Taxpayers left with £2bn Northern Rock bill
The Treasury had committed itself to nationalising Northern Rock in 2009 before assessing the full impact on the taxpayer, the National Audit Office has concluded.
A review by the spending watchdog concluded that while taking a government stake and selling off Northern Rock at the earliest opportunity was reasonable, the taxpayer could still be left £2bn out of pocket.
The NAO concluded that the Treasury’s decision in early 2009 to support mortgage lending by splitting Northern Rock in two was reasonable but based on a business plan prepared by Northern Rock management, in which events quickly showed to have been optimistic.
Amyas Morse, head of the National Audit Office, said: “Among the serious economic turmoil of 2009, it was reasonable to create Northern Rock plc to support mortgage lending. No alternative was likely to have been significantly better.
“But the Treasury committed itself before looking in detail at the possible consequences for the taxpayer.
“A sale of Northern Rock plc at the earliest opportunity was the best option to minimise losses on the £1.4bn of public money invested in the bank.
“But most of the former Northern Rock’s assets will be in public ownership for many years to come and there could be a net cost for the taxpayer of some £2bn by the time these assets are finally wound down.”