Jeremy Warner's Outlook: Mad hatter's tea party of Rock debt repayments

The loans are being paid back faster than anticipated, but there is a big loss and a £3bn debt for equity swap. It's not clear what message the Government is trying to send out about Northern Rock here, but to understand what a mess the Treasury has got itself into over this nationalisation, just consider the following.

Last summer, Lloyds TSB was said to be offering 250p a share to buy the Rock, but only if the Government guaranteed £30bn of loans. The Government refused.

Today the situation in the mortgage market is so bad that the Government has set up a "Special Liquidity Scheme" (SLS), under which banks can swap mortgages for Government debt. In effect, banks are borrowing from the Government to finance their mortgage books.

And who is the biggest buyer of the Northern Rock mortgages that the Government is selling so that its loans to the Rock can be paid down? Lloyds TSB, which is generously helping itself to the SLS facility in the process. It's like the Mad Hatter's Tea Party. The Government is, with one hand, lending the money which enables Northern Rock to make the repayments to the other. Hey ho.