Brown signals Northern Rock could be nationalised

Gordon Brown delivered his strongest signal yet that stricken bank Northern Rock could face nationalisation.

British Prime Minister Gordon Brown delivered his strongest signal yet that stricken bank Northern Rock could face nationalisation.

Speaking after rebel shareholders failed in an attempt to gain a greater say in the future of the mortgage lender, the Prime Minister confirmed that the government was now actively considering the option of taking it into public ownership.

Although “a number” of private companies had expressed an interest, the move may be necessary to protect the British economy, Mr Brown said in an interview for ITV 'News At Ten'.

“Because stability is the issue we will look at every option and that includes taking the company into public ownership and then moving it later back into the private sector,” he said. “So that is, yes, one of the options that has got to be considered.”

Earlier, investors in Northern Rock rejected three out of four resolutions put forward by its two biggest shareholders.

Hedge funds SRM Global and RAB Capital had wanted to restrict the board’s ability to issue shares and sell assets at knockdown prices.

However, the board had warned that the proposals could hinder a rescue of the ailing firm, and make nationalisation even more likely.

The resolution passed at the Extraordinary General Meeting limits the board’s ability to issue shares, although Northern Rock said this would not represent an “additional material restriction” to a rescue.

The bank’s chairman Bryan Sanderson said he would work “tirelessly” to find a solution to its current difficulties, but acknowledged the support that the rebel motions had attracted.

“Whilst we are pleased that all but one of the resolutions proposed by SRM and RAB Capital were not carried, we recognise that a material number of shareholders did vote in favour of these resolutions.

“Shareholders should be assured that the board will continue to work towards securing the best possible outcome for shareholders and other stakeholders,” he added.

Shadow chancellor George Osborne responded to the news by restating his view that nationalisation would represent a “major failure” for Government policy.

However, he did not entirely rule out the Tories supporting such a move in Parliament if it was considered necessary.

“The Labour Government’s dithering for months over Northern Rock has been deeply irresponsible and has now exposed the taxpayer to a £55bn (€72.7bn) liability, more than the schools budget,” Mr Osborne said.

“We may be fast approaching the defining moment when the economic incompetence of Gordon Brown and Alistair Darling is brought home to the whole country, with the first nationalisation of a high street bank.

“Nationalisation would be a major failure of policy. We have yet to see the detail of this desperate option, but it is difficult to see how we could support it.”

Before the Northern Rock vote result emerged, Chancellor Alistair Darling stressed that ministers’ “preferred” course would be to find a private buyer.

But he added in a speech in London: “Our objectives are to protect the interests of taxpayers and depositors, to maintain financial stability, to champion growth and enterprise.

“And I’ll take whatever action is necessary, however difficult, to take the right decisions for the long-term interests of the country.”

Mr Brown said he understood the public’s worries during the current “difficult and turbulent” economic conditions, but insisted the Government was taking action to ensure stability.

“I believe that even though this is a difficult time people will see us taking the right decisions that will enable us to bring down interest rates at the end of this year, keep inflation low and therefore keep the economy moving forward even when in other countries the economy is stalling,” he added.

The Newcastle-based lender has been in crisis since soaring borrowing costs in the summer credit crunch forced it to seek a Bank of England bail-out in September, prompting the first run on a UK bank in nearly 150 years. It now owes an estimated £24bn (€32bn).

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