Review into Sir Fred’s knighthood backed by UK and Scottish leaders

The Prime Minister said it was “right” that the forfeiture committee look at the issue after Sir Fred was heavily criticised over the bank’s collapse.

Sir Fred received his knighthood in 2004, but became a focal point of blame for the company’s financial collapse in 2008, which included RBS being mostly nationalised and bailed out by the government to the tune of £30 billion.

The collapse was largely blamed on Sir Fred’s expansionist policy, particularly the take-over of Dutch bank ABN Amro.

This week, 70 MPs signed a motion calling for him to be stripped of the knighthood following a highly critical report into his leadership of the bank this month.

It also emerged last night that the former Labour/Lib Dem Scottish Executive led by Jack McConnell nominated Sir Fred for the knighthood. Previously, it was believed it had come from the Treasury when Gordon Brown was chancellor.

If Sir Fred loses his title, his estranged wife, Lady Joyce, would lose hers.

Mr Cameron is understood to be “sympathetic” to the demands, and the Treasury is referring the matter to the honours forfeiture committee.

Asked about the issue after delivering a speech on responsible capitalism, the Prime Minister said: “I think it is right that there is a proper process to be followed for something of this order.

“There is a forfeiture committee in terms of honours that will now examine this issue. I think it is right that it does so, it is right that there is a proper process.

“Obviously, it ought to take into account the Financial Services Authority report, which I think is material and important because of what it says about the failures at RBS, who was responsible and all the rest of it.

“But there is a committee, they should do the work rather than the Prime Minister himself.”

The committee normally considers cases only where an individual has been jailed for more than three months or struck off or censured by a professional body for failings relevant to the granting of the honour.

Whitehall sources confirmed that the body – led by Cabinet Secretary Jeremy Heywood with other civil servants – would be examining Sir Fred’s actions.

The banker is not expected to appear before the committee personally.

The First Minister has recently been criticised for his strong support of Sir Fred’s push to take over ABN Amro, but yesterday he said there was “a case to be heard” for the honour to be taken away.

Meanwhile, shadow chancellor Ed Balls said Labour “would not object” if Sir Fred was stripped of his knighthood.

Mr Balls said: “I think he [Mr Cameron] is right that we have a proper process and in this case it should go into this review committee. I would be extremely surprised if that process didn’t end up changing the view about whether Fred Goodwin should have his honour.

“If that’s what they decide to do, there will be no complaints from Labour.”

Mr Balls was working at the Treasury as an adviser to Gordon Brown at the time of the knighthood, but insisted: “At no point did I play any role at all in any way in any decisions about any honours at all.”

Tory MP Matthew Hancock said: “No-one has ever presided over a bigger corporate disaster that has had implications for every single family in Britain than Fred Goodwin.

“The knighthood … is inappropriate for someone who was reckless at the helm of one of Scotland’s oldest institutions.”

Sir Fred received the honour in 2004 for “services to banking”.