The Treasury was 'ill-prepared' for the collapse of Northern Rock, failed to assess the scale of the bank’s bad debts even after bailing it out, made over-optimistic projections about a recovery, and gave too much authority to its advisers, Goldman Sachs.

The catalogue of errors is listed in a damning report on the nationalisation of Northern Rock from the influential House of Commons Public Accounts Committee. Edward Leigh, the chairman, said: 'The Treasury must never again be so ill-prepared.'

The report also reveals the cost to the taxpayer of banking, legal and accounting advice over Northern Rock. Since the Government’s intervention in September 2007, fees have totalled £26.8m. Lawyers Slaughter & May have been the main beneficiary, drawing £9.4m, followed by Goldman Sachs with £4.8m and Ernst & Young with £4.3m.

Daily Telegraph