The National Audit Office today publishes its report on the Treasury’s handling of the Northern Rock collapse. By any standards, it is highly critical.
Among the failings reported are:
- Northern Rock continued to write over £1.8 billion of mortgages of up to 125 per cent of a property’s value throughout the period that it was receiving emergency support from September 2007 to February 2008, when it went into public ownership.
- The Treasury had been aware of potential shortcomings in the arrangements for dealing with a financial institution in difficulty before the crisis at Northern Rock arose. Exercises it had carried out had revealed the need for further work on how to handle the “resolution of an insolvent firm with systemic repercussions”.
- However, “prior to 2007, work on improving the existing arrangements was not judged by the Treasury to be a priority in a benign economic environment, compared with other financial crisis response planning.”
- In the lead-up to public ownership, the Treasury did not commission its own due diligence on the company’s operations, for example, on the quality of the loan book. “The Treasury judged that it could rely on the work of the Bank, supported by its accounting advisers, and the Financial Services Authority as respectively lender to and regulator of the company.”
- The Treasury struggled to maintain continuity of staffing in handling the crisis. “The maintenance of financial stability had not, in terms of staff resources, been a major part of the Treasury’s work. In dealing with Northern Rock, the Treasury had to respond very quickly to events as they developed… The availability of people with relevant skills and experience was severely stretched and resulted in two changes of team leader along with changes to the composition of the team.”
Putting aside the extraordinary conclusion that the Rock was allowed to continue its reckless pattern of lending – which is what got it into trouble in the first place – even after its difficulties had become all too apparent, the overall picture is of a largely unprepared Treasury that assumed that the “benign economic environment” would continue indefinitely.
The report also casts still further doubt on the robustness of the tripartite regulatory system, which was, it will be recalled, the personal creation of none other than the Rt Hon James Gordon Brown.
Advertisement
The banking regulatory system is one thing, the other side of the argument is the regulation or lack of regulation of MPs expenses.
The revalation of Tony McNulty’s second home expenses which are enough in a year to fund four families is a disaster for democracy. It was claimed for the house of his parents where he allegedly did some constituency work. He lives in London for goodness sake!
He was within the rules, but now that he has been found wanting he thinks the rules should be changed. He should have campaigned for that before he was found out. He should not have claimed an allowance that could not be morally supported and is found to be morally lacking.
This is the man who in a previous post was moralising about police force funding. He is not fit for office and neither is the Home Secretary in the same way. How many others are there doing the same thing though. How are members of Parliament, Assembly members and Members of the European Parliament regulated?
What is the cost of the various levels of Government and are they value for money?
Just how much money is being poured into personal coffers. Perhaps this is part of the waste that the next Government party should seize upon to prevent the taxpayers money pouring away.
Nobody is more supportive that I am towards the view that persons staying away from home should be supported with subsistence. There has to be a limit and if Members and Ministers cannot do it themselves then there have to be hard rules that cannot be bent to suit morally questionable people.