Michael Fallon MP: Gordon Brown is the architect of the Northern Rock and HMRC crises

Michael Fallon is MP for Sevenoaks.

Architects can not escape their buildings.  The two crises engulfing the government at the moment have their origins in the decisions that Ministers themselves took.

HM Revenue and Customs (HMRC) and the Financial Services Authority (FSA) are the monsters that Brown created.  They’re two of the largest public departments, employing 100,000 and 3,000 staff respectively.

Both of them are super-agencies created by sticking other smaller departments together.  HMRC was the result of a merger between Inland Revenue and Customs and Excise.

The Treasury Committee investigated the proposed merger back in 2004.  We found that no cost benefit analysis of any kind had been done to justify the merger.  No efficiency savings were calculated.  No commercial organisation would proceed on this basis.

We warned of the risks involved.  We also pointed out the very different cultures involved – tax inspectors thrown together with cutter-riding “duty men”. 

Gordon Brown pressed ahead.  In fact, he did worse than that.  He chose that moment to make the Revenue take over a large chunk of the benefit system.  Tax inspectors used to reviewing your annual tax return – perhaps a year or so after it was submitted – were suddenly dealing with single mothers with large families wanting tax credit that weekend.

He then ordered the new HMRC to shed one fifth of its workforce- over 20,000 people - to meet the Treasury’s efficiency targets.  There have been deep cuts in frontline staff.  When we visited one of the London offices in July, we found poor morale, over-stretched employees and constant management upheaval.  Is it any wonder that procedures weren’t strictly followed ?

The FSA was the first super-regulator, combining all the previous regulators in a single massive bureaucracy.  Against the advice of the then Bank of England Eddie George, the FSA was also given supervision of the banks.

Three thousand people sit in Canary Wharf filling in forms.  Only three of them were detailed to supervise Northern Rock whose business model the FSA chairman himself described as extreme.  Nobody at the FSA thought to ask whether Northern Rock could remain liquid as well as solvent.

And the machinery for co-ordinating all this completely failed.  The FSA, the Treasury and the Bank of England held their “tripartite” meetings.  Despite a month’s warning, they couldn’t stop the bank run. Because the bureaucracies failed, £25 billion of taxpayers’ money is now at risk.

25 million families’ private details exposed to serious risk of fraud. £25 billion of our money propping up a bank they failed to supervise. 

There’s one man who should be apologising to us all – the Prime Minister.

Comments

[Griswold]

Exactly. These are the root and proximate causes of these two debacles.

Time and time again Brown, in his 'I'm the Boss' mode, would make decisions that no commercial manager would make. But arrogance, hubris and a flawed mental state, drove his ill considered ideas. He is a dangerous man since he hides under the matra 'I am competent, I delivered ten years of growth' which itself is not true.

It is time the financial press exposed the massive fraud that he is.

[Deborah]

well said

[Veritas]

Superb article. Why is this man not Shadow Chancellor? Evry news appearance has been informed, incisive and impreesive.

[Veritas]

Why is this man not Shadow Chancellor? Every news appearance has been intelligent, incisive and impressive.

[Ian Parker]

What you describe is, of course, the effect of huge bureaucracy with little or no accountability. Most public bodies have been effectively turned into organs of the Labour government. Since the government behaves without scruple, and now barely even attempts to conceal their own corruption, how can you expect public servants to accept any blame or responsibility? Ian Blair is, perhaps, the most obvious example of incompetence in office whilst remaining fireproof (pun intended). (There is, though, the lingering suspicion that he may juts have enough ‘dirt’ on the thoroughly debased regime which he serves to be immune from anything.)

The FSA is a slightly different case. Financial regulation in this country has always been a haphazard, backward-looking, reactionary affair. The only response the regulators have is to shift responsibility and dramatically increase the bureaucratic burden upon those regulated. The FSA did nothing to head off the ridiculous practice of self-certification mortgages and are clueless in the face of potential threats posed by the explosion of off-exchange derivatives. To date, the FSA have failed to protect the retail sector from routine mis-selling and are simply out of their depth in the institutional arena. Their inability and unwillingness to impose effective regulation on hedge funds is a prime example of their underlying ignorance and impotence.

With the new mindset borne of megalithic bureaucracies that exist largely for their own purpose and an administration mired in its own sleaze and spin, can we really be surprised by what we are now seeing?

[Tony Makara]

"He chose that moment to make the Revenue take over a large chunk of the benefit system"

A very fine article and analysis. The problems we face today are certainly a reflection of the bureaucratic and tax-fixated culture of the Labour government. Events have now finally exposed Labour as being economically incompetent and it was interesting to see Gordon Brown during PMQs retreating into a panicky defence of his so-called record over the last decade. A record that is all smoke and mirrors and is not quite what it seems, for example the claim that we have low unemployment and more people in work. That is a bare-faced lie which he continually feeds our people who Brown knows are often just too busy with their own lives to verify the facts.

Gordon Brown has promoted himself as an economic guru and unfortunately many of the public have believed him, however now the paint is peeling off the Iron chancellor and what we find underneath is rust and corrosion. I hope that a long-term objective of the Conservative party will be to eradicate the entire tax credit system, which is a political vice used to suck working people into state dependency.

[Matt Wright]

Good article. What we are seeing is the disaster that arises when you combine the closeted arrogance of Brown with his obsession for bureaucracy and centralised control.

[Richard Woolley]

Excellent post Mr.Fallon. Why then haven't the Tories and Lib Dems called for Gordon Brown to resign? The Daily Express called for Brown to go the other day and rightly so.

[Tony Makara]

Richard Woolley, yes, I agree. What the opposition parties could do is push for Gordon Brown to call an election, to confirm that he has the support of the British people. Let our people decide whether they trust Gordon Brown with government and the coming ID card scheme.

[sjm]

No, we should not be calling for elections or resignations yet.

Simply because the visitors to this site are politically aware, it does not follow that the rest of the country are.

Think about it - there will be a large mass of people just getting on with their life and work, shaking their heads and repeating the 'don't trust any of them' mantra; then there is the massive cohort of clients of the State who will be terrified of a change of Government.

We are only at the beginning of the end, and Cameron is right to play it cautiously.

[Essex Boys]

As a small group of poli-watchers we HAVE called for the PM's resignation, Richard Woolley, sir! We attempted last night to post a 7-day petition on the No 10 website but to date no acknowledgement, as per the screen message, or confirmation has been received. We contend that the PM knew full well - and certainly before yesterday's PMQs - that the Lost Data Calamity was not the responsibility of a 'junior officer' as is the impression the PM and Chancellor wished to create, but far more senior managers...and, only slightly less directly, himself as architect of the ill-conceived sweeping changes of 2005. If the Chair of the Public Accounts Committee knew key facts yesterday why did the PM allegedly not know these crucial details on a matter so urgently brought before the house? Shades of Blair not knowing that WMD were battlefield munitions when Robin Cook clearly did (and told him so on 14/3/03!) All the above comments refer to what close poli-watchers have known for 10 years...that Brown not only lacks evidence for his far-fetched claims on the British economy but has precipitated change for its own sake, generally with adverse results. Sadly the Opposition and media have allowed him to get away with claims that may at one time have held some water but are increasingly out of date. The only period in which Brown performed to standard was was in 97-99 when he stuck to the Tories expenditure plans - and then only because Labour would otherwise have had some difficulty in getting elected! I can never understand why William Hague and those who surrounded and subsequently followed him did not make a major (oops) play on this. The Tories' achievement in turning around the massive economic problems of 1990-92 to ultimately provide Lucky Gordon with a golden inheritance was massive. Now he is to get his cumuppance at long last!

[Watervole]

Fallon has been playing a blinder - so has Osborne. No one should be fooled into thinking this is an isolated incident.

Other government departments are in the same mess: piles of paper, inability to find records, inability or reluctance to respond to correspondence, lack of clear knowledge of procedures, lack of clear criteria for decisions or even any certainty that decisions have been made, paperwork filed in desk draws and absolutely no information on the hierarchy of staff and individuals through whom complaints can be escalated. There is no accountability.

The public should not be fooled by the rabbit out of the hat - Biometrics. The government are spinning a complete myth on this one. Biometrics will not secure data when the base infrastructure is so inadequate and in any event, the government and their advisors are concealing the very real issues that are at the heart of effective implementation of records management disciplines. There is a complete failure to understand how to effectively share data and generate meaningful information. Every sizeable government department, despite the big announcements like the NHS spine for instance, have this systems misunderstanding at their root and until they get their heads round this one, we will see continuing failures of big systems. What is needed is an architect - an information architect.

What Brown has done is to throw money at the big consultancies in the expectation of being able to pass the buck when the going got tough. As other instances like HMRC come to light, even the big consultancies will wonder if they should have had a bigger spoon to sup with this particular devil who is long past his sell by date.

There is no excuse for the delays and continuing obfuscation. The government once again believes we are all idiots.

Resign Brown, if you have any honour. There are at least 25 million people in this country who may not be politically active, but who do get concerned when matters affect them personally and the opposition should consider calling for a vote of no confidence at an appropriate point. Even Labour MPs and Lords are now appearing to stick the knife in as they too realise the problems of having an inept control freak as leader. Some of them, thankfully. do appear to have some conscience and morals and it would appear over the last few days that even they find his latest antics hard to swallow.

In any business you would only have a matter of months to prove you can do the job. We have given this government 10 years or more. That is enough.

[Winchester whisperer]

GB's structures are cracking. He is the bottler and the botcher. It's a grim thought that the country will have to suffer him for another 18 months and heaven knows what will happen to sterling. Anyway, should be positive for our Party...at last!

[David Belchamber]

An article like Michael Fallon's helps restore confidence in MPs; incisive analysis and credibility added by the inclusion of pertinent facts and figures.

Would Mr Fallon like to follow up with an article pointing to the solutions to these problems (aparting from removing GB et al)?

I do worry about the competence and morale of the civil service; we have to take this state of affairs over and make it work.

[Brian W]

Excellent article and some very interesting posts.

In response to David Belchamber, a good idea but Brown et al will pinch any solutions that we might propose and attempt to pass them off as their own

[Tony Makara]

"An article like Michael Fallon's helps restore confidence in MPs"

David Belchamber, very true. At a time when people have felt completely let down by politicians its good to have some proper old-fashioned political, facts, analysis and conclusions. Recent events are likely to have turned more people off events, lets hope not. Mr Fallon is the sort of level-headed politician that ought to be held up as an example of what an MP should be like.

[Laurance Allen]

I was one of the people who voted Labour into power twice and I beg your forgiveness, Labour have been so bad, i left the country and vowed never to return until we had a sensible Tory government. It is amazing that this Brown premiership is only 4 months old because it is the biggest mess you could ever imagine, incompetence off the scale. I think forcing an election now would be a good idea because I'm dont think the country can take another 2 years of this lot. I think the country is behind the Tory party now, they have seen the error of their ways. Brown is toast.

[Tony Makara]

Laurance Allen, you are not alone. Last night I spoke to my sister on the phone, she has always been a diehard Labour supporter but last night she expressed real concerns about having her data stored on an ID card and said that she felt the Labour government was now doing more harm than good to the country. So I think many well-intentioned Labour supporters are now starting to worry about the future direction of the country.

[Rob Stott]

Agree with the comments to date. The feeling on the ground within my industry (financial services)is that UK plc is heading for the buffers in a slow-motion train crash.

Much as I would like Brown to be the man in charge during an economic downturn and see 'economic stability' rammed down his throat, can the UK actually survive another 2 years of this incompetent bunch?

[Patsy Sergeant]

What an interesting thread this is, and the posters comments are also interesting.

I agree with sjm @ 12.24 - that however tempting it might be, and however much we may wish to stop anymore rot being perpetrated by this government, it is still too early to call for an election, because not enough people realise - yet - what an appallingly inefficient and corrupt government we have. BUT, the time is coming - fast, when enough people will realise to swing an election.

I said the other day that when events take on a momentum of their own nothing can stop them. I firmly believe that is happening now. At the same time I have noticed a different approach to the government by the reporters on the ITN news (perhaps because they themselves may be affected by the loss of identity details!). I never watch BBC news because of their bias (when I have!), so I don't know what their attitude has been.

I admire the way that David Cameron has tackled the situation in the HoC's, he has been sharp and concise, but not gone for bitchiness - which Tony Blair could never resist. George Osborne has also stuck to stating the facts.

[Tony Makara]

Patsy Sergeant, I agree with your distrust over the BBC. I feel that ITN has been very fair in holding the Labour government to account over the last few days, they have done so in a layman-friendly way too. ITN also had some very positive coverage about troop homecomings too. I find it hard to watch the BBC, apart from Paxman, its very difficult to find serious objective journalism.

[Essex Boys]

Did any of you have the same sense of deja vu as ourselves when it was announced that the culprit in the Lost Data Calamity was a 'junior official'? Did your thoughts go back to July 2004 and poor David Kelly? Dr Kelly was initially described by the MOD as a junior ranking official - later amended to middle ranking - on WMD to belittle the information and opinion he gave to Andrew Gilligan. We all remember with sadness the outcome of the government's handling of that particular scandal. All we can say to the lonely Tynsider incarcerated in a motel room with his media minder is 'please do NOT take a walk in the woods anytime soon'!

[David Sergeant]

Michael Fallon by carefully outlining the circumstances of Brown's foul ups has taken the political debate away from the usual one liner insults. It has taken a Tory about eight years to get to this. It was obvious by 2000 that Labour were incompetent and corrupt but the Tories AND the media never got their head round the details to really pin Labour down.

Surely we are heading to be a banana republic. And that includes the football team.

[Patsy Sergeant]

All the time that Alex Ferguson is allowed to make it so obvious that Man U is the only team worthwhile in England (yes I DO know he is Scottish), and that it is just a nuisance that ANY of his players have to go off and play for the national team, we will never have a decent national team. He started these tactics very publicly about five years ago - at least!

Someone commented on the news today, that in Italy (by way of comparison) most of the players in club teams are locals, but in this country most of the players in many of the larger clubs are foreigners.

Another thing that should be investigated is why so many players spend so much time 'injured'; if they are playing too many matches then if they are also in the national side and there is a World or European Cup comeing up, they should be made to limit other games for some time beforehand!

[Laurance Allen]

My god, have you ever seen such a collapse in support for the Govt. its gone through the floor, the reputation is in tatters. If I was Dave, i'd get out there now and ask where the PM is now that the govt is collapsing into an epic crisis.

[Mike Sheridan]

I am company secretary of a small development company and we were owed over £2,000 by our friends at HMRC.

I wrote in June 2007 to reclaim the money - "Sorry sir, you've filled in the wrong form" was the gist of the reply.

OK I tried again and filled in the correct form on 31st July 2007 just before going on holiday. By late September - no reply so I rang the tax office in Portsmouth.

Eventually, I was put through to the person who had written the "wrong form" letter and he told me "31st July? Oh yes, we are opening that post today".

Only takes them 8 weeks to open the mail!

We finally received our money back on 20 November - 7 months after we were first alerted to the problem.

Gordon Brown's tentacles reach far into the entrails of every small company and he should go before he inflicts more lasting damage!

[Steven Farrall]

Re Ian Parker

I do not agree with all of your analysis of the FSA. Firstly self certification mortgages are a very useful product for the self employed and those on variable earnings and those who have difficulty with the standard proofs required for status mortgages. The problem is that they became too cheap. The interest rate spread over base rates was the same or very little more than status mortgages. This has more to do with the cheap money / false inflation rate policy of Brown than regulation. In any event in a free market people should be considered adult enough to decide how much they can afford. Of course galloping house price inflation also casued by Brown's false inflation policy drove many borrowers to despately seek mortgages.

The FSA and its companion the FOS are deeply flawed models of regulation owing more in their operation and philosophy to back door nationalisation than sensible 'light touch' (ha ha) regulation. The machanistic compo schemes established under Brown and fed off by a large number of parasitical Claims management companies (whom by the way have been shown to add zero value to claimants and to have a lower success rate than direct claimants) further illustrate the inadequacies of these flawed organisations. The FOS is oprational week and serves merely to apply nonsense calculations to enable many oppotunistic claimants and CMC's to benefit undeservedly.

If the Tory's ever get back into power they should genuinely reform this attrocious monolith and return the power to the market to decide the best way to deal in financial services.

My business is in financial services, in which I have traded for 20 years. I have seen a successful sector that, in the main, delivered a good service cruelly maltreated by both Tory and Labour administrations. Sure there were rogues and some still exist but overall (with one notable exception) the results were beneficial. The one exception? The retail clearing banks and building societies and ex BS. And guess what? As soon as popular action starts to bite in regard to excessive charging the Government and the bank connive to introduce a stay.

This current Government is universally corrupt and nees to go. Now.

[Ian Parker]

So then, Steven Farrall, people might wonder what the self-employed and those on ‘variable incomes’ did before the advent of self-certification. Oh yes, they presented proof of earnings and the lending institution decided accordingly.

Whilst I am not saying that all self-certified mortgages are unsound, it is clearly an open charter to mortgage fraud. The FSA and the ending institutions cannot be unaware of this. However, the latter, quite cynically, they do not care. After all, their loans are secured and, as we see with the Northern Rock, the typical business model is often to expand the loan book as much as possible.

Frankly, I cannot think of one major area where the FSA have been able to anticipate or prevent retail catastrophes occurring. Their lack of ability now threatens the same in the wholesale sector. This is the cost of ‘benign neglect’. The whole mindset in this country is to shift responsibility and accountability; hence the nonsensical regulatory burden in relation to money laundering. A whole industry has been built on the back of this. More examples of bureaucracy for its own sake although, as I said, there is a more sinister aspect directed towards the avoidance of responsibility.

[Bexie]

The FSA should have seen this one coming and did not. Therefore the heads at the top should roll.

As for Brown Trousers, he was responsible for setting up the systems that caused the flooding in the summer, let the personal details of half the population go missing, together with several other key discs we later learn, not to mention hocking us all in for a grand each to prop up a company in a key labour area.

The man is criminally irresponsible. His own party should be calling for the vote of confidence in this shower.

[Kitty St Aubyn]

£25 billion / 25 million families = £1000 for every family endangered by release of their details.