Rock nationalisation denounced by Tories

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David Cameron has given his strongest indication that the Conservatives would not vote for the nationalisation of Northern Rock if the Government decided to take the bank into public ownership.

The Tory leader said nationalisation would be "catastrophic" and that the Government should get the Bank of England or a company administrator to reorganise the stricken lender.

"We don't think nationalisation is the right answer," said Mr Cameron. "They should be looking at other sorts of structures, such as the Bank of England acting as the restructurer of Northern Rock. It's not right to rule out administration or other options."

In calling for administration, Mr Cameron did not mean putting the company into bankruptcy but rather appointing someone to take over the management of the business. He said it would be "very, very difficult to see any circumstance in which nationalisation can be justified", though he did not say the Conservatives would definitely vote against public ownership.

A Treasury spokesman said: "Our priority is to protect the interests of taxpayers, of the depositors in the bank and to ensure stability of the financial system. We are working hard to see if a private-sector solution can be made to work but all options remain on the table."

The Bank of England's other assets fell by £2.15bn this week after Northern Rock used the £2.25bn it made from last week's sale of mortgages to JP Morgan to repay some of its borrowing from the central bank.

Nationalisation has moved up the Government's list of options because securing finance for a private-sector deal has proved difficult. But sources say bidders, the authorities, the Rock and their advisers are still working towards a non-nationalisation solution.

The Government could act as soon as next week if it thinks alternatives have been exhausted. If a private deal looks feasible it would probably wait until next month to decide.