Noise over Northern Rock nationalisation
Published February 28th, 2008
LONDON, UK - The confusion over the Northern Rock nationalisation has increased following a decision of leaving 40bn of the bank’s best mortgages in a private offshore trust, Granite. The Offshore firm Granite holds half of the bank’s best secured mortgages and it is not being nationalised as part of the rescue package. The government is facing much criticism in the Northern Rock rescue plan.
The contractual relationship between the Northern Rock and Granite is giving rise to confusion. The former chancellor Lord Lawson, expressed amazement that ministers were at a loss to explain at the outset of the Lords debate the contractual relationship between Granite and the Rock. In the Commons, David Cameron accused Gordon Brown of showing “less openness than Fidel Castro” while the Liberal Democrat spokesman Vince Cable, a supporter of the Rock’s nationalisation, suggested an Exocet may have gone through the government plan. The left wing Labour MP John McDonnell is one of the first MPs to raise the issue. He claimed the nationalisation programme could not proceed without the issue being addressed.
Shadow chancellor George Osborne said the situation proved that the taxpayer would “come last” under the move. “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,” he said.
The Conservatives claimed: “The contract between Northern Rock and Granite means that whenever Granite is short of assets, for instance when customers pay back their mortgage, Northern Rock has to top up Granite.”
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