Multi-million pound bill for Rock advice

Mar 11 2008 by William Green, The Journal

MINISTERS were last night blasted over a “shocking” bill for consultants hired to advise on Northern Rock and missing data.

The Treasury has revealed that more than £14.5m has been spent on external advice on how to resolve the future of Northern Rock and a review set up after the loss of 25 million personal records from a HM Revenue and Customs office in Tyne and Wear last year.

News of the bill was slipped out in a little-noticed Government document, although the precise split in the costs has not been outlined and may not be set out until a Treasury departmental report in the autumn.

Last night a Treasury spokesman said the costs of the consultants had been paid for by the Treasury but would be recouped from HM Revenue and Customs and Northern Rock – although both are now in the public sector.

Blyth Valley Labour MP Ronnie Campbell said: “It just seems to me we are back to rip-off Britain, never mind MPs and their expenses.”

Mark Wallace, from the TaxPayers Alliance, said: “This is a shocking bill, adding insult to injury for taxpayers. After losing our information and risking billions of pounds on the Northern Rock gamble, taxpayers should not be picking up the bill for these consultants.”

David Clelland, Labour MP for Tyne Bridge, said he was “gobsmacked” and called for more details to be released.

Tory Parliamentary candidate Anne-Marie Trevelyan said the use of consultants showed the Government was “incapable of taking difficult decisions” and left taxpayers with a further burden.

The Treasury said the Government had to have expert advice on complicated issues and would be criticised if it did not.

A spokesman stressed that the necessary advice had been secured but that it would not be paying the bill.

Most of the fees had already been paid back with any outstanding balance “netted off” from the sale of Northern Rock back into the private sector, added the Treasury spokesman.

The revelations came as ministers were told to be more open about the liabilities it took on in bailing out Northern Rock by John McFall, the Labour chairman of the influential Treasury select committee.

He said there were no figures for the potential liability incurred by underwriting the bank and guaranteeing savings in the spring supplementary estimate, giving details of the Treasury’s expenditure in 2007-8 and revealing the bill for consultants.

Former Labour Cabinet Minister Frank Dobson accused the banks of causing the global credit crunch – which hit Northern Rock – and warned it would be their fault if the Chancellor was forced to raise taxes in his Budget tomorrow.

“If people in other industries now lose jobs as a result of the credit crunch, it will be the fault of the banking industry – the overpaid and greedy people who were running it worldwide,” said Mr Dobson.

Northern Rock has withdrawn from handling more risky mortgages. The company had originated the sub-prime mortgages for an arm of US bank Lehman Brothers, which actually funded and administered the loans.