MPs said the Treasury was right not to pay investment bank Goldman Sachs a £4m “success fee” for its work on Northern Rock when success was not defined – but criticised it for signing a contract which did not allow it access to the financial models used by Goldman.

And the Rock’s initial business plan approved by the Treasury on nationalisation was found to be “over-optimistic” about house prices even compared to forecasts available at the time.

Northern Rock’s business plan was based on a 5% fall in house prices in 2008, with its “recession” scenario factoring in a 20% fall over three years.

But prices fell by 15.9% during 2008, the biggest annual drop on record, according to building society Nationwide.

Committee chairman Edward Leigh said: “The Treasury must never again be so ill-prepared.

“As this crisis has shown, the Treasury’s ability to respond effectively to future financial crises must be maintained at the highest level.”

Newcastle Central MP Jim Cousins stressed the need to recognise Northern Rock had survived, but expressed concern it could be broken up.

“It has to be tempered that not only is the bank still here, it has repaid £18bn to the Government.

“Now that is far and away the most positive significant return to the Government over this whole situation in the last 18 months,” said the Labour MP.

But he warned the Government could split the Rock into a “good” and “bad” bank - leaving a much smaller institution vulnerable to being sold off.

Northern Rock still owed around £9.8bn to the taxpayer as of March, but has since slowed repayments to lend an extra £14bn over the next two years to help the housing market.