The “NatWest Three” – the three British bankers who profited at the bank’s expense from their Enron dealings – may not attract sympathy as people but many UK executives will sympathise with their plight.

How many other British directors, even if totally innocent, would not plead guilty to US charges and face 37 months in prison when the alternative is 35 years?

The treaty that allows US authorities to extradite British citizens – businessmen or alleged terrorists - without stating a case is heavy-handed. This is especially true for such economic crimes as price-fixing that would not have been illegal in Britain.

The lack of a reciprocal treaty to bring Americans to Britain is not the point: two wrongs do not make a right.

The NatWest Three may have a poor moral case but the case against their extradition is sound. If they can offset their year under house arrest against the sentence, then, after repaying their gains to the bank, they may feel they have got off lightly compared with the draconian alternative.

A law, however, that makes honest businessmen wary of doing business with America cannot be a good law. And a sentencing regime that makes accepting 37 months in jail rather than offer a defence is not justice.

The head of HM Revenue and Customs quits over the lost CDs; the chancellor of the exchequer does not. Northern Rock’s chief executive falls on his sword. Met Police commissioner Sir Ian Blair refuses to go. Labour’s general-secretary resigns over donations. Cable & Wireless chief Harris Jones leaves with £5m. England’s football manager is ousted and received half that.

That was all in one week, and if the Tory front-bench calls were answered, Labour ministers would be resigning every day. The “heads must roll” call is a knee-jerk demand but when should they, and what good does it do?

Demanding resignations is a search for short-term satisfaction but it burns up managerial talent. We must accept that the best person to solve a problem can sometimes be the person in charge when it happened.

Shareholders, politicians or football fans need to differentiate between culpability and responsibility when something goes wrong. It can be argued Steve McClaren was a direct cause of England’s elimination from Euro 2008, so it was right he went. If the Cable & Wireless division had underperformed, then its chief executive deserves the blame. Adam Applegarth got Northern Rock into its mess, so staying was untenable.

Maybe if Labour’s Peter Watt should have known disguised donations were illegal, it is right he went – but equally, could he have been reprimanded and continued? The suspicion is he was a sacrifice to meet the baying critics, though quitting can tempt the critics to demand a bigger head too.

Why did Paul Gray, head of Revenue resign? He did not dispatch the missing CDs and could not monitor every junior civil servant. He set the right rules but has taken the rap for them being broken. After that the junior civil servant could hardly stay. But if the man at the top has to resign because of mistakes down the line, why not Alistair Darling? The prime minister? The Queen, as head of state?

There is no gain from good people honourably falling on their swords for other peoples’ mistakes. If Darling had gone we’d have had a second-choice chancellor who would do a worse job and be more likely to make mistakes that forced his own resignation and replacement by a third-rate chancellor.

Merrill Lynch and Citigroup changed chiefs after announcing losses. Are the new bosses better? Are the talents of their predecessors (ousted with massive pay-offs) to be wasted? We need to be more grown up about change at the top. Bad managers should leave but good managers that make a mistake or who are on watch when an accident happens should be allowed to express remorse and allowed to solve the problem.

Unemployment used to be caused by a lack of jobs. Now it is caused by a lack of skills. The jobs are there, but not for those unable to do them. The need to produce a better qualified workforce is imperative.

Government has a role – not in creating jobs, however, but in giving incentives to learn. And companies have a role, not simply providing the education that schools fail to supply but in giving workplace training that schools and colleges are unable to give.

If government is to throw money at the problem it should not now be by creating make-work schemes, but in helping employers provide that training.

Britain currently has six million unskilled workers and nine million who are highly-qualified. The review by businessman Lord Leitch for the government forecasts a rapid fall to just 500,000 skilled jobs but an increase to 14 million highly-skilled positions.

Somehow five million unskilled people have to be replaced by five million high-skilled employees – otherwise there will be five million unemployed unskilled people.

Tony Blair set a target of half the population going to university. A brave Gordon Brown would abandon that objective and concentrate on 95 per cent of the population acquiring useful skills. For half the population to have on-the-job training would be much more useful, whether they are apprentices or researchers.

That means employers becoming the new teachers. But as it is employers that will benefit from a qualified workforce, they should be eager to take on this role.

It does not matter that we all have an average debt of £33,000, as PriceWaterhouseCoopers calculates. In does not necessarily matter that the figure has doubled over seven years. What matters is what form that debt takes.

If your neighbour owes £33,000 on his credit cards he should be worried. If, instead, he has a £33,000 mortgage he is probably the most prudent borrower in the street.

The credit card bills suggest the neighbour is living beyond his means; the mortgage could be the normal way to put a roof over the family’s head. The credit-card balance has probably financed consumption; the mortgage looks like investment. And the mortgage borrowing is asset-backed.

Think of that debt in corporate terms and see the difference between an overdraft financing trading loses and a term-loan financing a new factory.

Actually, £33,000 per adult, although it adds up to the GDP of the country, is quite modest gearing. (And comparing a liability balance with an annual national income is another bit of apples and pears that merely tells us we have borrowed once-times our income.) Given the average house price is over £200,000, Britain is barely leveraged.

Except that these are averages. A quarter of the population does not own a home. Many householders have no mortgage. But some have loan to value rations approaching 100 per cent – or more. And some people do have credit card bills greater than their annual income.

Throw the bad cases into the current perfect storm of bad news and we will see cuts in spending to meet higher interest bills, more defaults, more repossessions resulting in falling house prices that reduce consumer confidence that hits sales, and profits. This is the credit-crunch hitting the high street, but £33,000 of debt by itself, is not the problem.

Related articles

• Tough times on the cards for borrowers
• Insolvency drop ‘calm before the storm’
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Surely every upstart finance director has laid in the bath devising his own solution for Northern Rock’s problems? Here then is my two pennyworth (or £113bn-worth).

First a recap of the balance sheet. In June there were £113bn of assets (mainly good quality mortgages, we are still told) financed by £24bn of retailer savings, £27bn of non-retail money, £46bn of securitisations, £8bn of bonds and £9bn of reserves. Let’s assume that is now £14bn of savings, £23bn from the Bank of England, still £9bn of reserves but about £68bn of wholesale money, some of which needs refinancing fairly soon.

This blog’s plan is to divide the loan book into packages and sold to other banks that do still have funds. Ten packages of £10bn would solve the problem: ten of £5bn could leave Northern Rock as a viable smaller bank. There is a market for such loans: Bradford & Bingley has just sold a package of over £4bn of mortgages despite the credit crunch.

There are commercial reasons why a Barclays or Nationwide or HSBC would buy: they make a margin between their own funding rate (lower than Northern Rock’s) and the lending rate and they can cross-sell to the new customers. But selling the package at a discount - say £9.5bn for £10bn of loans – would cover any defaults and give the buyer a capital profit.

The proceeds would repay the Bank or replace Northern Rock’s commercial borrowing.

But in case buyers don’t see the commercial logic, the Bank of England should twist an arm or two and help with the finance. Swapping a huge loan to Northern Rock with smaller loans to several highly-rated large banks would be more prudent.

Let’s say £50bn of loans are sold at a 5 per cent discount. The balance sheet would now have £63bn of assets supported by £14bn of retail savings, say £6bn of reserves (reduced by the discounts), perhaps £10bn from the Bank and £33bn of wholesale money with no urgent refinancing requirement.

And the Rock’s reserve ratio rises from 8 per cent to 9.5 per cent making it better capitalised than Britain’s other banks. It might even attract a bid that gives shareholders more than a nominal sum.

I suggest the Bank governor starts twisting arms immediately – while he is still governor and Alistair Darling is still chancellor.

“Can we rely on HM Revenue & Customs?” this blog asked last month. We cited three cock-ups in three days of one week at the tax agency.

“If it is to have the respect of its compulsory customers then it has to safeguard its reputation,” we wrote. “Imagine a finance director who made so many errors on his company’s tax form!”

Now we see the extent to which the taxmen are out of control. Records relating to half the UK population have been lost in the post exposing people to the risk of identity theft.

October’s blog revealed an error in both the booklet and CD-Rom versions of CA33 (2007) regarding Class 1A National Insurance contributions on car and fuel benefits. Another day the Revenue had to amend the inheritance tax forms IHT200 because of a calculation error in box WS20. Between those two admissions it admitted electronically-filed PAYE returns (P35 and P14s) have given rise to incorrect penalty notices.

Since then discs containing information on 15,000 Standard Life customers got lost in transit. Now we find that was merely a practice for the loss of records about child-benefit recipients including names, addresses, bank account details and National Insurance numbers.

The head of the revenue has done the decent thing in resigning, but that may not be the right thing. Heads rolling is not a substitute for a security system that works. HMRC’s new boss needs to realise from the start that its customers do not deal with the tax agency because they want to but because they have to.

The tax monopoly must not abuse that position. A top to bottom change of attitudes is necessary before taxpayers – corporate or private – deal with the Revenue out of trust rather than compulsion.

Related links

• HMRC loses 25 million personal records
• PwC chairman to head data probe

Now that the government is having another go at sorting out the fraud of people who blame illness for having no job, it should sort out the fraud of people with jobs who feign sickness. And it should start with its own workforce.

Public sector employees take 50 per cent more days off work for sickness than those in the private sector. At some government offices, throwing a sickie has become a way of life: for thousands of people at DVLC, the vehicle licensing department, the average is three weeks off “sick” per year. Average, take note.

Unless you believe public-sector offices suffer from sick building syndrome, this is an attitude problem by staff and weak management, quite likely by managers who are on the same fiddle.

The sickie habit is spreading to the private sector, however, as workers see colleagues taking off days for indefinable and unprovable reasons. Companies seeking to look compassionate are reluctant to query absences, leaving loyal staff to cover – or retaliate by claiming their own sick days.

The government’s sensible new incapacity-benefit test is to assess what a person is capable of doing rather that what he or she cannot do. In a world of computers and call-centres there are many jobs, including home-working, available to people who cannot lift loads, climb ladders or carry goods.

Having asked these benefit claimants what they can do, the state should now ask what prevents so many of its own employees from turning up for work.

The Walker code of conduct for private-equity firms is a door slamming shut after the horse has bolted. When the buy-out industry was bidding for Sainsbury and Boots at the start of 2007, freely writing cheques for billions, it was Public Enemy No 1. Setting up a committee under a former banker seemed a good way of deflecting the flak.

Not as good as a credit crunch, however. Since Sir David Walker started penning his code at the request of the industry, the money has dried up preventing these funds from buying anything – fancy prices or otherwise. And bigger villains have emerged in the financial community: sub-prime, Collateralised Debt Obligations and Structured Investment Vehicles have entered the vocabulary to replace Leveraged Buy-Out or mezzanine finance.

Walker’s code emerges when it no longer matters.

A period of inactivity could be a good time to introduce new rules on transparency and disclosure, but even if the UK venture capital funds adopt it, why should the mighty US buy-out houses? Or why should the sovereign wealth funds – the new financial force stalking the globe – comply with a British code when they answer to no-one in their home countries?

The Walker code was designed to pre-empt draconian legislation. That is the last thing private-equity companies need to worry about now. This is the industry the government hopes will get it off the hook at Northern Rock. Suddenly, private-equity is Public Friend No 1. Perhaps Walker and his masters knew all along that by the time he produced his report the problem would have gone away?

Barclays writes off £1.3bn for the credit crunch; HSBC writes off £1.6bn. Carry on like this and we’ll soon be talking about serious money. It may look like the banks are paying for their mistakes, but don’t doubt it, it will be their customers who foot the bill for those losses.

In fairness, the losses – so far – by the British lenders are far less than those of the big US banks like Merrill Lynch and Citigroup, but it is the ordinary customer that will pay.

In a fair system every customer pays his own whack with no cross-subsidisation, but it is too late to expect the sub-prime borrowers in America to pay for the bank’s losses. It is because they can’t even pay their subsidised rate that the banks have had to make the write-offs.

UK companies may think the cost of the credit crunch is that if they wanted to borrow more it might be difficult. Not so: even on existing borrowings they are now paying the risk premium that banks forgot to add on in their excitement during recent years. Loans that used to cost one per cent above base rate will cost two per cent more next time round.

That’s how the banks will recoup their losses in the short term: good customers will pay for the bad borrowers’ defaults. But the real cost will be the squeeze on the economy as growth slides, demand falters, exports are hit by a strong pound and domestic sales are hit by imports flooding in because of the same strong pound. We may avoid recession, but 2008 will be the worst business climate since the early 1990s.

And all because the world’s bankers lost their judgement.

It’s not surprising that companies are eager to dump their pension schemes. Many firms feel they are running huge investment funds when all they want to do is run small widget makers. But after private-equity, hedge funds and the other financial fashions, the latest wheeze in the City is companies that will take the pension fund off your balance sheet, often asking for a hefty dowry to do so.

Is it a good bit of outsourcing or storing up the next generation of problems?

One problem for boards looking to shed the albatross of their pension scheme is that there is no standard solution. Some of the new pension vehicles are offering insurance, some matching liabilities with bonds, others seeking to take-over the whole company then spitting out the trading operation to keep the pension plan. Some convert final-salary schemes into money-purchase, some continue as defined-benefit schemes.

The chance of not choosing the best scheme is high, therefore. The chance of choosing a wrong scheme is quite feasible.

Some of these pension solutions depend on the purchaser persuading as many young people as possible to leave the fund so that the investment company can wrap up the scheme at the earliest date and keep the surplus. These vehicles have no incentive to enhance benefits if good practice changes in future.

And while the widget company may or may not be around to pay a pension in 80 years time to the 20 year old who has just joined, will these pension vehicles be there? Many of the firms offering pension solutions are off-the-shelf companies with no past and no guarantee of their future – and usually run by smart investment banks seeking a new way to make big bucks.

Businesses who see these vehicles as an easy way to offload their pensions should think twice. If it all goes wrong, they will be pressured to make up pensions for many years ahead.