"All options open" for Northern Rock
Northern Rock could be nationalised
Friday, 14, Dec 2007 12:00
The government was last night reportedly drawing up a rescue plan to nationalise Northern Rock after hopes of finding a private buyer appeared to have stalled.
The prime minister and chancellor have been adamant a private buy-out is the best option for the troubled lender. However, the turmoil in the global financial markets has inhibited the bank's sale, with preferred bidder Virgin Group unable to finalise a deal.
Ministers may now introduce emergency parliamentary legislation to temporarily bring Northern Rock into state ownership in the new year.
A Treasury spokesman confirmed last night that "all options are open".
Following pressure from Northern Rock shareholders, Richard Branson has now lost his status as sole preferred bidder. Abbey National boss Lugman Arnold will today be confirmed as joint preferred bidder.
The bank is currently dependent on Bank of England (BoE) funding in an unsustainable situation. Concerns have been raised taxpayers could lose out if the bank collapses before the BoE's £30 billion loan is repaid.
Gordon Brown has been pushing for a private sector buyer for the bank and is likely to face political embarrassment if it is nationalised.
However, he has now appeared to accept a temporary period of state ownership is practical.
Yesterday, he told the Times: "Those people who are proposing nationalisation are proposing it only as a means to get it into the private sector.
"The eventual outcome, whatever way you look at it, is to move into the private sector."
Liberal Democrat economic affairs spokesman Vince Cable has been leading calls for nationalisation and this week wrote to the prime minister urging him to seek parliamentary approval before Christmas.
Mr Cable wrote: "Whatever the theoretical attractions of a rapid private sale it is now clear that with the banking markets almost closed no bidder can raise the capital necessary to guarantee full and prompt repayment of the taxpayers’ loan, with accumulated interest.
"I am sure you will agree that no government could tolerate an outcome in which a private bidder profits from a transaction in which public money is lost."
The Conservatives have opposed calls for nationalisation, insisting it would be a "monumental failure".
David Cameron told the Today programme: "What I want is a private sale, but I suspect that the government is running out of time and running out of money and it may well be that they have to go down the path of nationalising."
Mr Branson is also now predicting the lender may have to be temporarily taken into state ownership.
He told Channel 4 News last night: "I think the shareholders have to realise that if Virgin doesn't get this away it's likely that no one will get this away, and it's likely that it'll end up being nationalised and the shareholders will get nothing."