THE most astonishing thing about Revenue & Customs losing the personal and account details of almost half the British population is that managers appear to have ignored every warning sign that this could happen.

Two months ago a CD from the Revenue with personal information about 15,000 Standard Life customers was also lost in the post, yet nobody thought to review procedures for sending sensitive data. In September it was revealed that more than 40 Revenue laptop computers – some containing taxpayers’ details – had gone missing in the previous 12 months, yet nobody thought it wise to employ encryption technology to protect data.

Despite the repeated blunders and maladministered projects, such as tax credits, there is a culture of arrogance at the Revenue that needs to change. Let us not forget that this is an organisation that fought all the way to the Court of Appeal to avoid paying compensation to taxpayers for bad advice, delay or incompetence.

The unions and those trying to make political capital out of the most recent fiasco blame job cuts and efficiency drives, but that misses the point. Morale may be low at the Revenue, but since when was that an excuse to abandon common sense?

Nobody could reasonably argue that the public sector is understaffed. Productivity levels in the Civil Service are appallingly low while the terms of employment are generous to a fault. Few workers in the private sector enjoy the luxury of final-salary pension schemes and the chance to retire at 60. This episoide should not be used to reject reforms that are designed to deliver value for taxpayers’ money.

Though it is tempting to blame Alistair Darling for what happened, he cannot be expected to micromanage every element of the tax office. The real culprits are the managers who allowed such a cavalier approach to data security to develop.

It was right that Paul Gray, the head of Revenue & Customs, resigned over this. Others should follow. The possibility of a more contrite Revenue emerging from the debacle is the only silver lining to this otherwise dark cloud.

With more bad debt and bad news to come, cash is king

DEVELOPMENTS in equity markets this week offered a stark reminder that the full consequences of the credit crunch still have some way to run.

Investors in Northern Rock, many of whom inherited the shares when it demutualised ten years ago, watched in disbelief as the value of their shares halved again – this time in reaction to the proposed takeover plans. The value of Paragon Mortgages, the UK’s third-largest buy-to-let lender, also halved after it gave warning that its future will be in doubt if it fails to secure more funding by February. Any private investors left in these companies would be well advised to head for the exit.

These developments also dragged down the wider market and blue chip financial stocks in particular, leaving the likes of Barclays and RBS trading on staggeringly low price-to-earning ratios. But anyone who thinks that the price of banking stocks represents a decent buying opportunity would do well to remember the City adage that it is easy to get hurt catching a falling sword.

Few professional investors are optimistic about the prospects for the wider stock market, even less for the financial sector, at least over the short term. The threat of recession in America is growing by the day and there is almost certainly more bad debt and bad news ahead. That said, anyone who has the nerve, and can afford to take a longer-term view, may yet profit from buying a stake in one or more of the bigger banks.

Those of a more cautious disposition may do better to quit the stock market, particularly as the credit crunch has helped to push savings rates much higher recently. But remember that only the first £35,000 of your savings is protected in any one institution. A saver with a total of £70,000 split between Bank of Scotland and Birmingham Midshires, for example, has only £35,000 protected because both banks are part of the HBOS group. For a full list of which savings brands are owned by which banks, go to timesonline.co.uk/moneycentral .

Failure to pass on rate cuts to borrowers cannot be justified

THE outlook for borrowers took a further turn for the worse this week. Libor, the interest rate at which banks are prepared to lend to one another, started edging higher, which is bad news for borrowers who want to take out variable-rate mortgages.

Worse still, lenders gave warning that there is no guarantee that they will lower mortgage rates even if the Bank of England cuts the cost of borrowing.

To some extent, this is already happening. The prospect of lower base rates has reduced swap rates, which the banks use to fund fixed-rate mortgages. But the fixes available to consumers have barely come down since the credit crunch began. In July the best two-year fix was 5.49 per cent, nearly a full percentage point lower than the cost of funds. The best fix now is 5.48 per cent, four hundredths of a point higher than the current swap rate.

The banks may be nervous about the fallout from the credit crunch, but boosting margins to this extent is simply not justified. When the base rate falls, the banks must respond with cuts of their own.