Former RBS boss stripped of knighthood 'for starting worst recession since World War Two'

The now more prosaically titled Mr Fred Goodwin has been stripped of his 2004 knighthood, which was awarded 'for services to banking' (PA)

The former head of the Royal Bank of Scotland, Fred Goodwin, was stripped of his knighthood yesterday and effectively blamed by the Government for starting Britain's worst recession since World War Two.

Mr Goodwin was informed of the decision by the head of the Civil Service, Sir Bob Kerslake, after the annulment was ratified by the Queen. Sources at the Cabinet Office said Mr Goodwin had told Sir Bob he "expected it would happen" and described the conversation as "amicable".

But last night some senior MPs and banking industry insiders expressed unease that Mr Goodwin was being made a scapegoat. "There are far more people involved in the causes of the financial crisis than just Fred Goodwin," said the Labour MP John Mann who questioned Mr Goodwin when he appeared before the Treasury Select Committee in 2009.

The Cabinet Office said the knighthood – awarded to Mr Goodwin in 2004 for services to banking – was removed on the Forfeiture Committee's advice because Mr Goodwin had brought the honours system "into disrepute". It said his record as chief executive of RBS, which had to be bailed out by taxpayers in 2008, meant it was "an exceptional case" so normal rules about removing knighthoods did not need to be followed.

Honours cannot normally be withdrawn unless a recipient has been jailed for more than three months, or is struck off by professional or regulatory authorities for actions directly relevant to their granting.

In October 2008, Mr Goodwin, now 53, was forced to step down as chief executive and take early retirement after the bank was bailed out by the Government.

Although the Forfeiture Committee is made up of senior civil servants, Mr Goodwin's fate was sealed when David Cameron called for the knighthood to be taken away.

Speaking yesterday Mr Cameron said the Forfeiture Committee had made "the right decision", while the Labour leader Ed Miliband said the Government should now go further: "We need real responsibility right across the board."

The spotlight will now fall on others who were involved in the financial crisis, notably Sir Victor Blank, who was at the helm of Lloyds TSB when it had to be rescued by a £17bn bailout, and Sir Callum McCarthy, chairman of the Financial Services Authority from 2003 to 2008, who moved to the Treasury just before the start of the crisis he had failed to avert or foresee.