David Prosser: Stuck between Rock and a hard place

Outlook Time is running out for Gordon Brown if he wants to return any of the banking assets that the British taxpayer owns back to the private sector before the next election. Of all those assets, parts of Northern Rock look most saleable – the latest rumours suggest it could be offloaded to Tesco, though these have been denied – particularly if the taxpayer retains the less attractive parts of the bank.

You can understand why the Prime Minister would want to do a deal sooner rather than later. Getting Northern Rock off its hands might return Brown to his "saviour of the banks" days – and how galling would it be to see David Cameron sell the bank at a whacking profit if the PM decides to leave the sale until after the election, which he loses?

Still, leave it Brown should. Selling Northern Rock too cheaply, for political reasons, would undermine the courageous decision that ministers took (in the end) to nationalise the bank. The only part of Northern Rock for which the Government would currently get even a remotely credible offer is its deposit book – on mortgages, losses are still rising, the bank conceded yesterday – and any buyer with half a brain isn't going to pay top dollar to a desperate seller.

Having flogged the savings book on the cheap, Brown would then be saddling the taxpayer with Northern Rock's mortgage portfolio, on which bad debt isn't likely to fall any time soon, particularly on those Together loans, which offered up to 125 per cent loan to value ratios.

Much more sensible to hold fire on Northern Rock until the outlook for a sale improves. There is no financial imperative to get rid of it – the cash received would not be material to the public finances – and political considerations must be put aside.