Deadline on Rock stands, says Darling
Jan 25 2008 by William Green, The Journal
THE Government plans to stick to a tight timetable to decide Northern Rock’s future, the Chancellor said yesterday.
Alistair Darling told MPs that he wanted to stop the crisis dragging on “indefinitely”.
He said he did not really see “any merit” in extending a deadline of February 4 for companies interested in investing in the bank to come forward with proposals, but stressed all options – including public ownership – remained on the table.
Earlier this week, the Treasury confirmed plans to back a private sector rescue of the Newcastle-based lender through the sale of Government-guaranteed bonds to pay off its £24bn debts.
The Chancellor also yesterday confirmed the only bids currently on the table were from investment group Olivant, a consortium led by Virgin, and the Northern Rock board, as MPs expressed concern about the bank’s future. Leeds MP George Mudie highlighted how Olivant and Virgin were given preferred bidder status on the basis of a main feature of their bids being repayment of £10bn-£15bn of debt.
He added: “Now that that has disappeared, if another private sector bid comes in, not having had the months of scrutiny of the Northern Rock’s books, and wishes the deadline of 4 February to be shifted slightly, would the Chancellor look positively at that very reasonable request?”
Mr Darling said Olivant and Virgin’s indicative bids were conditional on them being able to raise commercial sources of finance, which had not proved possible, and said the Government would look at any institution’s proposals. “Most people take the view that we need to bring matters to a head, not least because the State aid approvals we have will expire in March. Now if someone comes along on February 3, of course we will listen to them and inevitably in these things there is going to have be negotiation. Olivant and Virgin and the board are the only three that have expressed an interest so far.
“We will be sensible about these things but I don’t want the whole process to drag on and on and on.”
Newcastle Central MP Jim Cousins urged Mr Darling to avoid a situation where Northern Rock went bust or where the Chancellor would end up as a “sort of neo-Mr Putin and operating Northern Rock as a kind of Gazprom of the North”.
The Chancellor replied, saying he should be “careful for a number of reasons” but stressed the Government’s plans offered a constructive way forward for Northern Rock.
“I hope we can find a solution. If it doesn’t happen then, as I said, public ownership remains an option. But I would much prefer to find a solution where we can get private sector investment in because I think in the long term that would be the better option for the bank, and its employees and the North-East.”
Liberal Democrat Treasury spokesman Vince Cable said: “Isn’t the risk of a rapid private sale that the Government will either be trampled by an Olivant or shafted by a Virgin?”
Mr Darling replied that it was “an interesting piece of analysis” and promised to study the remarks, but said proposals would be received and considered soon and expressed hope a solution could be reached.
