Northern Rock sell-off would be a disaster say Lib Dems

Jul 3 2009 The Journal

ANY early Government sell-off of Northern Rock would be “disastrous”, Liberal Democrat treasury spokesman Vince Cable said yesterday.

Mr Cable told the Local Government Association annual conference he did not know whether a report the supermarket giant Tesco could launch a bid for the nationalised Newcastle lender was true.

But he told delegates: “It’s very clear that they (the Government) want the banks off their hands as quickly as possible. In the current context, this would be absolutely disastrous.”

Northern Rock is currently awaiting approval from the European Commission for an injection of Government capital which will then allow the business to be split into two parts. This could lead to a sale of the retail part of the business, with Virgin and now Tesco linked as possible suitors. It is unlikely any deal will happen until late this year at the earliest.

Mr Cable told the representatives of local authorities across England and Wales the experience of other countries was that Governments often had to retain control of banks for up to 10 years in these circumstances before they got a return on the investment.

He told the conference in Harrogate how the Government had treated the economic crisis like a “dose of the flu” when the correct analogy was with a heart attack.

Mr Cable also dismissed what he called an “unholy alliance“ of bankers, ministers and commentators who were talking up signs of “green shoots“ of economic recovery.