UK Treasury review: unprepared for banking crisis

Associated Press + More

LONDON (AP) — Britain's Treasury was not prepared for the financial crisis which began in 2007 and still needs to do more to retain talented staff, according to a review published Thursday.

The review recommended that the Treasury raise pay — at a time when salaries across the civil service have been frozen or cut — and reform a culture which makes it hard for outsiders to succeed.

The report said very few officials at the Treasury had any experience of crisis management when mortgage lender Northern Rock got into trouble in July 2007, and had to be rescued within months. Nor had the Treasury done any planning before 2007 for dealing with the bigger crises which forced the government to bail out two much larger banks, Royal Bank of Scotland and Lloyds Banking Group.

However, performance did improve as the crisis developed, according to the report.

When Northern Rock's problems became known and depositors lined up to withdraw funds, the report said the Treasury wasn't ready for the challenge of providing information to the public on sometimes technical issues, and not everyone on the communications team understood financial markets.

The Treasury attracts a high-quality staff, one which is 13 years younger than the civil service average, but has trouble keeping them, the report said. Turnover peaked at 38 percent in 2008 and averages 25 percent a year; the report recommended a target of 20 percent or less.

"Uncompetitive salaries and limited career progression are the key reasons cited by staff who leave," the report said.

Median pay in the Treasury is 10 percent lower than in the broader civil service, and median pay for senior officials is 14 percent lower.

"In the 2011 Civil Service people survey, the Treasury ranked 96th out of the 97 organizations in terms of staff satisfaction with pay and benefits," the report noted.

The Treasury's culture of encouraging staff to develop general skills useful in a range of posts discourages the development of specialists, the report added.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.