Members of the Bank of England’s monetary policy committee were not told about the secret £62bn bailout handed to HBOS and RBS last year.
In an article for the New Statesman, former MPC member David Blanchflower says Bank of England governor Mervyn King did not make external MPC members aware of the £36.6bn given to RBS and the £25.4bn doled out to HBOS at the time when both banks were seeking a state bailout.
He says: “Even though I was an external member of the MPC at the time, nobody told me about these loans or how bad things were in the financial markets. We were also kept in the dark about what was happening with Northern Rock. The extent to which the external members of the MPC were not provided with basic information on the crisis is only now coming out. Surely, such information was relevant to our decisions on setting interest rates?
“If we had been told what was going on, we may have started quantitative easing sooner and cut rates faster.”
Blanchflower agrees that the bank governor and the Chancellor Alistair Darling were right to keep the loans from the public to avoid widespread panic but says keeping it from MPC members was “questionable at best”.
He says: “There is no point in having an MPC unless all members, and not just some, are given full access to vital information.”