UK Ministers look to aid private Northern Rock buy-out
The British government is preparing to provide more financial support to enable a private sector buy-out for the stricken Northern Rock bank, it was reported.
Gordon Brown has accepted a plan drawn up by bankers Goldman Sachs to convert the billions of pounds lent to the bank by Northern Rock into bonds, according to the BBC.
The bonds – guaranteed by the government rather than a private sector insurer - would be sold off in small parcels to international investors every few months.
According to the report by BBC Radio 4’s The World Tonight, it could mean the Treasury funding Northern Rock to the tune of billions of pounds for up to five years, even if it remains in the private sector.
Chancellor Alistair Darling was said to be due to make a Commons statement on Monday.
Liberal Democrat Treasury spokesman Vince Cable denounced the plan as a “complete sell-out”.
He accused ministers of being prepared to put taxpayers’ money at risk in order to avoid the “embarrassment” of having to nationalise the bank.
“It looks at first sight, if the story is true, that the taxpayer is being comprehensively shafted,” he told The World Tonight.
“The government will be completely underwriting this company, it will be carrying all the risks. It will have effectively nationalised the liabilities of the bank but not the assets.
“A private buyer will come in – probably Richard Branson, we don’t know - buying the company for a very small sum and able to make an enormous amount out of it while all the risks are being carried by the government.
“There is no guarantee that the taxpayer is going to get its money back, certainly over a reasonable period of time.”
There was no immediate response from the Treasury.
