Taxpayers may be forced to pay for the Northern Rock crisis, the Government has admitted for the first time.

 

Alistair Darling, the Chancellor, refused to guarantee in Parliament that the £24 billion of public money propping up the bank - the equivalent of £1,000 for every taxpayer - would ever be repaid in full.

 

Mr Darling, who previously said he expected the money - which amounts to half the annual education budget - to be paid back with interest, would only say he was looking for the "best outcome for the public purse".

 

The Opposition said Mr Darling's job was "on the line" over accusations that the Treasury missed clear opportunities to prevent Britain's first bank run in 141 years.

 

As a result, Northern Rock sought an emergency loan from the Bank of England which led to a disastrous loss of public confidence in the bank. Savers queued in the street to withdraw deposits in scenes of panic broadcast around the world.

 

George Osborne, the shadow chancellor, said Mr Darling would have to resign if it turned out that his alleged failings had cost the taxpayer money.

 

Mr Darling's faltering performance as he stated the Government's position yesterday was compared to that of the Tory chancellor Norman Lamont, who sang in the bath after the pound dropped out of the ERM on Black Wednesday.

 

Mr Osborne said the Government had shown "incompetence and weak leadership" throughout the Northern Rock affair and the situation "got worse each week".

He told MPs: "We have a Chancellor who has made guarantees to the taxpayer he cannot be sure of honouring.

 

"And we have a Chancellor whose weakness is contributing to the instability of the financial system. That is why we have a Chancellor whose job is on the line."

He said Mr Darling had said last month that he fully expected all £24 billion to be paid back with interest.

 

"The Chancellor is not prepared to offer the same guarantees as he did a month ago because he is not in a position to do so. The language has changed for a reason, the risk is now greater to taxpayers."

 

Mr Osborne and the acting Liberal Democrat leader Vince Cable both failed to obtain a commitment from Mr Darling that taxpayers' money would be paid back in the lifetime of this parliament.

 

Instead of saying it would be paid back with interest he said he was looking for the "best outcome for the public purse."

 

That was seized on as a sign that Mr Darling was now unsure about the money. His officials insisted that he was still being constrained by continuing moves to find a buyer.

 

Mr Darling later told MPs: "The money lent by the Bank of England is secured against assets, such as mortgages, held by Northern Rock. So we fully expect to get it back."

Government-backed loans to the bank must be repaid, he said. The lending was guaranteed against "quality assets" including mortgages.

 

The Chancellor caused more concern when he admitted that the commitment to guarantee Northern Rock's deposits is likely to stretch beyond the February "deadline".

 

He was accused by Mr Osborne of "misleading the public" by failing to disclose that the Treasury had agreed to defer interest of up to £500 million on the loan for five years.

 

 

The £24 billion lent by the Government to Northern Rock is equivalent to:

 

40 times the amount spent on flood defence in 2007

400 new children's hospitals

5 times the public investment in science this year.

12 times the amount needed to upgrade Armed Forces' accommodation.

 

source: Daily Telegraph

 

 

Do you think we should be bailing out a bank/building society with taxpayers money with no guarantee of getting it back?

 

Surely it is the mis-management of the Bank owners and management who borrowed billions like there was no tomorrow.

 

It seems to me that the best idea is to nationalise it and then sell it off when the various problems are sorted out. At the curent share price, it wouldn't cost very much. At least that would be better than some private equity company doing the same as the profit would go to the Exchequer (effectively the taxpayer) rather than a few very wealthy individuals.

Edited November 20, 200717 yr by Suedehead2

it has to be tempting to buy a few shares atm, at £1 a time you cant really lose much...

it has to be tempting to buy a few shares atm, at £1 a time you cant really lose much...

 

 

I wouldn't be to sure just yet,might wait till it drops to a penny :w00t:

the companies value has fallen from over £4billion to less than £500million :o

it has to be tempting to buy a few shares atm, at £1 a time you cant really lose much...

That's what some people said when they fell to about four quid when the story first broke. I don't suppose they're laughing now.