By Alex Stevenson Follow @alex__stevenson
Bailed-out high street bank Northern Rock has been sold at a loss to Virgin Money.
Chancellor George Osborne announced the £747 million sale would be completed on January 1st 2012.
The bank was taken over in February 2008 by the taxpayer after collapsing in the autumn of 2007.
Labour's Treasury under former chancellor Alistair Darling provided £1.4 billion to prevent the total collapse of the lender during the credit crunch.
Today Mr Osborne insisted that "it was clear to us this was the best deal for the British taxpayer", despite the loss of up to £650 billion.
"We're creating a powerful new presence on the high street, a very well known brand that is going to be out there offering good deals for customers," the chancellor told journalists in Downing Street.
"It's part of recovering the British economy that we're starting to return some of these bank shares to the private sector."
Northern Rock's bad debt was placed in a separate company, Northern Rock (Asset Management), in January 2010. The government has no plans to sell this entity.
The Treasury said Northern Rock's current customers would not be affected by the sale. Their terms and conditions are not altered and they can continue to hold their accounts as usual.
Virgin Money is to establish its headquarters in Newcastle and has pledged there will be no new redundancies among its 2,100 employees for three years.
Around 3,000 staff at Northern Rock have lost their jobs since the collapse of the bank in 2008, but the Unite union now hopes today's sale will be the start of a "secure future" for the remainder.
"The Treasury's decision to sell Northern Rock to Virgin Money marks a significant moment in the history of this north-east based financial institution," Unite union national officer's David Fleming said.
"After three years of turmoil and upheaval for the workforce at Northern Rock, Unite hopes that today will be the start of a secure future."
Virgin founder Sir Richard Branson has agreed that any sale of Northern Rock or its listing on the stock exchange in the next five years will mean an additional payment to the government of up to £80 million.
"Banking in the UK needs some fresh ideas and an injection of new competition," he said.
"I'm delighted we will get the chance to work with the loyal staff of Northern Rock to create a new force in the market. Virgin has a history of entering new sectors to improve service and provide value for customers. We plan to do the same in banking."
Northern Rock's one million customers are to be added to Virgin Money's three million to create a bank with a £16 billion retail deposit book and a £14 billion mortgage book.
"We are aiming to build a true banking alternative for the UK consumer, one centred around our ambition to make everyone better off," chief executive Jayne-Anne Gadhia said.
Mr Osborne said the sale was part of the government's strategy towards economic recovery. He had originally announced it in his Mansion House speech in June this year.
"The government is straining every sinew, doing everything possible to help the British economy move forward at a time when so many other economies in the world are in trouble," he added today.
"The government is doing everything it can do to help people at this difficult time. Things like the sale of Northern Rock are a sign that we are taking every step to move the economy forward."
The sale will be a welcome windfall for the Treasury, coming shortly before the chancellor delivers his autumn statement to the Commons on November 30th.