Rumours of Rock buy-out are simply ‘good publicity’ (From The Northern Echo)

Rumours of Rock buy-out are simply ‘good publicity’

8:18am Friday 10th July 2009 in

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CITY firms such as Tesco and Virgin are spreading the stories that the Government wants to sell them Northern Rock, the Treasury has claimed.

A source close to Chancellor Alistair Darling hit back at growing rumours that the nationalised lender will be quickly sold – at a cut-price rate – by describing them as “good publicity” for the companies named.

The comments follow rising criticism, led by Liberal Democrat treasury spokesman Vince Cable, that the Government is preparing a “dash for cash that would cost the taxpayer dear”. Prime Minister ordon Brown is said to be desperate to be rid of Northern Rock before next year’s election, as tangible proof that the economic recovery is well under way.

Rumours that Tesco and Virgin are preparing bids for the Rock – which employs 5,000 people in the region – have circulated in the City of London for several weeks.

But a Treasury source told The Northern Echo: “These names, like Tesco and Virgin, I can assure you they are not coming from us. But it’s good publicity, isn’t it?”

That message was echoed in the Commons chamber this week by Mr Darling, who insisted Northern Rock would only be sold back to the private sector “when we think the time is appropriate”.

The Chancellor told Mr Cable: “We do not have an artificial time scale and we are not under any pressure to sell.

“It will not have escaped his notice that, just at the moment, the shares in the two banks that we own are worth slightly less than we paid for them. He therefore need have no fear of being confronted with a quick sale.

“We will do what is right to achieve the best value for the taxpayer.”

The Northern Echo reported last week that there would be no attempt to sell the Rock while it was going through a restructuring process that still requires European approval.

The bank is expected to be split into two parts.

BankCo will hold savers money and carry out lending, as well as holding some mortgages, while AssetCo will hold the rest of the mortgages and repay the outstanding £8.9bn of the Government loan.

It follows the U-turn to create a “good bank” – resuming the Rock’s role as a big player in the mortgage market, to tackle the problem of a slump in lending and even possibly taking on extra staff.

However, Mr Cable has condemned the idea, alleging: “Buyers – Tesco?

Sir Richard Branson? – are being sounded out for a fire sale of the better bits of Northern Rock leaving the rubbish with the taxpayer.

“A dash for cash would cost the taxpayer dear.”