Darling defends Northern Rock bail-out
Tax payers could lose money because of the government’s moves to protect Northern Rock, it has been alleged.
In a Treasury statement issued to the Stock Exchange today, the department said it expects the private sector to bear “to the greatest extent possible” the cost of the Northern Rock bail-out.
In September, the Treasury authorised the Bank of England to make £24 billion in emergency loans to the troubled lender.
Addressing MPs this afternoon, Mr Darling justified the multi-billion pound intervention, saying the government had an interest in maintaining financial stability.
It has now been alleged the Bank of England loan may never be repaid, with critics claiming this is equivalent to every household donating £1,000 to protect the bank.
In a statement to the Commons, Mr Darling insisted taxpayers’ money – used to guarantee deposits at the bank – was secure.
He maintained many of the deposits secured are still in the bank – despite a run by savers when news of the crisis first broke.
Mr Darling confirmed savers will continue to have their deposits guaranteed throughout the ongoing period of financial instability.
Turning to the wider issue of the loan itself, the chancellor insisted the money had been secured against assets held by Northern Rock.
Mr Darling said: “Like any lender on this scale, we have ensured that the Bank’s lending is subject to significant conditions and controls to ensure that our interests are protected, and in return for this facility Northern Rock has agreed a number of controls.”
His shadow counterparts argued Mr Darling has not guaranteed taxpayers will not end up footing the bill for the banking crisis, with the government reluctant to confirm if it will be able to recoup the loan.
Liberal Democrats economic affairs spokesman Vince Cable said £11 billion of the total loan was completely unsecured with the remainder offered on more “relaxed standards” than usual.
The Lib Dems argue Northern Rock should be nationalised and then sold off once it has been stabilised.
Shadow chancellor George Osborne challenged Mr Darling over reports the Treasury has also made a secret loan to the bank.
Mr Osborne said the chancellor had made guarantees he cannot be sure of, claiming his job was now on the line.
Northern Rock admitted today it has been unable to agree a deal with bidders, claiming offers have so far been below its market value.
The government has said it cannot be certain any bidder for the bank will have access to the £24 billion emergency loan.
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