of Northern Rock over a private deal if the decision had to be taken today.

The BBC cites a ‘banker’ who is said to be ‘close to the negotiations’ who says that the Prime Minister Gordon Brow (rather than the chancellor, Darling) is calling the shots on any potential deal. Apparently, Brown isn’t averse to the nationalisation of Norther Rock ‘at any cost’ now. He is said to feel that a partial nationalisation deal with Virgin involved may be beneficial but he wants more money in exchange for the billions (£100billion?) in support already doled out to the Rock.

You can read more in Robert Peston’s: Rock Nationalisation ‘back on’ article.

Photo Credit: Alex Gunningham cc-by-2.0

Bang goes the government’s wage inflation target.

UK workers unions UNISON, GMB and TGWU have agreed to demand a 6% pay deal for council workers that they represent. All in all, the three unions represent about 3 million workers in all disciplines although I don’t know how many of those are council workers.

The unions say the pay deal is neccesary to help the lowest paid workers catch up with the rest of the public sector although they concede that for many, even 6% would not bring all into line with the union’s target minimum ‘living wage’ of £6.75/hr

The government, however, has been trying to suppress public-sector pay increases to below 2% in order to control inflation. Nurses and Police officers have been handed out below-inflation pay rises in recent months.

Seeing as UNISON is a traditional backer of the incumbent Labour party, it will be interesting to see how Prime Minister Brown and his Chancellor Alistair Darling handle this.

If you’ve seen the news in the UK in the last couple of days, you’ll be aware that Her Majesty’s Revenue & Customs has managed to lose the digital records of 25 million British citizens in the post and exposed them to potential identity theft.

For those not aware, briefly: The National Audit office requested a sample of National Insurance numbers of Child Benefit claimants from HMRC stripped of any other data. HMRC therefore sent the entire record of all British child benefit claimants on apparently unencrypted CD-Rs via unrecorded delivery. Almost inevitably, these disks have been lost in the post. The data contained on the disks includes:

• Name
• Address
• Date of Birth
• National Insurance Number
• Bank details (or, presumably PO accounts)

The details cover 7.25 million families, a total of 25 million records of both the claimants and their children.

Now, HMRC have stated that they do not believe that the disks have fallen into the wrong hands. However, this is based on their being no evidence of fraud being perpetrated using these details as of yet. The fact of the matter seems to be that HMRC and the Police simply have no idea where the disks are.

Furthermore the Chancellor, Darling, mentioned that the records were contained within “password protected” files. I take this to mean that they were in unencrypted ‘password locked’ zipfiles or similar, otherwise the Chancellor would have been telling us all not to worry as the encryption could not be broken. Exactly how hard can it be to use something like Truecrypt to secure files?

The Real Risk

Another red-herring from the Chancellor, Darling, was that banks were now monitoring accounts for suspicious activity. Any even moderately organised criminal worth his or her salt will not be bothering to try to access people’s accounts with this information. They will appreciate that if the information relates to benefit claimant’s details then the likely hood of any given account containing much money at any given time is rather slim.

Instead, they would use the details they have acquired to assume the identity of the person from any given record. This stolen identity would then be used to take out lines of credit in the victim’s name. This is the most common use of identity theft. With the details that have gone missing, it should be trivial, for example, to obtain items like birth certificates to further back up the identity-thief’s operations.

Unfortunatly, when identity theft is used to perpetrate credit fraud, no amount of checking your current account will help you. Only the likes of Experian and Equifax can tell you if someone is taking out credit in your name without your knowledge and their service is both chargeable and reactive (They can only tell you it’s happening after it has happened).