UK taxpayers may foot bill for Northern Rock sale: Lib Dems

UK Taxpayers may be forced to foot the bill for lawyers, bankers and accountants’ fees relating to efforts to sell off Northern Rock, which have already run into more than £30m (€41m), Liberal Democrats warned today.

Lib Dem Treasury spokesman Vince Cable said that there was an assumption that part of the cash would be paid back by the successful bidder for the ailing bank, but he warned it was by no means clear that this was guaranteed.

Mr Cable, who has long argued for temporary nationalisation of Northern Rock, said that public ownership may have to last for several years.

On the issue of professional fees, Mr Cable told BBC Radio 4’s Today programme: “Initially, the Government said it would pay the fees for Virgin, because they were made the preferred bidder.

“It was odd and it seemed discriminatory, so the government extended it to all parties.

“I think it is assumed that if a sale goes ahead, some of the money, or most of it, will be reclaimed, although that has not been spelt out very clearly.

“The big lesson from all this – although £30m (€41m) is actually rather a small sum alongside the £30,000m (€41,330m) which the government is lending to the company – is that it does tell us that the government is being casual with public money, and also is desperate to sell and therefore may sell on terms which are not good for the taxpayer.

“It has to be businesslike. Its first obligation is to recover the vast sums of money from the taxpayer which has been lent to the Northern Rock bank. We think it is in the order of £30bn (€41m), plus of course a lot of guarantees.”

Mr Cable said that, while the government was still seeking to find a buyer for Northern Rock, it was clear that preparations were taking place in the Treasury for the bank to be put into temporary public ownership in the New Year.

“The Governor of the Bank of England, Gordon Brown, the Chancellor – when they are pressed on whether they have ruled out nationalisation, will say very clearly ’No, we haven’t ruled it out’,” he said.

“We know there is planning going on in the Treasury for this to happen in the New Year.”

Mr Cable acknowledged that potential buyers, including Goldman Sachs, were still trying to mount a purchase of Northern Rock, but said it would be “extremely difficult” for them to raise the necessary capital in current market conditions.

He said that the best way of safeguarding public money was now to put Northern Rock into temporary public ownership, “probably for several years”.

Mr Cable said: “We are in a very critical situation and it may well be very difficult to sell this bank on to the market under conditions which are at all similar to the present, so we may well be talking about a period of time.

“The government has already nationalised the liabilities and the risks. That is effectively what has happened. You, the taxpayer, have already taken on a massive loan to the bank. You have taken on a responsibility for deposits and unsecured loans.

“If the government is going to take all the risks, it should take any potential upside which comes from the sale, and moreover it should not allow any small group of shareholders to block an arrangement which might well be in the public interest.”