How the government plans to shift Northern Rock

The details of the government’s latest scheme for Northern Rock shows just how long the taxpayer will be left supporting the stricken bank. The government will guarantee £25bn plus of bonds designed to cover both the loans given by the Bank of England and the bank’s need for cash to cover its operations with these bonds taking five years to repay.

Rock shareholders are being increasingly sidelined. The BBC reports that once business plans re submitted by February 4th, it will be the Chancellor Alistair Darling who decides which bid to accept with the greatest emphasis being on which would allow taxpayer backing to be withdrawn soonest.  However, the government no longer seems to be demanding an instant repayment of a large chunk of the public money loaned to the Rock. 

Politically the risk is that the government is seen to be giving the bidders a chance to make a quick buck with taxpayer backing.