Economies: Brown bets the farm

The reality of the control that Gordon Brown exercises over the Treasury despite no longer being Chancellor was apparent yesterday when he fielded questions from journalists throughout a long and sometimes hostile Q&A. At one point, he even started his answer with "Alistair would tell you...." but we rarely got to hear what Alistair would have said if he had been allowed to speak.

Brown dodged a question about where the money would come from - he went off on his routine prepared soundbites (he used the word "radical" a lot) - but later Darling let it slip that there would be borrowing.

What Brown did not do was give a total of the money that he (without taking the matter to a vote in parliament, continuing the tradition of the Blair government of legislating first and seeking debate later) was putting at risk.

So we'll do it for him - prepare for a shock.

GBP50 milliard for short term support which will be used to buy preference shares (i.e. ahead of ordinary shareholders in the event of a failure) in UK banks that ask for help

GBP200 milliard for short term lending - in effect the Bank of England acting as lender of last resort

GBP250 milliard in lending guarantees so that banks that say they have no money can borrow from other banks that say they have no money but in any case they won't lend the money they don't have because they have no security that the bank they lend the money to will pay it back. If that sounds to you like the same money going around in circles, then it sounds to you exactly the same as it sounds to us.

So that's GBP500 milliard - or USD865 milliard at yesterday's exchange rate of USD1.73 per pound. And that's more than the US has committed in its USD700 milliard rescue package that has caused so much consternation and upset there as ordinary Americans see it as a payoff to bankers for failing in their jobs. But being more in cash terms is one thing: Brown has bet the entire future of the UK on this one, single, throw of the dice.

When asked by a BBC journalist what, if anything, was Plan B, Brown fell back on his soundbites. He had no answer.

And he will not have. For if the whole amount is called upon and lost (which, to be fair, is unlikely) then he will have bet a third of the nation's GDP on this single palm-sweating toss.

The IMF estimates UK GDP for 2008 to be 1452.05 milliard. The similar figure for the USA, says the IMF, is 14334.03 milliard. So Brown has put the UK at risk for some ten times a greater share of GDP than the USA has.

The first measure of whether plan B would be needed was the stock market which opened minutes after the plan was announced and whilst the Brown was speaking. The shock at closing time for both Brown and the man who will get the blame, Darling, must have been palpable: the London market fell another 5% during the day.

And that was taking account of the fact that a concerted effort by central banks across the world saw most major economies reduce interest rates.

Seemingly, all good news - and there is precious little of that - has already been discounted.