News

26 March 2009

Every so often an independent report sheds light on aspects of Government policy and action that might otherwise have been kept secret for a very long time.

Last week’s report by the National Audit Office on the nationalisation of Northern Rock was a very good example.

Two of its findings in particular stood out.

First was the astonishing fact that for six months after Northern Rock had been nationalised it continued to provide mortgages of up to 125 per cent of a property’s value. These loans amounted to the staggering sum of £1.8 billion – around 30 per cent of total mortgage lending.

The second was the finding that the Treasury had been aware of the inadequacy of its arrangements for dealing with a banking crisis before the failure of Northern Rock. As long ago as 2004 the Treasury was warned that it was not properly prepared to cope with a crisis of this kind.

But at that time Treasury Ministers decided that this was not a priority issue. The Chancellor of the Exchequer at that time was, of course, Gordon Brown.

I put this point to Mr Brown in the House of Commons on Monday when he was reporting back on the European Summit at which he and his fellow heads of government had discussed the financial crisis. I asked him whether they had considered what lessons they could learn from his failure to take that warning seriously. I’m afraid I did not get a coherent reply.

These two findings do not reflect well on the competence of the Government in dealing with the problems which are now causing us all so much difficulty. What a tragedy that we are likely to have to wait another 14 months before we have the opportunity to register our verdict on their performance at the ballot box.