Rock debts row as nationalisation looms

Emergency legislation to nationalise Northern Rock is expected to become law today amid warnings that the taxpayer was being saddled with the bank’s bad debts.

The Banking (Special Provisions) Bill is expected to receive the Royal Assent after completing its remaining stages in the House of Lords, having been pushed through the Commons in a single day on Tuesday.

Ministers were forced to fend off claims yesterday that the taxpayer had been left with the “rubbish” while the bank’s high-quality mortgages had all been sold off.

It followed the disclosure that Northern Rock had been selling off mortgages through Granite, a separate company used by the bank as financial vehicle to raise funds.

In a letter last night to Liberal Democrat treasury spokesman Vince Cable, Chancellor Alistair Darling insisted that such arrangements were not unusual and posed no barrier to the nationalisation.

“The Government’s loan and guarantee arrangements are secured against Northern Rock’s balance sheet which includes high-quality mortgage assets. Granite and its bondholders have no access to these assets,” he said.

However, after a meeting with Mr Darling, Mr Cable said that he was not reassured and called for a full audit of Northern Rock’s assets.

“It is clear that many of Northern Rock’s best assets have already been hived off to Granite,” he said.

“It is now critical that there is a full independent audit of the quality of Northern Rock’s remaining assets to determine how many of these are dodgy unsecured loans.”

Shadow chancellor George Osborne said: “Now everyone knows that the way Northern Rock and Granite will operate under nationalisation leaves the taxpayers saddled with all the bad debts, with Granite taking the best mortgages”.