THE Government was today said to be planning emergency legislation to take troubled bank Northern Rock into public ownership as Gordon Brown gave the clearest signal yet that nationalisation was likely.
A Bill, transferring the ownership of Northern Rock from its shareholders to the Government, is seen as preferable to either buying the bank or allowing it to go into administration and acquiring its assets. A decision is expected in the next few day
s, but the Prime Minister last night confirmed 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.
"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. So that is, yes, one of the options that has got to be considered."
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 £24 billion. Rebel shareholders yesterday failed in an attempt to gain a greater say in the future of the bank. Investors 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.
Northern Rock now has a stock market value of less than £300 million – compared with a peak of almost £5.3 billion a year ago.
The two hedge funds have called for 400p a share in compensation if the lender is nationalised, but the company's shares are currently trading at less than a fifth of that level.
Shadow chancellor George Osborne claimed 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. He said: "The Labour Government's dithering for months over Northern Rock has been deeply irresponsible and has now exposed the taxpayer to a £55 billion liability, more than the schools budget. 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."
Chancellor Alistair Darling said yesterday ministers' "preferred" course was 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."
