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MPs question UKFI-Treasury link

The Treasury select committee has urged the Treasury to reconsider the structure of its relationship with UK Financial Investments to ensure other shareholders of state-supported banks are protected.

In its report on the administration and expenditure of the Chancellor’s departments 2008-09, the select committee examines the Treasury, HMRevenue and Customs, the Debt Management Office, National Savings and Investments and the Royal Mint.

In November 2008, the Treasury created UKFI to manage the Government’s investments in Northern Rock, Royal Bank of Scotland and Lloyds Banking Group. Select committee MPs question how the Treasury’s arm’s-length relationship with UKFI works in practice to ensure UKFI does not benefit from privileged information relating to its shareholdings.

The report says: “We recommend that the Government considers whether the formal terms of the relationship need some redefinition in the light of experience. It is important the lines of demarcation are clear and reflect the reality on the ground, not least to ensure other shareholders are properly protected.”

The MPs also criticise the Treasury for claiming it met its targets for supporting low inflation when it missed its target for 11 months in the year.
The report says it is very difficult to draw final conclusions on the level of success that should be attributed to the Treasury and associated bodies for 2008-09 as “too much remains unfinished business”.

The committee hit out at performance at HM Revenue & Customs, particularly concerning low staff morale and customer experience. Separately, City minister Lord Myners told the Smith Institute in London this week that “lazy and complacent” bankers are to blame for the economic crisis.

He said: “We are serious about removing the safety net that has allowed those with blind faith in market efficiency to ignore the consequences of their lack of discipline. Far too many bankers themselves have enjoyed massive awards during the crisis, even as their firms were rescued.”

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