Tories will vote against Labour's plans to nationalise Northern Rock

Robert Peston: "The decision will be a blow to the bank's shareholders - who will receive next-to-nothing in the short term for their shares.  Emergency legislation to nationalise the bank will be introduced into the Commons tomorrow afternoon."

Alistair Darling: "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."

George Osborne: "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."

Mr Osborne confirmed that conservatives will oppose nationalisation.

Breaking news at the BBC.

5.55pm statement from George Osborne: "This is the day when Labour's reputation for economic competence died.  Gordon Brown has dithered his way to the disaster of nationalisation.  Now the taxpayer will bear the full risk of lending £100 billion of mortgages in an uncertain housing market.   We will not back nationalisation.  We will not help Gordon Brown take this country back to the 1970s.”

9.45pm: John Redwood offers ten reasons why Darling is wrong to nationalise.

Comments

[Adam-]

Will the Government be compelled to compensate/bail out the vultures who piled into Northern Rock after the share price slump?

[David Belchamber]

If the conservatives oppose nationalisation, what will they propose instead?

This should be the final straw for Darling but it is more important for the conservatives to trace each of the recent government disasters back to Gordon Brown.

As the FCO was Blair's private fiefdom, so is the Treasury Gordon Brown's.

[Mark Williams]

The Conservatives should have a go at the Labour spin that this is "temporary" ownership of NR. If the government could not package NR for sale in the last 3 months, why should anybody believe that they will be able to sell it as a going concern in the next 3 months or the next 3 years?

[Doctrine of the Right]

This is the best option for the TAX PAYER. Surely you can see that? Perhaps if the government did not act, the run on the bank may have spread to natwest, rbs, halifax and hsbc etc...surely something that needed to be avoided at ALL costs. Stability of the economy (security for all those mortgage holders) must come first? The tories need to tread carefully here - there is nothing financially wrong with NR - it still has 100 billion in assets (which now belong to the state)

Why should the state not be the benefit of the 55 billion? In the private world, a company would charge hundreds of millions of pounds in a fee for that amount of financial backing. The private plan was more than generous. If the bank is made profitable on that back of state finance - then the state should have those profits to use as its sees fit.

Shareholders should get nothing - some you win, some you lose. In a true free market - NR should have been allowed to collapse for the shocking business model that they had adopted. Thank god the government has more foresight.

[Buckinghamshire Tory]

I am quite pleased with George Osborne's comment, especially this part:
"We will not back nationalisation. We will not help Gordon Brown take this country back to the 1970s.”

[Adam-]

George Osborne on Sky News:
http://video.news.sky.com/skynews/video/Business+News/1305765v_Between_A_Rock_And_A_Prime_Minister?lpos=Business+News_1&lid=VIDEO_1305765_Between+A+Rock+And+A+Prime+Minister&videoCategory=Business+News

[David]

"the run on the bank may have spread to natwest, rbs, halifax and hsbc etc..."

That would involve a substantial rewriting of history on the government's part if that were to become common currency.

The run occurred due to reports about the viability of Northern Rock's rather particular business model. Had the same factors been present with other banks, given the dither by the government at the time, there was plenty of scope for the run to spread if it were minded to. Further, the dither by the government did not provide any reassurance to the financial sector (the lack of a serious bid for the business seems to indicate that), such that were there indeed similar risks, there was nothing to stop them from occurring. That they didn't was simply because there was no real chance of it happening.

The taxpayer should never have been placed in this position in the first place. NR isn't one of the major clearing banks that would have destabilised the UK financial system had it gone under. The government panicked over the adverse effects the collapse of the bank would have on its reputation (oh the irony) and the politically unpalatable loss of jobs in Labour constituencies. That's what we are all paying for. It's a disgrace.

[Oberon Houston]

The second forced nationalisation of a private company by Brown. Railtrack was forced into administration by him (using Byers as a front man) and now the Rock (using Darling as a front man).

[Bill Maguire]

I actually think Vince Cable has done a great job... If we are to form a coalition with the Lib Dems then I would back Vince over George as Chancellor anytime. Perhaps we need to start a 'Consevatives for Lib Dems' campaign and organise some tactical voting

[Percepied]

Are those with NR mortgages now technically council house dwellers? If so will Labour somehow use this to show they have increased the stock of affordable housing?

[Buckinghamshire Tory]

I think David is on to something important here.

Or as someone else said a few months ago: Would the government have poured billions of pounds into this bank if it's name had been "East Anglian Rock"?

[Northernhousewife]

Vince Cable has done a credable job of highlighting nationalisation. However, to propose nationalisation without full knowledge of the state of the finances of NR -something which no oppostion party can be confident of- is writing a blank cheque on behalf of the taxpayer.
We would trust a Tory Government to nationalise in the nations interest. We have done so to good effect ih the past.
Labour have form too, but it is not as promising.

[Scotty]

"This is the best option for the TAX PAYER"
Doctrine of the right, this is not the best option for the taxpayer, getting into this mess in the first place was the worst option for the TAXPAYER, please lets not forget that!

[Oberon Houston]

"This requires from the Labour Movement today a positive commitment to creating a socialist society — a phased extension of public control under workers' self-management."

Gordon Brown

"Mrs Thatcher's failures are rooted as much in doctrinaire prejudice as in her inability to see beyond the short term, her economic insights revolve around a naive yearning for the Arcadian simplicities of a marketplace untainted even by the sinister insights of Adam Smith."
(Where There's Greed: Margaret Thatcher and the Betrayal of Britain's Future by Gordon Brown)

"I think Lady Thatcher saw the need for change – we have got to understand that she saw the need for change. I also admire the fact that she is a conviction politician, I am a conviction politician like her."

Gordon Brown, Prime Minister

[Life On Mars]

New on television this week:

Life on Mars

The programme tells the story of Sam Tyler, a New Labour backbench MP, who after taking a poisoned chalice in 2007, finds himself in the year 1978. There, he works for the British Government under a control freak Prime Minister (played expertly by Gordon Brown) and his sidekick Chancellor (Alastair Darling).

Over the course of the series, Tyler faces various culture clashes, most frequently regarding the differences between his modern approach to politics and the more traditional methods of his colleagues.

Followed by News Headlines

Northern Rock Bank To Be Nationalised, Says Chancellor

[Michael Davidson]

I thought Osborne had said that if he was Chancellor, he would have nationalised it straight away. So why on earth is he saying this now?

And what is Osborne saying should be done instead of nationalisation?

[V. Rathbone]

Nationalisation is not only the right thing to do in the circumstances, it is the only thing to do to protect OUR money.

The Conservative response is pathetic. There will be no credit - or electoral
benefit - in opposing the government's action without a clear explanation and laying out of an alternative solution. I don't hear either from George Osborne at the moment.

I'm with Bill Maguire - Vince Cable as Chancellor over the schoolboy Osborne, any time.

[Richard]

"Are those with NR mortgages now technically council house dwellers? If so will Labour somehow use this to show they have increased the stock of affordable housing?"

I have an NR mortgage, fortunately I don't have my savings with them...

[Oscar Miller]

Michael Davidson - Osborne never backed nationalisation.

[Northernhousewife]

Vince Cable wanted to write a blank cheque [taxpayers money] when he has not seen the books of a company which could cost Britain a [not small] fortune.
He has not to my knowledge has access to the multitude of data complied at no small cost to the taxpayer by financial experts on the value of the assetts/risks of this company. On what did he basis was his decision to buy this company on behalf of the taxpayer responsible?

[V. Rathbone]

Michael Davidson - Osborne never backed nationalisation.

Posted by: Oscar Miller | February 17, 2008 at 19:54

More fool Osborne. What exactly has he backed? What is his solution?

All very well to blame the government - with some justification - for getting us in this position, all very good political knockabout.

But the fact is we are IN this position. What do the Conservatives propose to do about it? Nothing, just carp on the sidelines and vote against the action the government is taking in OUR best interests as taxpayers.

[Kevin Davis]

Vince Cable over George Osbourne - are these people mad or just Labour/Lib trolls.

Nationalisation is a through back to an age that should not exist in a modern economy. The only reason Cable ever suggested natonalisatio is because he knew that the Tories would never back the idea and he thought the Government would never do it.

This will prove to be a national disaster and Labour and their Lib lackey's will go down in flames.

[Malcolm Dunn]

Doctrine of the right is totally wrong about RBS,HSBC or Bank Of Scotland (owner of the Halifax).None of these institutions are remotely comparable in either size, balance sheet assets and most importantly in how they finance their mortgage business to Northern Rock.
If Darling was only thinking about the taxpayer Northern Rock could and should have been allowed to go bust. But that bank is based in a Labour heartland and I suspect Darling/Brown didn't fancy taking heat from irate savers.It would be interesting to see what would have happened had it been Chelsea B/Soc(based in Cheltenham) or Nationwide (based in Swindon). It is not certain that any other bank would have gone bust as no other institution financed their mortgage business to anything like the extent of the Northern Rock by borrowing in the wholesale money markets.
This is a huge failure for Labour. But the greatest failure has been Brown's for his creation of the FSA which yet again has showed itself to be not up to the job.
Nationalisation will do Britain's financial reputation no good at all around the world and unless it is (very) short term it does involve considerable risk for the taxpayer.That's why I think Cable lacks credibility on this issue.Sadly because he has yet to say anything on what the Conservative party would do so does George.

[Kevin Davis]

oooops..."throw back"....

[Kevin Davis]

Malcolm,

I thought George O, on the BBC, was very clear about what he would do.

He said he would have gone for a break up, or restructuring, of the bank led by the Bank of England. This is in effect what the Government has said the BofE/FSA should do in future. sounds credible to me!!

[David]

It's probably also worth noting the close links between the board of NR and Labour.

"What do the Conservatives propose to do about it? Nothing,"

I would certainly hope so. Unless you are arguing that no business should be able to go bust? What next, nationalise the Alliance and Leicester? Bradford & Bingley?

"action the government is taking in OUR best interests as taxpayers."

Us taxpayers should never have been exposed this way in the first place.

[Mike Ainsley]

Kevin Davis - you're missing the point a little bit. The Government is breaking up the bank to sell it off to private buyers. However, nationalisation gives the Government breathing room to hold a sale of NR's odds and sods at their leisure. Saying that we would never nationalise NR but would otherwise do the same as the Government meas we are simply pledging to get screwed in a fire sale!

Vince Cable has definitely been much more credible than Osborne on this issue.

[Manish]

Some people need 3 months to realise Nationalisation has been and will be the best solution of this mess.
Delay and dithering, it is for this reason Darling must go !!
As long back as November it was clear credit crunch and financing situation would have and has worsened so why this delay of 3 months. Vince Cable was not writing blank cheque, he has a better head than a lot of other political analyst and politicians.
Now to Tory plans to oppose Nationalisation... hmmm have we thought of this (as I have ponited out before on Conservativehome in december).. NRK underlying assets are good, it always has been. They had a bad financing model which can and will be corrected. Just imagine... if Ron Sandler, does a job of turning this business and not just restore it but also deliver a profitable NRK, what then for people who opposed Nationalisation.... political stance shouldn't be just driven by emotion and attack mentality but with constructive reality.
Wouldn't it have been nice for us to have said .." We are Tories, we do not like nationalisation, but given the mess you have run us into Mr. Chancellor, we have no other option but to accept less of all evil and support nationalisation", a suggestion I have mentioned on this website in response to a John Redwood article.
I just hope we dont wrong foot ourselves by opposing nationalisation... and then see NRK turned around and emerge as a 'rectified' institution which may coincide with 2009-10 election. Who then gets the political milegae.
Short time political thinking is not going to serve us well. We are doing good job of shots at Darling.. but we need to be careful of not misfiring.
And yes Gordon should be tackled more on this dithering and made to shoulder the responsiblity of this mess.

[Yet Another Anon]

why should anybody believe that they will be able to sell it as a going concern in the next 3 months or the next 3 years?
They might try selling it in tranches, trying to encourage people to buy shares on the basis that the government will still be backing it because they are the main shareholder - it's going to be a big task to get back all the money the Treasury has already loaned and avoid having to pay for any of the debt the government has underwritten.

No doubt they will look to restructure it perhaps calling in consultants, sell off any profitable assets as quickly as possible, the one thing Northern Rock does have is it's customer base many of whom other financial institutions will be eager to attract, after all even if Northern Rock sinks then people can claim up to £35,000 of the losses in their savings back and many will have other assets.

[Mike Ainsley]

I'm a Tory, but let's be balanced here:

David: "taxpayers should never have been exposed this way in the first place."

Quite right - but, in fairness, no-one really expected this, least of all the banks! There was no criticism of the tripartite system until this happened, so it's silly to pretend it's "obviously" flawed. We are where we are!

Malcolm: I think you should check the sizes of those banks...

Incidentally, I have found our position throughout this to be barmy. When nationalisation looked a distant prospect, we were openly pledging to have a fire sale of assets, and we also seem to have been toeing the lines set by our donors:

http://timesonline.typepad.com/politics/2008/01/northern-rock-t.html

[David Cooper]

From John Redwood's blog today (link via Editor's Blog Choice): -

"There are ten reasons why nationalising Northern Rock is a bad idea.

1. It more than doubles the amount of money the taxpayer has at risk , from a little over £50 billion to more than £100 billion
2. It means any bad loan Northern Rock owns, the taxpayer will own.
3. It means the taxpayer is now liable for any redundancy payments if Northern Rock has to slim its staff numbers.
4. The taxpayer may have to defend against writs from angry shareholders if the compensation terms are not sufficient.
5. The taxpayer becomes responsible for the pensions deficit for staff
6. The taxpayer has to pay compensation to shareholders at a time when public borrowing is already excessive
7. The Chancellor will have to explain mortgage foreclosures, staff redundancies and other bad news to Parliament each time it happens
8. The amount of total government borrowing will increase as a result of the big increase in the amount of money at risk, and the cash needs of the business.
9. The taxpayer will have to pay any losses, meet any write downs of assets and pay for all capital expenditure of the business.
10. The government and taxpayer may be accused of undercutting other viable financial businesses competing against this bank dependent on public money if they are not careful with their guarantees, subsidies and pricing."

Here's hoping for his chance to put this all to Alastair Darling tomorrow in the Commons debate.

[Patsy Sergeant]

'Mrs. Thatcher's (Mr. Brown's) failures are rooted as much in doctrinaire prejudice as in her/his inability to see beyond the short term......' Curtesy of Oberon Houston @ 19.36 quoting from Mr. Brown's book 'Where There's Greed:.....'

[Northernhousewife]

A couple of thoughts:
Where is Gordon? One announcement he felt able to leave to his staff?
How long before we have a terror issue?

Too cynical?

[asquith]

Patsy Sergeant, I agree that it's a bit rich given that it comes from Brown and he's just as bad, but it's actually a fair criticism to make of Thatch too.

Oh, the joys of equidistance! :)

[Northernhousewife]

We get more LIBDEM posters on here than they do on LibDem Voice.

[Scotty]

"We get more LIBDEM posters on here than they do on LibDem Voice."
Northernhousewife, thanks for making me LOL.

[Mike Ainsley]

I think Northernhousewife is bemused.

I'm not a LibDem, but I think Cable is much more right than wrong, and I'm not clear what Osborne's solution is.

People do realise that the effective liability held by HMT hasn't changed at all?

[Tony Makara]

Economic conditions are not going to improve between now and the election of a Conservative government. So now the best brains in the Conservative party need to have a plan of action ready for when they take over. I don't wish to make political capital out of the misfortune of those who involved with Northern Rock, but by nationalizing the bank Gordon Brown and Alistair Darling have just handed David Cameron and George Osborne a big stick to beat them with all the way up to and during the course of the next election.

[Malcolm Dunn]

Mike Ainsley,I know the sizes of those banks and they all dwarf Northern Rock. What point are you trying to make?

[Yet Another Anon]

Maybe National Savings & Investments and the Post Office's il advised ventures into selling insurance and things like that could be lumped together with Northern Rock as a sort of sweetener when it goes back to the private sector.

In my opinion though it should never have demutualised, many thought there was an opportunity to make big money and lent money very rashly in huge amounts to many who couldn't afford it and so ended up unable to collect in many cases.

[Malcolm Dunn]

I don't think you know what you're talking about YAA. NS&I does not sell insurance. Northern Rocks problems are the result of how they raised the finance to lend money for mortgages ie from the wholesale markets rather than from deposits,the overly competitive mortgage offers to build market share, and the credit crunch rather than the quality of their book.

[Andrew Lilico]

What a shambles this Brown government is. Blairite backbenchers and MPs must be gazing on in open-mouthed embarrassment.

The government's bungling ineptitude over the matter - there's really no other way to describe it - has destroyed all the value of Northern Rock's shareholders (who must be thinking of ways to sue) and wrecked Britain's reputation for regulatory competence in the banking arena for the next decade, at least. What a disaster!

As for voting against nationalisation - well, although it's easy to say we shouldn't be starting from here, but we are, and nationalisation is by no means a silly option now. My guess is that the best option would actually be to cut our losses, accept that we aren't going to get back all the money loaned to Northern Rock, and flog it off to whomever's daft enough to pay anything at all - giving them a few months either to pay back the loan or to liquidate the whole thing.

The government can't do this, of course, for two reasons. First of all it was daft enough to "guarantee" that the taxpayer would get back all the money loaned (which isn't going to happen with any of the sensible solutions); Second, because if administration was really an option, it should have been pursued back at the beginning, rather than the whole ridiculous deposit insurance route. Administration at that point, or even the Lloyds takeover, would have left the Northern Rock shareholders with some money and Britain's reputation largely intact.

As it is, the government's inability to accept its mistakes leads it to make more and more. And there's no guarantee that the saga will be over once they Nationalise, either. There's plenty more bad mistakes for them to make, yet...

[Mike Ainsley]

Malcolm - I skimread your post as suggesting NR was larger than those banks. Apologies.

[Kevin Davis]

"People do realise that the effective liability held by HMT hasn't changed at all?"

Now I know Mike Ainsley does not know what he is talking about.

Who will fund the redundancy payments? Who will take the write down in property assets of the company?

As the BBC points out, at 12.00 today we were exposed to £55bn, by 6pm that had doubled.

Nationalisation means it is our problem and if all those supposedly secure assets prove to be anything but then we are all screwed.

I think you will find there has never been an emergency nationalisation in history that has been temporary. What we do not yet know is what exactly it is that the Treasury is going to do to make the company ready to go back to the private sector? The new Chairman talks of making it smaller, that will incur large costs and the probable sale of the premium end of its mortgage book.

When it does get privatised again who will want to buy into it unless it is at a very low price?

[Scotty]

Well calling off the Autumn GE was politically damaging for the Labour party and Gordon Brown, but not half as expensive or damaging as it has now become for the taxpayer and the UK's financial credibility because Brown even considered holding one!!!

[Opinicus]

No Labour government has ever not nationalised something. This one held out against its addiction as long as it could.

Its back to the Seventies but without the rock anthems.

[Joe James Broughton]

I'm afraid we really do need a more effecive economic spokesman - as soon as possible. And we need someone who is also seen to be.

I am optimistic for the Tories, but there's no denying that central fact.

For goodness sake, put Michael Fallon there who would make a credible case on Northern Rock (over the failure to supervise this bank, as he did in the Select Committees). Alternatively, Dominic Grieve or deputy Phillip Hammond.

[Doctrine of the Right]

The tories are not getting this - the state now owns this bank and all that comes with it. ANYONE could turn this bank into profit and with 55 billion in finance - it may emerge stronger than ever.

It also gives the old labour crowd a booster shot in the arm - that labour is still a party of state intervention when it is required.

The polls will be VERY interesting after this. I may be wrong, but I can see labour take a lead now - which will be very very awkward news for Cameron etc...and that practically useless Osborne.

Darling may take the flak - but we all know that the prime minster calls the shots in the treasury.

[David Lindsay]

Nationalisation is not a party point. Labour and the Tories have both done it repeatedly, and it is the Tories whose record in this regard is more uniformly successful. Admittedly, they have used the device much less frequently. But their nationalisation of electricity was a great success, and their nationalisation of Rolls Royce was a triumph in the long term.

However, if the money can now be found to nationalise Northern Rock, then it should be found to renationalise the railways (which only make a profit at all because of guaranteed public subsidies – give that a moment to sink in) and the rip-off utilities. But I hope that the Government will turn Northern Rock back into the locally rooted mutual building society that it used to be in happier times.

There are those who regret the failure of the Attlee Government to honour the 1945 Manifesto pledge to nationalise the land and the clearing banks. I don’t. But if there had been any chance of the subsequent implementation of Distributism on the land and mutualisation of the banks in the Forties, then I would.

Might there be any such chance today? After all, just listen to the fearful wailing of those who had thought that they had banished civil society, acting as the democratic State, from economic life, but who now see it coming back with a vengeance because nothing else works. As someone once put it, “A new day has dawned, has it not?”

Well, has it?

[Yet Another Anon]

NS&I does not sell insurance
I didn't say it did, it sells other financial products, I said the Post Office sells insurance, which it has been doing for a couple of years now.

[Yet Another Anon]

No Labour government has ever not nationalised something.
I don't think the 1924 or 1929-31 Labour Government's nationalised anything.

Conservative governments:
Under Disraeli part nationalised the Suez Canal
Nationalised the BBC in the 1920s
Effectively nationalised electricity distribution in the 1920s
Nationalised British Leyland, Rolls Royce and some of the water companies in the early 1970s
The creation of Premium Bonds and later the National Lottery were effectively nationalisations of gambling

The National Government in the 1930s carried out a number of nationalisations although being Conservative dominated.

That said though Labour and the Liberal Party were the 2 main parties who at various times stood on platforms of mass nationalistaion notably in 1918 and for Labour in 1945 & 1983 - some of the things Labour nationalised in the 1940s probably would have been nationalised by the Conservatives if in power at the time, in the past Labour and Liberal governments have not gone in for denationalisation - prior to 1997 the only privatisation by a Labour government I can think of is in 1978 of 49% of BP shares although that was used as a blueprint for future nationalisations by the Conservative Party after coming to power, Labour would probably have sold minority stakes in other state owned companies if they had won in 1979.

It's a question of degree really, no government can really rule out doing either any nationalisation or denationalisation/privatisation, it all depends on the situation of the time.

If for example a future government came up with a scheme to privatise the armed forces then even someone normally ideologically opposed to nationalisation might feel that was somewhat crazy and decide to take it back into public ownership, or if some government decided to nationalise all corner shops then even someone such as Michael Foot or Tony Benn might feel that was going too far.

[David Belchamber]

Andrew Lilico at 22.50:

"Administration at that point, or even the Lloyds takeover, would have left the Northern Rock shareholders with some money and Britain's reputation largely intact".

Spot on; the trouble is, what are the tories going to suggest now? It is easy to criticise, not so easy to find an alternative to nationalisation now.

[Malcolm Dunn]

That is absolutely true David. With so much taxpayer money already committed there does not seem to be many alternatives. All the opposition parties can do is try to ensure that the interests of the taxpayer are paramount and that everything is done to protect them.

[Andrew Lilico]

David@09:41

I don't think that the government has any political choice other than Nationalisation, given where it had got to. It couldn't take the risk of crystallizing losses to the taxpayer of £10bn or £20bn (I'm not saying that losses on that scale were likely, but they weren't going to risk it, having promised to get all of the taxpayers' money back).

The Conservatives, on the other hand, having started on this issue very badly (remember Cameron's daft speech in which he blamed Gordon Brown's government borrowing for the debacle?), are now belatedly doing okay. The problem we have is that Vince Cable was so much more effective than we were, early on, that the press is taking the lead from him, rather than us, now.

Be that as it may, Osborne's solution is probably marginally better than Nationalisation.

[Mike Thomas (215cu)]

Nationalisation is not the answer at all.

The merger of British Motor Holdings and British Leyland Motor Cars definitely did not happen on a Conservative watch, it was Wilson & Benn in '75 playing socialism with manufacturing with speculator results (unless you lived in the Midlands as my family did during that awful time).

This is not a bank as we know it, it is a financial institution using cheap (not anymore) short-term money to buy market share by offering competitive mortgages(sometimes at 125% LTV and at more than 3x earnings multiples) over 25 years at too high a gearing against its booked deposits.

It should not have been allowed to operate in that matter. It was on this government's watch that this bank was not properly regulated.

The worst case scenario is the loan book is of dubious value and house prices depreciate below the value of the mortgages, interest rates say at their current levels and become unaffordable to homeowners.

Reposessions are already on the increase, if the mortgagees cannot make the repayments then the government is now saddled with bad debt or little or no value.

This also places the government as the owner of a bank that would seek to repossess people's homes on an inability to pay.

The best case is mortgagees either pay off the principal or seek to remortgage elsewhere. That could take 25 years to realise the loan book with plenty of interest as profit or reduce the debt liability of the loan book.

There is no-one out there in the private sector is willing to do this; they will only engage in a risk-share. In as good as marketplace as financial institution that speaks volumes for the business credibility of NR's operation.

It should have wound up the bank, paid out depositor protection, sold the loan book and closed down the retail business and that way no such liability.

Mistake 1: Guaranteeing 100% deposits.
Mistake 2: Not allowing Barclays to take on the loan book.
Mistake 3: Nationalisation.

Finally, Rolls Royce nationalisation was government as shareholder NOT as executive. The problem was purely down to corporate governance NOT a failed business model, RRs problems were well over by 1973, incidentally the US government had to act as shareholder to Lockheed as all the problems stemmed from the Trident airliner being late in production.

[Andrew Lilico]

It's highly likely that there will be significant losses on the Northern Rock loan book. A high proportion of the business was done right at the end - in 2006 and up to mid 2007, when Northern Rock was growing very rapidly. Many of those deals will go into negative equity with even relatively mild house price falls.

That's presumably one reason the private sector isn't very interested in even the fire sale we just saw.

I was amused by the government's suggestion that nationalisation is going to prove a good deal for taxpayers, giving us all a chance to make big profits when Northern Rock does well. After all, the government is *so* much better placed than the private sector bidders to know what Northern Rock's business prospects are...obviously...