Gieve rocked by new Home Office scandal

Deputy governor faces calls for resignation

Sir John Gieve, deputy governor of the Bank of England, is being pressed to resign following revelations of financial mismanagement at the Home Office, where he was permanent secretary.

The top civil servant, who moved from the Home Office to the Bank in January, is already under pressure as a result of the lost prisoner scandal, where it emerged that more than 1,000 foreign nationals had been released from British prisons without being considered for deportation.

Now a National Audit Office review of the Home Office's accounts for 2004-05 has revealed errors so wild that they beggared belief.

Information produced when Sir John was called to give evidence before the Public Accounts Committee (PAC) on Thursday showed that the NAO found that problems with the Home Office's new computer system, Adelphi, had led it to get its sums massively wrong. The gross value of the debits and credits recorded by the Home Office totalled £26,527bn - 1.3 times the GDP of the entire planet and 2,000 times the Home Office budget. When this error was eradicated, the Home Office still had a £1bn discrepancy in its budget - 5 per cent of the total.

Sir John faced a grilling by MPs on Thursday over the problems at the Home Office, but only appeared after the PAC rejected an attempt by Sir Gus O'Donnell, the Cabinet Secretary, to exempt him from giving evidence. Sir Gus claimed Sir John did not have to appear because he was no longer in charge of the department under investigation.

The appointment of Sir John to the £220,000-a-year post at the Bank, where he is in charge of financial stability and helps set UK interest rates, was announced in October. But he did not take up the post until January. The appointment was made by the Queen on the recommendation of the Prime Minister and the Chancellor of the Exchequer.

By then not only had the massive problems in the Home Office accounts emerged, but Tony Blair had also been made aware of the crisis at the Home Office over prisoners from overseas. According to statements he made in the House of Commons, the Home Secretary, Charles Clarke, knew about the prisoner problem in July and told Mr Blair "before Christmas".

The fact that Mr Blair allowed Sir John to take up his post at the Bank knowing that he had left these problems at the Home Office has brought anger from MPs. Richard Bacon, Conservative MP and member of the PAC, said: "It is an eloquent comment on the nature of public appointments by this Government that Sir John can leave a catastrophic mess at the Home Office and walk into a job as deputy governor of the Bank of England. This is the sort of thing you'd expect in a Gilbert and Sullivan opera."

Vince Cable, Liberal Democrat Treasury spokesman, said the Bank had "acquired a seriously tainted official. Charles Clarke's position is untenable and this applies a priori to the man who was running his department."

The Bank said it was not aware of the problem at the Home Office before Sir John took up his role, but would not comment on whether he might have to resign.