A note of thanks: and why Granite remains at the core of the Northern Rock debacle

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John McDonnell MP offered me a note of thanks today, in the Guardian when he wrote:

I first raised the issue of Northern Rock's Granite companies in September 2007 as chair of the Left Economics Advisory Panel (Leap), which was set up to advise MPs and others as a socialist alternative to the Bank of England's monetary policy committee. I pay tribute to Richard Murphy, an economist and campaigner I work with through Leap, for exposing these exotic financial shells.

John needn't have done that, and a great many people would not have done so. I'm grateful to him.

I'd add three things. The first is that I am not a member of any political party, but am pleased to work with John and other MPs who show concern for the issues about which I write.

Second, a lot has happened on Granite this week. Not all that has been said and written has been wholly accurate. In many cases it has been hard to be accurate: the precise nature of the structure is obscure. I, and I'm sure John, think this attention has been appropriate though. The issue has not been the technicalities. And it's not the minor offshore dimension. Nor is it anything to do with tax. It's about the deception that the Granite structure represents. Nothing has changed what I have written here: I contend that is right, but the government still seems to deny it. Worse, the government is now hiding behind the legal structure to supply yet more misinformation, for example that it has not nationalised Granite, when it has. After-all, an entity controlled by a nationalised company and no one else is nationalised. What else can it be?

Third, and of wider concern is my belief that when the type of deception inherent in the Granite structure is pervasive (and let's be clear: the whole thing is based on a legal deception, which is that Granite is not a part of Northern Rock legally, when it is controlled by it) then the risk to good governance is enormous. You can't play legal games of deception on the one hand and expect good governance on the other. That's just not possible.

And this is the reason why Granite should be unwound now by the government. It has to show that it will be transparent, and expects others to be the same. It has to show that deception is not allowed. It has to be clear that it is liable for its debts. It has to signal that this form of funding was and will remain inappropriate in the future: the risks it created were unacceptable and have imposed enormous cost on society.

This is the importance of this issue: this is why it's been raised again. Ignore those who argue the fine points of detail: they've already missed the wood and are embracing he trees. Look at that wood - and then you'll see that this structure has no further commercial justification for Northern Rock, which will never raise funds using such a mechanism again (because the market for them is dead) and must be used to lead the way to a better form of finance.

I sincerely hope Alistair Darling is listening.