Any hope that the Chancellor, Alistair Darling, might have had that nationalising Northern Rock would make its difficulties pass quietly out of public view has disappeared. The loss for the first half of the year of over half a billion pounds follows the announcement that 1,300 jobs will have to go. There could be worse losses to come if the fifth of Northern Rock borrowers now estimated to be in negative equity fall into arrears, as there will be pressure on the state-owned bank to avoid repossessions.

As the anniversary of Northern Rock's descent into crisis last August approaches, the big losses it has announced today are a reminder that the Government failed to act fast enough as problems in the US mortgage market took effect - as well as presiding over a system of banking supervision whose outdated deposit protection scheme and unclear division of responsibilities were not adequate to cope with the massive expansion of credit over the past decade.

The losses now emerging at the Rock also give ammunition to those who believe that selling the bank was never a realistic option. The final cost to the taxpayer of the first run on a British bank for more than a century cannot yet be calculated. But as the Chancellor is reported to be mulling over changes to stamp duty, in a bid to revitalise the falling property market, Northern Rock continues to give the lie to Gordon Brown's claims to have ended the British disease of boom-and-bust.

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