The US bail-out and Mr Brown

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THE Prime Minister will be buoyed today by the news that two polls suggest Labour has narrowed the Tory lead in the polls to 10 points. Yet his hopes of using his trip to the US for a UN conference to fulfil his conference pledge to tackle the international financial crisis have not been met. Mr Brown has met with Wall Street hedge fund chiefs but the US Treasury Secretary, Henry Paulson, is too busy to see him right now. He is engaged in trying to salvage his $700 billion bail-out for American banks, which looks increasingly likely to undergo a radical overhaul in Congress.

Last night, the US President, George W Bush, addressed the American people to impress on them the gravity of the situation. He says he understands the reluctance of "responsible Americans" to pay the cost of Wall Street's mistakes but he warned that if the banks were not given state assistance, a "distressing scenario" would ensue. He did not quite mention the Great Depression but that was the spectre he invoked. Nonetheless, the deal is already getting a rough ride from both sides in Congress. Quite understandably: it would mean the American taxpayer buying the banks' toxic debts - those imprudent, securitised propertybased loans which came unstuck with the collapse of the sub-prime market - in the hope that this will maintain liquidity in the financial system and confidence in the banks.

Mr Paulson insists that the assets could be resold later, when property values improve, without leaving the taxpayer at a loss. But putting a fair valuation on property-based assets is extraordinarily difficult. The Democrats want the banks to underwrite at least some of the risks. An alternative is to inject the same sum into the banks by way of new equity, giving them larger capital and liquidity but leaving the toxic assets where they are.

The Prime Minister has expressed his support for the Bush plan. It is in the interests of the global financial system that the US concludes a deal. A collapse of confidence in US finance would have immediate repercussions here. But in the longer term, a priority for finance ministers, including the Chancellor, must be to consider how to re-establish the principle of moral hazard - the idea that institutions, and the individuals who run them, should bear the consequences of their bad decisions rather than relying on rescue by the taxpayer.

Queen's crunch

THE credit crunch and rising fuel bills have hit every household in the country including, it seems, the Queen's. It is reported that royal aides are hoping to get an increase in government payments to the Civil List, which costs nearly £8 million annually, and to the £15 million paid by the state towards the cost of maintaining the Queen's occupied palaces. They point out that Civil List expenditure has risen to nearly £14.4 million and that the royal properties will need refurbishment and maintenance costing £32 million in the next 10 years.

Obviously, the cost of the Civil List should reflect inflation. But right now, when government expenditure is being curbed and every family is struggling with the cost of food and heating, it would be wrong for the Queen to receive more taxpayer support. Conspicuous belt-tightening by the royals would send out a better message. The Queen had abundant experience at practising thrift during the war - no one better than she to show us how it's done.

Cool on the Tube

GOOD news for passengers: London Underground has unveiled the first Tube train with air conditioning. The trains will not only be cool but completely walk-through, with no divisions between the carriages. The new trains, the first of which will be on track in 2010, will eventually feature on the Metropolitan, Hammersmith & City and District and Circle lines - other lines run too deep. But it's a good start.