Michael Howard highlights National Audit Office warning on banking - from 2004

Michael Howard made another useful intervention in the Commons yesterday.

The Prime Minister had made his statement on the European Council held in Brussels on Thursday and Friday. (We carried David Cameron's response yesterday.)

Mr Howard had a humdinger for Mr Brown:

"In discussing the financial crisis with his colleagues at the Council, did the Prime Minister draw to their attention the important report of the National Audit Office on the nationalisation of Northern Rock? Did he consider with them the lessons that can be learned from the report’s finding that in 2004 the Treasury over which he presided was specifically warned that we were ill-equipped to deal with a systemic banking crisis, but decided that the issue was not a high priority? Does he now regret his failure to take that warning seriously?

The Prime Minister: Long after 2004, we did a number of exercises with the American authorities about what we would do in situations in which individual banks collapsed and about whether there was a systemic crisis as a result. Far from not taking action, we did take action and looked at what the global repercussions of individual bank failures would be. We talked to the United States Treasury and Federal Reserve and the regulators. The right hon. and learned Gentleman must recognise that Northern Rock, among other companies in the United Kingdom, was buying assets, from the United States of America, which were at that time labelled triple A but which turned out to be absolutely worthless. So there is also a failure in international regulation, which must be dealt with. I hope that he will agree that the measures that we are taking at the G20 are the right ones to take."

I think young Mr Howard (MP for Folkestone and Hythe) could have a future in politics ...