4.7 Prior to the crisis, responsibility within the Treasury for financial stability and for working with the Tripartite Authorities lay chiefly with its financial stability team, comprising a senior civil servant and a team of 16 officials, plus access to the Department's legal and financial advisers. The unfolding crisis multiplied the demands made upon Treasury resources. Several major strands of work required attention over the period: an assessment of the wider implications flowing from the situation at Northern Rock and the closure of the wholesale funding markets; the recruitment of relevant external advice; an appraisal of the options for dealing with Northern Rock and the initial search for private sector solution; an assessment of the state aid implications of public support; and the preparation of draft legislation for bringing banks in difficulty into public ownership.
4.8 The appointment of the Treasury's Second Permanent Secretary to lead the Treasury team between October 2007 and the decision to take Northern Rock into public ownership was crucial to providing clear leadership at official level. Stakeholders interviewed by us suggested the appointment provided a clear focus for other members of the Tripartite, private sector bidders, banks and others seeking, often at short notice, an informed view of the Treasury's likely position.
4.9 The availability of people with relevant skills and experience within the Treasury was severely stretched. Once the scale of the crisis had become clear, a team was brought together from across the Treasury. By mid-October the Treasury had around 24 officials working on the Northern Rock core team plus support from external advisers. Until these events, the maintenance of financial stability and liaison with the Tripartite Authorities had not been, in terms of staff numbers, a major part of the Treasury's work. Staff on the team did, however, bring other experience including, for example the rescue and restructuring of British Energy in 2003 and dealing with State Aid issues.
4.10 Stakeholders interviewed by us found it difficult to work with the rapid turnover of staff within the Treasury team. Below Second Permanent Secretary level, the Treasury employed, for example, three different team leaders to deal with Northern Rock over the period August 2007 to February 2008 and into public ownership. The three individuals covered, in turn, the initial period to stabilise Northern Rock up until early October 2007; the subsequent search for a solution up until March 2008; and, following a short gap with no post holder, oversight of Northern Rock in public ownership from May 2008 onwards. Other members of the staff joined and left the team as dictated by the work in hand. Stakeholders, whilst praising the talent and versatility exhibited by members of the Treasury's team, considered that corporate knowledge in a fast moving situation was, for a short time, reduced and risks increased as new members of the team got to grips with their new portfolio of work.
4.11 The Treasury's decision-making at official level relied on challenge and counter-challenge within the team, and its advisers, to test the rigour of the solutions that were formulated. At times the Treasury had to respond very quickly to events as they developed. As a result, decision making took place largely outside the Treasury's normal risk management procedures for major departmental projects and made limited reference to the Treasury's board, although the board did receive briefing on two occasions over the six months prior to public ownership.
4.12 There were weaknesses in the Treasury's management of electronic records. Following the decision to take Northern Rock into public ownership, the Treasury had to spend significant time and resources to identify and file relevant records in an accessible form for litigation and audit purposes.