15/05/2012 07:47 BST | Updated 15/05/2012 08:12 BST

Fred Goodwin Should Have Kept His Knighthood, Says Alistair Darling

The decision to strip Fred Goodwin of his knighthood following the near-collapse of the Royal Bank of Scotland was a "terrible mistake", Alistair Darling has said.

Giving evidence to MPs on Tuesday morning, the former chancellor said there was "a bit of the lynch mob" about the way the former chief executive of RBS was stripped of his honour.

"The whole episode it backfired, it shouldn't have been done," he said. "It was not the fault of one man, he made mistakes, but to try and pass this off as 'here's the one man', it bring politics into disrepute".

"We're all supposed to be equal before the law, something is very wrong when you say 'I'm picking you out' after the event," he said. "I found the whole thing so repugnant."

Darling, who was chancellor when the financial crisis hit in 2009, told the public administration committee that he had not entertained the idea of stripping Goodwin of his knighthood "for more than a couple of minutes" while he had been in government as he knew he would be accused of trying to "pass the buck".

Fred Goodwin was awarded a knighthood when Gordon Brown was chancellor for "services to banking".

But he stripped of his honour by the so-called forfeiture committee in January for bringing the honours system "in to disrepute" after the bank had to be bailed out by the taxpayer.

Darling has previously criticised the decision as "tawdry" given that Goodwin had not been convicted of a crime.

"In the House of Lords you've got people who have been to jail but are still allowed to vote," he said in February.

He also hit out at the "quotas" of honours for civil servants and MPs.

"It striking if you look a the civil service," he said. "You get these lists coming up, it's not only that someone automatically expects a knighthood, you get upgrades."

"It means nothing to the general public, it means an awful lot to Sir Humphrey ... it's all nonsense."

Darling also questioned whether it was stil appropriate to include the word 'empire' in honours such as the OBE and CBE.

"We don't have one," he said. "So it's a difficult position. Commander of the British Empire (CBE) is something we are in no positon to offer."

His comments were echoed by former Labour trade minister Lord Digby Jones (also a knight), who told the committee he was embarrassed when he had to explain to people abroad that the word 'empire' was included in honours.

"We are going to have to shelve and dismiss the arrogance that comes of 200 years of empire, we are going to show the world we are damn good at what we do," he said.

"The moment you say the word 'empire' you just wish you didn't have to. At one end you get the Opium Wars, at the other the some battle for independence."