Reporting contingent liabilities to Parliament - Treasury Contents

Conclusions and recommendations

Reporting contingent liabilities to Parliament

1.  The Treasury clearly breached its own well established guidance to all parts of the public sector when it failed to inform the Chairman of this Committee and the Chairman of the PAC of the guarantee given to the Bank of England in respect of Emergency Liquidity Assistance. (Paragraph 7)

2.  Sir Nicholas's evidence was exceptionally frank, and is to be commended. Given the events surrounding the failure of Northern Rock, the extreme urgency of the situation, and the Bank of England's view that "secrecy was of the utmost importance", we can understand why the Chancellor decided that absolute secrecy was paramount, and why Sir Nicholas considered that decision proper. Nonetheless, in our view, the decision was overly influenced by the assumption that disclosure of the liability would have to be in writing. We welcome the Chancellor's proposal that if such extreme circumstances arise in future the Chairmen should be briefed orally, and regret that this was not done when the indemnity for Emergency Liquidity Assistance was extended. In future, we expect Committee Chairmen to be briefed properly, whatever the circumstances. (Paragraph 14)

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Prepared 22 February 2010