THE cut-price sale of Northern Rock will be investigated by Parliament’s spending watchdog amid claims that Richard Branson and his partners are poised to grab it for free.

The National Audit Office (NAO) has announced an inquiry into the deal, under which Virgin Money and others are, according to the Treasury, due to pay £747m for the nationalised lender.

Labour has protested that the buyers may be planning to raid Northern Rock’s cash reserves after the purchase, to reimburse themselves and, effectively, buy the bank for nothing.

Now that allegation will be probed by the NAO, although its inquiry will take six months – while the deal is expected to go through by the new year.

Last night, Chris Leslie, Labour’s Treasury spokesman, urged the Government to put the sale on hold and wait for the NAO’s investigation to run its course.

He told The Northern Echo: “There is clearly strong evidence to suggest that this Northern Rock firesale represents poor value for money for the taxpayer and this investigation confirms that serious questions hang over George Osborne’s deal. The Chancellor should consider delaying the sale, due on January 1, until the NAO can assure the public that it is the right way to proceed.

“At present, there is the possibility that those buying Northern Rock could asset strip so much from the firm that they get back virtually every penny they invest within a matter of months.”

The deal involves billionaire Wall Street investor Wilbur Ross injecting £250m, five times as much as Mr Branson and an Abu Dhabi investor, who are both putting up £50m.

Last month, it was revealed that £250m of Northern Rock’s own money is being used to part-finance the sale, prompting Labour’s accusations of “asset-stripping”.

That is being achieved by dipping into the Newcastlebased bank’s back-up cash – known as its Tier One capital ratio – which has been cut from 30 per cent to 22 per cent.

Labour then leapt on Virgin’s statement that it plans to take the capital ratio to as low as 15 per cent of the Rock’s loan book – in line with most other banks.

Mr Leslie said raiding the reserves a second time could hand back to Virgin and its partners their combined £350m investment, which would be “nothing short of a scandal”.

Now a letter sent by Amyas Morse, the NAO’s auditor general, announcing the investigation, tells Mr Leslie: “My team will certainly consider the points which you raise when conducting the study.”

Mr Morse continues: “I will conduct my study as a matter of urgency and I expect to publish my report by the summer recess. But I regret that I shall not be in a position to complete, or publish, the study before the expected date of the completion of the sale, in January 2012.”

Virgin has denied the accusation of asset stripping, promising to use any windfall to increase loans to its customers.