Bank public ownership in interest of taxpayer, says Brown

Monday, 18 February 2008

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Gordon Brown today defended the Government's decision to nationalise the stricken Northern Rock bank.

At his monthly Downing Street news conference, the Prime Minister said that they had taken action in the best interests of the taxpayer.

"We will and always have put the interests of taxpayers first," he said.

Flanked by Chancellor Alistair Darling, Mr Brown said that it would have been wrong not to have explored the options for a private sector solution.

"Given that both bids that came forward involved a subsidy from Government without an appropriate level of return for taxpayers, after detailed consideration and independent advice, the Chancellor concluded that the right decision is to hold Northern Rock in temporary public ownership, to be run at arms length from the Government under professional management until market conditions change," he said.

Mr Brown acknowledged that Britain was affected by "sharp changes" in the world financial markets, but insisted that it was well placed to ride out the current difficulties.

"Because of the decisions we have made, Britain is in a better position to deal with global turbulence," he said.

The European Commission said it was keeping a "very close eye" on the Northern Rock situation - but had no involvement in issues of public or private ownership.

"The EU treaty is very clear that the European Commission must be completely neutral about public or private ownership. This is a matter on which we have no opinion," said a Commission spokesman.

The Commission approved a Government package of rescue aid for Northern Rock last year. That approval expires on March 17 and any new national aid plan injecting funds into the bank would also need to be authorised by Brussels.

"If there were to be a new round of public support then that would have to be notified to us and would have to be vetted for compatibility with European state aid rules," explained the spokesman.

"We have been in regular contact with the UK authorities on Northern Rock and that contact is continuing. We have been keeping a very close eye on the situation, and that continues."

The Prime Minister said: "We have steered a course of stability through difficult times and so my message is: stability is our watchword and will remain so; to protect savers and to secure the best interests of taxpayers; we have the strength to take the long-term decisions and the strength to see them through."

The Government would have been "failing in our duty" if every possible option, including the private takeover proposals, had not been examined, he said, rejecting suggestions that he received official advice to nationalise the bank in the autumn.

Mr Darling said that, with the approval of MPs, Parliament would begin debating emergency legislation to nationalise the bank tomorrow.

The bank was "open as normal", he said, announcing that former Abbey National chief financial officer Stephen Hester had been asked to join the board as a non-executive deputy chairman by Ron Sandler - the man charged with running the nationalised bank.

"Having looked at the options, we think the best option is this temporary period of public ownership and that is what we intend to do," he said.

Mr Brown defended his successor's record at the Treasury despite a series of high-profile controversies over tax changes as well as the Northern Rock problem.

"We are dealing with a global financial situation; I believe we have been better prepared because of the actions of Alistair Darling in the Treasury than in other countries," he said.

The "test of economic competence" was the UK's stable economy and higher growth and employment than competitor nations, he added.