Government ‘not ruling out’ nationalising Northern Rock
The government confirmed today it has not ruled out nationalising Northern Rock.
The chancellor insisted “all options are on the table”, as the ongoing global financial uncertainty makes finding a private buyer for the bank problematic.
Yesterday, the Treasury agreed to extend its financial guarantees towards the bank, as it appears increasingly likely the government will be forced to take the bank into state ownership as a temporary respite.
Gordon Brown had resisted calls, led by the Liberal Democrat’s, for a period of temporary nationalisation, but today appeared to accept this may be necessary.
In his monthly press conference, he told reporters it would be “wrong to dismiss any option without proper consideration”.
The Liberal Democrats welcomed the government’s tentative support for nationalisation and urged it to do so immediately.
Lib Dem economic affairs spokesman Vince Cable said: “Gordon Brown mustn’t delay his actions because of stubborn pride.
“Currently, the government is carrying all the risk of keeping this bank afloat while having no direct control over its affairs.
“It is critical for the security of the huge sums of taxpayers’ money involved that this company is nationalised immediately.”
Alistair Darling and Mr Brown defended the Bank of England’s intervention in Northern Rock – with state aid now estimated to be as high as £57 billion – insisting there was a systemic risk to the banking system if the lender was allowed to collapse.
Mr Darling said the continued intervention was necessary to give the bank “breathing space”, as shareholders hold out for a private buyer.
The prime minister downplayed the suggestion the run on Northern Rock reflected badly on the British economy, insisting the bank’s “unsound business plan” underpinned its collapse.
The Tripartite system, of the Treasury, Bank of England and Financial Services Association (FSA), had been “working well,” Mr Brown insisted, allowing the crisis to be contained.
Despite the prime minister’s confidence in the Tripartite system, Mr Darling confirmed a new package of reforms will be unveiled next year to help banks that get into difficulty.
In his final media grilling before 2008, Mr Brown continued to talk optimistically about the current financial situation.
Inflation is very close to target and Britain is set to record the fastest growing economy in the G7 next year, he insisted.
But he warned the government would continue to make the “hard decisions” needed to keep it that way, standing by his pledge to restrict public sector pay awards.
Mr Brown appealed to voters to take the long view, predicting people would see the decisions taken on the economy are the right decisions in the long-term.
