HOC Public Accounts Committee, 30 March 2009
Subject: Northern Rock
Chairman: Well good afternoon. Welcome to the Public Accounts Committee, where today we are considering the Controller and Auditor General's report on the nationalisation of Northern Rock. And we welcome back to our committee Sir Nick Macpherson who is Permanent Secretary of the Treasury and John Kingman who took the Treasury lead on the nationalisation, before becoming Chief Executive of the UK Financial Investments  in November last year. You are both very welcome.
Now Sir Nick I know that Mr Kingman took the lead in all of this, but I'll address my questions to you but please pass any answers over to him you think that are more appropriate.
Could we first go to the beginning of this story and look at the scenario planning that apparently the Treasury undertook and this is dealt with in paragraph 4.2. 4.3, 4.4, which you can find on page thirty eight. And there was indeed way back in 2004 some scenario planning, the tripartite authorities had identified weaknesses in the arrangements for dealing with insolvent institutions. But we read further on in this report that at this stage work on improving the existing arrangements was not considered within the Treasury to be a priority.
So you knew in 2004 that there would be a problem if a bank got into a major difficulty, obviously, why then Sir Nick in 2007 was there nothing in place to address this problem?
Sir Nick Macpherson Secretary HM Treasury: Well Chairman I think 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 you know, 30, 40 a 100 years, without having a problem. So we did take the work forward but it was taken forward at perhaps an excessively leisurely pace.
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 that was too late, it again with hindsight, it would have been great if we had followed that through. But it would have taken quite a lot of Parliamentary time. As it was, the quite urgent legislation we took through earlier this year, took two periods of consultation, a major consultation paper and quite a lot of Parliamentary time. So obviously in future if we came across an equivalent problem we would pursue it more urgently.