The Northern Rock crisis was something that is seen as the first event that kicked off the financial crisis that seems to have gone on for far longer than previous ones. I’m not going to pretend to be a banking expert, so am not going to go into the detail of what happened when and why. I’ll leave that to the Treasury Select Committee’s investigation and report.
Strangely enough it led to one of the highlights of my civil service career – having to deliver a ministerial speech with three hours notice because the minister that I was working for at the time was called into the Commons (as with all the other Labour MPs) on a three-line-whip in order to pass the Banking (Special Provisions) Act 2008 that evening. I knew this was serious stuff because the entire bill needed to be passed in that single evening – with all of the parliamentary votes such a move entails. It is extremely rare for such a move to happen, which is why the minister could not get out of it.
I had already been aware of what was kicking off on the Rock – not just because of the queues outside the bank but also because of the compelling footage from the Treasury Select Committee where parliamentary heavyweights (messrs McFall, Fallon and Thurso amongst them) tore into the non-executive chairman of Northern Rock, zoologist Matt Ridley. (Why a major UK bank would employ a zoologist as a non-executive chairman is beyond me – George Monbiot goes further).
John McFall – the then Chair of the Treasury Select Committee tore into Northern Rock’s former board over what happened – in this case the chair of the risk committee.
I blogged previously on the issue of non-executive directors not doing their job. The Northern Rock crisis was a classic case. Is the cosy club of non-executive directors an opportunity for well-connected rich people to get paid lots of money for doing not much? What penalties are there on non-executive directors that fail spectacularly in their jobs? The sack? Well…they’ve already pocketed a nice amount of money so it’s not as if that’s going to be a huge deterrent.
As far as the status of the bank is concerned, we are where we are in terms of it having been nationalised…until today’s announcement.
“BBC business editor Robert Peston said taxpayers had injected £1.4bn into Northern Rock plc.
He added that, in addition to the immediate £747m the government would get back following the completion of the sale, there was the potential for the Treasury to receive a further £280m over the next few years.
“So on paper, taxpayers end up with a loss of somewhere between £400m and £650m,” said our business editor.
The size of the potential losses contained in the bad bank part of Northern Rock is still uncertain and it still owes the Treasury £21bn.”
As Robert Peston asks: Why now? Why choose to confirm those losses at a point when the market is at rock bottom, rather than wait for the value to rise? Or does this indicate that markets have further to fall? I don’t know. What I do know is that Parliament now has a duty to scrutinise this move in detail – both the Treasury Select Committee and the Public Accounts Committee. The sad thing today is that the chairs of neither select committees were interviewed by journalists or the mainstream news – or if they were’ I’ve not spotted it (despite being in all day and having BBCNews24 running for much of the afternoon). But then, given that Parliament is in a mini-recess, there are few backbenchers around within easy reach of Parliament – perhaps why the only backbencher I’ve seen interviewed is the Conservative MP for the Cities of London and Westminster.
Because I and many other taxpayers don’t know the intricate details, it’s all the more important that those within Parliament who do can properly hold the government to account for such decisions. Because the headline losses don’t sound too clever to the person on the street.