Temporary nationalisation for Northern Rock
March 1, 2008
The government recently decided that Northern Rock will benefit from going into public ownership, at least on a short term basis, rather than being sold off privately. The Chancellor of the Exchequer, Alistair Darling, said that the ailing mortgage lenders would be nationalised on a temporary basis. He said that neither of the two private offers, which included an offer from Sir Richard Branson’s company Virgin, offers sufficient value for money to taxpayers.
The government plans to hold on to the bank until market conditions improve according to reports. Emergency legislation has been discussed in order to get the bank into public ownership as early as possible – within a few days of the announcement. The man put in charge of Northern Rock whilst in public ownership, Ron Sandler, assured savers that their deposit would be safe.
However, the move has been fiercely opposed by Conservative Party officials. The Shadow chancellor said: “After months of dither and delay we have ended up with this catastrophic decision. We now have the situation where the government will be making decisions on whether or not to foreclose on people’s loans in a falling housing market.”
Virgin boss, Sir Richard Branson, was not happy either, stating: “We believe we had a very strong proposal, an experienced team and one of Britain’s best brands. We believe nationalisation is not the right answer and that a commercial solution would have been the best way forward.”
However, Mr Darling stated: “It is better for the Government to hold on to Northern Rock for a temporary period and as and when market conditions improve the value of Northern Rock will grow and therefore the taxpayer will gain. The long-term ownership of this bank must lie in the private sector”.
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