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Rock to appear on public accounts Rock to appear on public accounts
(about 2 hours later)
Northern Rock will appear on government accounts, the Office for National Statistics has decided.Northern Rock will appear on government accounts, the Office for National Statistics has decided.
The decision from the Office for National Statistics (ONS) had been widely expected as a result of the government's rescue package.The decision from the Office for National Statistics (ONS) had been widely expected as a result of the government's rescue package.
It means the government may be at risk of breaking its rule to keep net debt below 40% of national income.It means the government may be at risk of breaking its rule to keep net debt below 40% of national income.
The ONS stressed that the statistical change to public status should not be confused with nationalisation.The ONS stressed that the statistical change to public status should not be confused with nationalisation.
'In charge''In charge'
Under the change, Northern Rock is to be classified as a public financial corporation for statistical purposes.Under the change, Northern Rock is to be classified as a public financial corporation for statistical purposes.
This means that the ONS judges that the government is in charge of Northern Rock's "general corporate policy".This means that the ONS judges that the government is in charge of Northern Rock's "general corporate policy".
"This is largely due to powers that the Bank of England has taken as part of its secured lending facility arrangements," the ONS said."This is largely due to powers that the Bank of England has taken as part of its secured lending facility arrangements," the ONS said.
It gave examples of the things that Northern Rock cannot do without government permission - such as corporate restructuring, making dividend payments and buying or selling certain types of assets.It gave examples of the things that Northern Rock cannot do without government permission - such as corporate restructuring, making dividend payments and buying or selling certain types of assets.
'Consolidation' 'Risk of loss'
The change will be back-dated to 9 October 2007, which was when the Treasury extended its guarantees to cover new savings deposited at Northern Rock. The BBC's business editor, Robert Peston reckons Northern Rock adds about £100bn to the national debt, mostly secured against the mortgages of the Rock's customers.
The BBC's economics editor, Evan Davis, said the move was "not nationalisation". "Even so, a portion of that £100bn is genuinely taxpayers' money at real risk of loss, because the value of those assets could turn out to be less than the Government hopes."
"Northern Rock had been expected at some stage to come on to the government books," he said. "However, it's impossible to assess that risk of loss with scientific precision," Robert Peston said.
"It does not mean we own Northern Rock any more than we did... but this consolidates it on the books." The statistical change will be back-dated to 9 October 2007, which was when the Treasury extended its guarantees to cover new savings deposited at Northern Rock.