Tories reject calls for Northern Rock nationalisation
David Cameron has blocked Liberal Democrat calls for the government to nationalise the troubled Northern Rock bank.
The Conservative leader said it would mark a “monumental failure” if the government was to take over the lender, but predicted it risked being left with no other option.
Vince Cable, Lib Dem economics spokesman and acting leader, today wrote to Gordon Brown calling on the government to nationalise the bank in order to reduce the risk taxpayers’ money will be lost.
In September, the Treasury authorised a Bank of England loan of £22 billion to the northern bank after it was badly affected by the credit crunch.
In a letter to the prime minister today, Mr Cable said urgent legislation should be introduced to put the bank into temporary public ownership until a private buyer can be found in more stable conditions.
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.
“I have urged for some time that temporary public ownership leading to private sale in more settled conditions is the least worst option.”
The Liberal Democrats argue an enabling bill could be introduced before Christmas and passed with cross-party support.
Accordingly, Mr Cable has also written to Mr Cameron, urging him to support the measure.
Speaking to the Today programme this morning, however, the Tory leader said he did not support nationalisation.
Mr Cameron said: “I don’t think it would be right for the government to spend even more taxpayers’ money nationalising a bank and suddenly becoming responsible for £100 billion of mortgage lending.”
Stressing that he wants a private sale, Mr Cameron cautioned he suspected the government is running out of time and money and will be forced to nationalise the bank.
“If it does, it will be a monumental failure,” he added.
Northern Rock’s chairman Brian Sanderson has said he does not expect any action to be taken “this side of Christmas”.
