Examination of Witnesses (Question Numbers
280-290)
MR NICHOLAS
MACPHERSON AND
MS LOUISE
TULETT
22 OCTOBER 2008
Q280 Chairman: Northern Rock has
spent over the last year some £63 million on consultants'
fees and various expenditures. The tripartite has spent £23
million which has been recharged to Northern Rock. How do we know
whether that is good value?
Mr Macpherson: The National Audit
Office may want to do a value for money study of it in due course.
It is difficult to tell. You do need really good legal advice
and I have to say that, on some of the things I have been involved
with, our legal advisers have paid for themselves several times
over. It is a buyers' market now and the sort of investment advice
we were picking up the weekend before last came rather more cheaply
than it did a year or so ago. Louise is involved in negotiating
these contracts and value for money is going to be really important
because these people can be quite expensive.
Q281 Chairman: £87 million.
Mr Macpherson: Some of this reflected
a loss of control at Northern Rock in the period in particular
between the run and nationalisation, where I think Northern Rock
might have been able to manage itself a little better.
Q282 John McFall: Just today Northern
Rock has announced that bonuses have been paid to the directors
and I think the chief executive at £403,000. The only reason
I am bringing it up with you is I have had four emails already
from members of the public on that. Were you informed beforehand
that this was taking place? Did you agree to it?
Mr Macpherson: I would have to
come back to you on that. I certainly was not, which does not
mean that the Treasury did not agree it. On the one hand you want
to attract good people. There are big reputational risks with
involving yourself in an organisation like Northern Rock. You
do have to incentivise some of these guys; otherwise they simply
will not do it. Coming back to your point about what the public
think, you do not want people being rewarded for failure, so there
is a balance to be struck there. I can come back to you on this.[8]
John McFall: I think it would be worth
writing to us on that.
Q283 Nick Ainger: Following on from
that and our experience in Japan, in the business improvement
plans which were agreed between the banks that were nationalised
and the Japanese treasury was an issue relating to remuneration
packages. I do think it is absolutely essential that we understand,
first of all, that there is a business improvement plan and, secondly,
that it does include things like remuneration packages for senior
management.
Mr Macpherson: Central to the
agreements last week was a more sensible approach to remuneration
and we will obviously have to come back to you on that.
Q284 Chairman: The detail of all
these agreements the Chancellor referred to in his statement was
supposed to be put in the library in the House. Has that happened?
Mr Macpherson: I will check. I
would assume it has because the agreements were published by the
companies themselves.
Q285 Chairman: He said that the detail
would be placed in the library of each House.
Mr Macpherson: I will check up
on that.[9]
Q286 Chairman: You have been rather coy
about the economic situation. I think you refer to it as a change
to trend. The Governor last night referred to us entering a recession
and the Prime Minister this morning referred to the onset of a
global recession. You are in overall charge of the UK economy.
Are we entering a recession?
Mr Macpherson: "Recession"
is a very emotive word. The media have been determined that we
should be in recession now for several months. Output was flat
in the second quarter. We will get the third quarter figure on
Friday, but we should be in no doubt that conditions out there
are very difficult. I think the Prime Minister said that no country
can insulate itself from world conditions and he mentioned Britain
in that context. I would definitely be in the same place.
Q287 Chairman: Your assumption would
be that we are, to all intents and purposes, in recession at the
moment?
Mr Macpherson: A number of countries
are already—
Q288 Chairman: I am talking about
the UK.
Mr Macpherson: I would be very
surprised if the British economy did not have at least one quarter—possibly
more than that—of negative growth.
Q289 John McFall: We are in for a
downturn?
Mr Macpherson: I think we are
in for a downturn.
Q290 Jim Cousins: A downturn in inflation?
Mr Macpherson: We are going to
have a downturn in inflation for sure.
Chairman: Thank you very much. You owe
us quite a number of notes as a result of this afternoon. Thank
you very much.
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