"There are very contradictory signals been given to the banks by the Government. On the one hand they are being called on to make rate cuts and on the other being told to operate commercially and strengthen reserves.
"Bankers are being pushed and pulled all over the place with no clear sense of direction or strategy. The top priority must be to maintain lending to keep the economy going.
"The Government should also recognise that some banks are having to borrow money at rates well above Bank of England base rate. To force these banks to pass on the full rate cut would mean them lending at a loss.
"There should be a fundamental change to Northern Rock's strategy. It is completely nonsensical in the current environment for Northern Rock to be told its priority is to run down its mortgage book and reduce lending.
"The housing market is falling through the floor, in substantial part because of a famine of mortgage lending. Northern Rock should be given a fresh mandate to help arrest this collapse."
