Gordon Brown has refused to guarantee that the Government will recoup the taxpayers' money ploughed into Northern Rock under a long-awaited rescue plan to be unveiled tomorrow.
At a press conference during his visit to China, Mr Brown did nothing to deny a BBC report that he had accepted a plan by the investment bankers Goldman Sachs to convert £25bn lent to Northern Rock by the Bank of England into bonds.
The move would make it easier to achieve a private sale of Northern Rock so it would not have to be nationalised, which Mr Brown wants to avoid.
The government-guaranteed bonds would be sold off in small parcels to investors when market conditions improved. The idea is controversial because it could mean the Treasury funding Northern Rock for up to five years, even if it remains in the private sector. It also raises questions about whether a buyer could make profits at taxpayers' expense.
The Independent on Sunday has been told that Mr Brown approved the plan in talks with Alistair Darling, the Chancellor, on Thursday morning before he left on his four-day visit to China and India. The move leaked out about 30 minutes after letters were sent to potential buyers on Friday night.
Mr Darling will make a Commons statement on the Government's next moves tomorrow.
Government sources insisted the new plan did not mean that nationalisation of Northern Rock had been ruled out. A week ago, state ownership appeared to be the leading option, but one source said: "Nothing has changed. This is all part of the same process. We don't know the endgame yet."
The Prime Minister hinted that he may have discussed the latest moves with Sir Richard Branson, whose Virgin Group is the front-runner to buy the bank if there is a private sale. He is one of 25 business people accompanying Mr Brown on his visit.
"I haven't spoken in any detail to Richard Branson. The commercial decisions are not a matter for me," Mr Brown said.
The Government-commissioned Goldman Sachs report included a number of options. "All options, including public ownership on the road to moving the firm back into the public sector, are on the table," Mr Brown said.
The Prime Minister said the Government's intervention to help the bank had been proved right because it prevented a "spillover" to other financial institutions. But he stopped short of guaranteeing that taxpayers would get their money back.
The Prime Minister said: "The loans that we have made to Northern Rock are secured by its assets and the aim of our negotiations is to ensure that that position is properly maintained."
Branson, accompanying Brown on his tour, said it was "pleasing that Goldman Sachs have a package they believe works, and we're looking forward to getting into detailed discussions with them."Reuse content