Treasury ‘dragged its heels’ before Northern Rock crisis

Mar 31 2009 by William Green, The Journal

GORDON Brown suffered a serious blow after a Treasury mandarin last night admitted the Government “dragged its heels” on bank regulation for years before the Northern Rock crisis.

Treasury permanent secretary Sir Nick MacPherson also risked a row with the Bank of England by accusing them of failing to act despite warnings in 2004. He spoke out as the Commons public accounts committee grilled him over the Government’s handling of the Northern Rock crisis.

Committee chairman Edward Leigh demanded to know why work warning of “potential shortcomings” in dealing with a failing bank in 2004 was not a priority – when Gordon Brown was Chancellor.

Sir Nick said: “That is a very good question and with the benefit of hindsight we should have treated this work with greater urgency.

“But at the same time we had survived without that legislation for 30, 40, 100 years without having a problem.

“So we did take the work forward, but it was taken forward at perhaps an excessively leisurely pace.”

He added: “But from early 2007, the pace of that work picked up and we were planning to publish a consultation document that autumn. In the event it was too late.”

Under furthering questioning, Sir Nick said: “It wasn’t just the Treasury dragging its heels on this, the Bank of England wasn’t putting pressure on us either.”