Rock nationalisation an option, PM admits

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The Independent Online

The Prime Minister kept open the option of nationalising Northern Rock as the European Union approved the Government's emergency support for the stricken bank.

Gordon Brown told the House of Commons yesterday that the Government was keeping open all routes to end the Northern Rock crisis, which included nationalisation.

"All options are on the table, but we are trying to find a private buyer," Mr Brown said.

Vincent Cable, the acting leader of the Liberal Democrats, continued to call for short-term nationalisation and said Mr Brown was "petrified by indecision" on the matter.

The Treasury is prepared to nationalise Northern Rock if no suitable buyer can be found but denies it has drawn up draft legislation. George Osborne, the shadow Chancellor, said he had not been shown proposals for nationalising the bank. He added that the Chancellor Alistair Darling had not replied to a letter he wrote in September offering to discuss Northern Rock with Mr Darling.

The European Commission approved the 25bn of emergency loans to Northern Rock from the Bank of England and the Treasury's guarantee of its deposits. The commission said the Bank of England's initial lending to Northern Rock did not count as state aid. The deposit guarantee and further loans with a Treasury indemnity do count as state aid but are legal.

The commission would have vetoed the aid if it thought the Government was trying to stifle competition by keeping Northern Rock alive. The approval runs until mid-March, by which time Northern Rock hopes to have settled its future, and keeps support in place as the bank tries to find a buyer. Sir Richard Branson's Virgin Money consortium is the preferred bidder but it faces competition from the private equity firms JC Flowers, Cerberus and Olivant.

Olivant is expected to submit its proposal before the weekend. It has hired Lehman Brothers as its broker to advise on its bid for Northern Rock. Lehman would also advise on the rights issue Olivant plans if it takes over the bank.

Northern Rock said all parties were confident of a successful outcome to the sale process, which has been accelerated since Virgin was named as preferred bidder last week.

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