David Prosser: Northern Rock heading back to where it belongs

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Before we all get too upset about the losses to the taxpayer – up to £650m at the prices agreed – on the sale of Northern Rock, it is worth remembering that only part of the bank nationalised three and a half years ago was sold yesterday. Virgin Money is buying Northern Rock, but not Northern Rock Asset Management, the so-called "bad bank" that will remain with the taxpayer for the foreseeable future – probably until around 2050, when the final mortgages in the business are due to be repaid.

We will not know for several decades yet, in other words, what the true loss to taxpayers has been from Rock. Indeed, it is still possible that we will turn a profit on the rescue.

Ironically, the bad bank, into which Bradford & Bingley's toxic loans have also been injected, has been a much better performer than "good Rock" over the past couple of years – booking profits at a time when the entity just sold was loss-making. Even more happily, its mortgage arrears rates have been coming down, suggesting that the loans it holds, including those infamous 125 per cent Together mortgages that Rock once shifted by the bucketload, are not quite as toxic as previously thought. That may yet change, of course, but the bad bank has been quietly making profits for the taxpayer and repaying debt steadily. So much so that its £50bn mortgage book, set against an effective loan from the taxpayer of £22.5bn, produces enough to compensate us all for the loss crystallised by yesterday's sale of its other half.

If so, the promise made by Alistair Darling, the then-Chancellor, four years ago, that taxpayers would not in the end lose out from the nationalisation of Rock, will be kept. Not that Mr Darling had any choice but to take over the bank – whatever its shareholders tried and failed to claim subsequently. Against all that, we can only speculate about the returns to come. What we know for sure is that the taxpayer is today booking a loss from the Virgin sale. Naturally, that begs the question – posed, but not actually answered, by Labour's Ed Balls yesterday – of whether George Osborne has got the timing of this deal right.

Certainly, there is a natural suspicion that political motivations have played their part. But would the Government have got a better price by biding its time? In truth, probably not, unless it was prepared to play the really long game.

In this low-interest-rate environment, running a small retail banking business focused on UK savers and borrowers means coping with low margins and a tough competitive environment.

In that context – not forgetting the prevailing economic headwinds – this is not a business that has been sold on the cheap. Nor does it belong in the public sector.

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