The key lesson of Northern Rock is that the monetary policy reform package of 1997 was misconceived and unviable. Giving formal independence to the Bank of England in setting interest rates was harmless enough – a matter of degree rather than of principle, and in fact designed to enhance the Treasury’s independence of Downing Street more than the Bank’s independence of the Treasury. The blunder was to remove the Bank’s authority to regulate the banking sector and to imagine that the Financial Services Authority could do the job instead.

Of course this too was politically motivated. The Bank must not be allowed to look too powerful. In today’s post-welfare-state era, legislators and officials are accustomed to creating regulatory bodies and distributing functions among them more or less at random. But banking is different. Unlike health and safety, food standards or indeed share flotations, its supervision did not arise from government fiat. Rather, it evolved from within the market system more than a century ago, when government was minimalist and today’s culture of state regulation unheard of.