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Taxpayers face £2 billion Northern Rock bill

Taxpayers face £2 billion Northern Rock bill

Category: Banking

Updated: 18/05/2012
First Published: 18/05/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The decision to split the ailing bank Northern Rock into two parts could end up costing the UK taxpayer £2 billion.

The forecast has been made by the National Audit Office (NAO), which added that UK taxpayers made a loss of around £480 million on the sale of Northern Rock plc to Virgin Money last year.

The Government faced criticism in the wake of the sale for selling off the bank for less than it paid for it.

But despite the loss, the NAO said the sale represented the 'best option to minimise losses'.

"A sale of Northern Rock plc at the earliest opportunity was the best option to minimise losses on the £1.4 billion of public money invested in the bank," said Amyas Morse, head of the National Audit Office.

The report says that the cost to the public purse should be seen as part of the overall cost of securing the benefits of financial stability during the financial crisis.

The bank was bailed out with taxpayers' money in 2008, and split into two bits – known as the 'good bank' and the 'bad bank', known as Northern Rock Asset Management (NRAM).

This part of the bank holds bad loans and mortgages and is to be eventually wound down, although it is to remain in public ownership for 'many years to come', according to Ms Morse.

"Given the scale of the crisis, we are fortunate that the net present cost to the taxpayer is potentially not more than £2 billion," said Margaret Hodge, who chairs the Committee of Public Accounts.

"But this is perhaps more by luck than good judgement."

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