The taxpayer lost out over Northern Rock because of five months of “drift” at the Treasury as the crisis unfolded, its most senior official said today.

Sir Nicholas Macpherson said that with hindsight, efforts to effectively “bribe” private firms to buy the troubled bank should have given way to nationalisation earlier.

But he assured MPs there was now sufficient expertise to make sure future disposals of state-owned bank assets would be done in a “far more professional” manner.

The permanent secretary delivered his frank assessment as he and other officials were grilled by a spending watchdog over the sale of Northern Rock to Virgin Money last year.

Northern Rock plc was sold last November to Sir Richard Branson's firm in a deal expected by the National Audit Office to rack up a £480 million loss for the taxpayer.

While the NAO backed the sale, it warned “bad bank” assets still in public ownership could lead to a net cost to the taxpayer of £2 billion when taking account of risk and deferred proceeds.

Sir Nicholas conceded there was an element of luck that the sale appeared to have been well-timed but suggested the Treasury had more than its fair share of bad luck elsewhere.

He said he believed the decision to split the high street institution into the “good” and “bad” parts proved to be the right one.

Asked about the whole saga, Sir Nicholas told the public accounts select committee: “The main damage which was done on Northern Rock goes back to 2007/08.

“With the benefit of hindsight, the Treasury was slow off the mark.

“From the point there was a run on Northern Rock in September through to nationalisation there was a five-month period of drift, and that made it quite likely that we would lose money on Northern Rock ... it was certainly not inevitable at the point we took a majority holding in RBS.”

Asked what should have been done better, he added: “I would have wanted to nationalise it earlier.

“We spent a long time coming up with ever more sophisticated ways in effect to bribe private companies to buy it. That failed.”

The senior mandarin said it would be a waste of taxpayers’ money to pack the Treasury with experts “on the basis that a bank is going to collapse tomorrow”.

But sufficient expertise and additional powers have been installed to ensure that the Government would handle the state’s huge remaining stakes in RBS and Lloyds “in a far more professional approach to asset management than existed in government in 2007”.