HBOS independence to be considered by UK Auditor-General

Tim Burr, the UK Auditor-General, is to examine whether or not HBOS could survive as an independent bank. This will be a major issue in his broader investigation into whether the UK Government’s £37 billion bail-out of HBOS, LLoydsTSB and the Royal Bank of Scotland is value for money for the British taxpayer.

The Auditor General reports to the Westminster Public Accounts Committee chaired by Edward Leigh. He has told MPs that Mr Burr will consider whether ‘the wider strategic interest in strengthening the business performance of these banks has been met – protecting the value of the taxpayers’ investment’.

Here in Scotland the fate of ‘the Bank’ is an emotive one. The First Minister has described the Bank of Scotland as ‘hardwired’ into the national consciousness.

As the Auditor General’s investigation was being announced, the new Business Secretary, Lord Mandelson spoke plainly on the responsibility of ‘the banks and the regulators in that order’ for a lack of prudence and a lack of proper risk management in the poorly regulated chase after what looked like golden opportunities in the American sub-prime mortgage market.

Eight unserviceable Chinooks, the ‘wrong’ software and the 1994 crash on Mull of Kintyre

We ran a recent article on the Ministry of Defence (MOD) admission that eight Boeing Chinook Mark 3 helicopters ordered in 1995, delivered in 2001 and now costing us £422 million have not yet seen service and will not do so until 2010. A sharp-eyed site visitor contributed an interesting Yak – above. ‘Hiyak’ noted the coincidence that the date of order of these machines was shortly after the 1994 fatal crash of a Chinook in fog at Machrihanish on Argyll’s Mull of Kintyre, resulting in the loss of all twenty nine people on board. These were the two pilots and the entire top level hierarchy of security and intelligence personnel serving in Northern Ireland at the time.

he cause of the crash remains unresolved and controversial. The MOD instituted an internal enquiry which, highly unusually, placed the blame unequivocally on the two pilots, Rick Cook and Jonathan Tapper, accusing them posthumously of negligence. Authoritative information at the time and since has consistently blamed the navigational software system installed on the Chinook – FADEC (Full Authority Digital Engine Control) - which was allegedly known to be unreliable and which allegedly gave concern to pilots required to fly machines fitted with it. Pilots said to have expressed such concerns included at least one of those on duty on the day.

The Public Accounts Committee at Westminster later conducted its own investigation and its report in December 2000 contradicted denials by ministers in both Conservative and Labour Governments that the Fadec software could have played any part in the crash.

‘Hiyak’ noted in the Yakking item concerned that today’s embarrassment with the eight still unserviceable Chinooks was put down by the MOD to problems with ‘wrong’ software having been fitted; and also noted that the purchase date was shortly after the Machrihanish crash. The question remains – was this ‘wrong’ software the same or related to the suspect software that may have downed the Chinook on the Mull?

Today’s Herald quotes the MOD as now admitting that the ‘wrong’ software fitted to the eight aircraft in question means that they have safety clearance only to fly abpve 500ft in clear skies and when landmarks are clearly visible to the pilots. The crash at Machrihanish happened in fog and the aircraft hit the Mull just short of the summit of the hill above the town.

The foundation for ‘Hiyak’s’ question is gathering substance. We are keeping a watching brief and will report on developments in this case.