There can be no more doubt. Northern Rock is Gordon Brown's Black Wednesday. The Prime Minister, like John Major before him, remains in office, but he is no longer in power. The mini-Budget in October, with its misconceived plagiarism of Tory tax policies, marked the beginning of the end, when Mr Brown handed over his hard-won economic credibility to David Cameron and George Osborne.

But yesterday's statement on Northern Rock represented an even more astonishing - and shocking - derogation of power: Mr Brown handed over the keys to the Treasury to Sir Richard Branson and Goldman Sachs, destroying in the process the entire economic and political framework that he created as Chancellor in 1997. With Britain's foreign policy still firmly in the hands of the White House and European policy managed from Brussels, it is hard to see why Mr Brown bothers to turn up to work.

Financial upheavals so powerful that they topple the whole machinery of government seem to strike Britain about every 15 years - Black Wednesday in 1992, the Winter of Discontent in 1979, the 1967 and 1949 devaluations, the 1933 collapse of the Gold Standard. So far, no government has survived one of these earthquakes. I thought at first that Mr Brown, with the help of the Bank of England, might defy the odds and pass the test this time. But yesterday's statement made clear that I was wrong. Like Major before him, Mr Brown is not being swept out of power by the tidal wave of events but by his own inability to take timely, sensible decisions in response to them.

There was, in principle, no great difficulty in resolving the Northern Rock crisis. Mr Brown could have offered a modest Treasury guarantee back in August to facilitate a takeover by Lloyds TSB. Or he could have told the Treasury to put Northern Rock into administration, buy all the assets and liabilities immediately for £1 from the receiver and then run the bank down in an orderly way. But Mr Brown was too slow and indecisive to take the first option and too timid to face the job losses and temporary opprobrium resulting from the second.

Instead, he has chosen the worst of all possible worlds, described by Vince Cable, of the Liberal Democrats, with his customary precision as “nationalisation of risks and losses, combined with privatisation of gains”. In effect, Mr Brown is offering £55 billion of public money to Sir Richard Branson and other shareholders in Northern Rock, whether present or future, with which to speculate on the housing market and the stock market. If these speculations work out, these private individuals will pocket 90 per cent or more of the profits. If the speculations fail (which is much more likely) taxpayers will bear the entire loss. Looting of public wealth on this scale has not been seen in Britain since the South Sea Bubble.

If you think I exaggerate the egregiousness of the announcement, consider the following facts. The so-called bonds that will be used to “repay” Northern Rock's £25 billion in borrowing from the Bank of England will be guaranteed by the Treasury and will therefore be indistinguishable from any other government borrowing. In addition, the Treasury will maintain indefinitely the present guarantees on £30 billion of other Northern Rock obligations. In other words, not a penny of taxpayer money will be repaid by the proposed “rescue bids”. That much is obvious. What is much worse politically, however, is that Alistair Darling will keep claiming that these bonds constitute some kind of repayment - yet this falsehood is so transparent that what little is left of the Government's economic credibility will be completely lost. Mr Brown is sliding out of an embarrassing admission by insulting the intelligence of the British public. We all know about using our Mastercard to pay off the Visa debt. This is an insult that voters are unlikely to forget.

Once people fully understood that the Government, far from receiving any repayment as part of this “rescue”, will be offering a long-term operating loan to Northern Rock for five years or beyond, the politically embarrassing questions will pour in. If this kind of money is available for a minor bank in Newcastle, what else could the Treasury have done with £55 billion? Here are a few ideas: it could have rescued MG-Rover and turned it into the worlds strongest car manufacturer after Toyota. It could have acquired control of the Airbus programme and shifted its headquarters to Bristol from Toulouse. And even after these industrial subventions there would have been plenty of change from £55 billion to set up a permanent endowment fund to finance Britain's universities, or build a new high-speed rail system covering much of Britain, or a new London airport in the Thames estuary to replace Heathrow or underwrite the entire economic risks of a new generation of nuclear power stations. And what about rescuing the pension funds wrecked by Mr Brown's previous excursions into high finance?

Even if such embarrassing questions die down, behind them will loom an even bigger challenge to Mr Brown. By piling another £55 billion of government debt on top of a government deficit that is already exploding, Mr Brown will explode the entire fiscal framework on which Labour has built its tax and spending policies. By lavishing unthinkable sums of public money on the shareholders of Northern Rock he will directly repudiate the warnings from Mervyn King about the “moral hazard” of subsidising irresponsible banking. It is hard to see how the Prime Minister and the Governor could continue to work together given this fundamental, and enormously expensive, difference of views.

The Northern Rock bailout will demolish or, at best, discredit the entire economic policy framework created in 1997. Since the creation of this framework was his one unquestionable achievement, it seems fair to say that Mr Brown's career as a serious politician ended yesterday.

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