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Darling under pressure over Rock Brown rejects competence attack
(about 2 hours later)
Alistair Darling faces accusations that Britain's reputation as a financial centre has been damaged by his decision to nationalise the Northern Rock bank. The prime minister has defended the decision to nationalise Northern Rock and rejected suggestions he has lost his reputation for economic competence.
The chancellor told BBC Radio 4's Today programme the move was the "best value for money" for the taxpayer. Gordon Brown said ministers' actions had stopped the Rock crisis spreading and also protected its customers' cash.
However, Tory shadow chancellor George Osborne said the decision marked the day that "Labour's reputation for economic competence died". He said UK economic stability had been maintained and nationalisation was now "the best option" for the taxpayer.
Shadow chancellor George Osborne has called it the day "Labour's reputation for economic competence died".
Lib Dem Vince Cable said while it was the right move, it could be costly.Lib Dem Vince Cable said while it was the right move, it could be costly.
Trouble-shooter
Mr Darling is set to make a Commons statement on his decision to temporarily nationalise the stricken bank, which will require emergency legislation.Mr Darling is set to make a Commons statement on his decision to temporarily nationalise the stricken bank, which will require emergency legislation.
Mortgage book During his Downing Street press conference, Mr Brown said the government had two options - to go with a bid by the Virgin group or a management buyout, or a temporary nationalisation of the bank.
Prime Minister Gordon Brown is also likely to be given a rocky ride over the issue when he faces reporters at his monthly Downing Street press conference on Monday.
The chancellor told Today that in considering a bid by the Virgin group and a management buyout, temporary nationalisation of the bank had appeared the best option.
Getting into nationalisation is a lot easier than getting out - as those of us who have read about the 1970s can remember George OsborneShadow chancellorGetting into nationalisation is a lot easier than getting out - as those of us who have read about the 1970s can remember George OsborneShadow chancellor
"I came to the view that the best value for money would be to transfer this bank into a temporary period of public ownership and that's what I had to do," he said. "We did have a choice, but having looked at the options, we think the best option is this temporary period of public ownership ... because that's in the best interests of the taxpayer," he told reporters.
"We took the right decisions at the right time and for the right reasons."
Mr Brown said global financial turbulence had resulted in banks failing in Germany and America, with unemployment rising in the US and mortgages affected.
"I believe we have been better prepared because of the actions of Alistair Darling in the Treasury," he said.
The running of Northern Rock will now be handed to City trouble-shooter Ron Sandler, who will be paid £90,000 a month for taking on the role.
'Arms-length' management
Asked about the chances of branch closures and job losses at Northern Rock, Mr Brown said Mr Sandler would restructure the company as he saw fit.
"Mr Sandler is free as the chairman of the company to develop the company with the restructuring plan he will develop in the next period of time," he said.
"I think it's important to stress this is arms-length management, it will look at what can be done, but obviously we want a successful company we can pass on to the private sector at the earliest opportunity."
Earlier, Mr Darling told BBC Radio 4's Today programme: "I came to the view that the best value for money would be to transfer this bank into a temporary period of public ownership and that's what I had to do.
"As far as the bank is concerned, it has got a good quality mortgage book and that's something we could build on. It's open for new business now."As far as the bank is concerned, it has got a good quality mortgage book and that's something we could build on. It's open for new business now.
"The Tory policy is to run the whole thing down - that would mean the taxpayer would be in for quite a substantial loss.""The Tory policy is to run the whole thing down - that would mean the taxpayer would be in for quite a substantial loss."
The running of Northern Rock will now be handed to City trouble-shooter Ron Sandler, who will be paid £90,000 a month for taking on the role.
Trading in Northern Rock shares has been suspended.
'Taxpayer liable''Taxpayer liable'
Mr Osborne accused Mr Brown of having "dithered his way to the disaster of nationalisation". As trading in Northern Rock shares was suspended, Mr Osborne accused Mr Brown of having "dithered his way to the disaster of nationalisation".
"The trouble with nationalisation, as we're about to discover, [is that] getting into nationalisation is a lot easier than getting out - as those of us who have read about the 1970s can remember," he told Today."The trouble with nationalisation, as we're about to discover, [is that] getting into nationalisation is a lot easier than getting out - as those of us who have read about the 1970s can remember," he told Today.
The government's made the right decision Vince CableLib Dem treasury spokesmanThe government's made the right decision Vince CableLib Dem treasury spokesman
"Once you are in to public ownership, then the taxpayer is liable for everything that the mortgage bank does."Once you are in to public ownership, then the taxpayer is liable for everything that the mortgage bank does.
"Every time it forecloses on a home, every time it fails to extend a mortgage to someone."Every time it forecloses on a home, every time it fails to extend a mortgage to someone.
"Also, there is the reputational damage."Also, there is the reputational damage.
"If you speak to people around the world who are connected with financial services, they have not only noticed what we've been doing with Northern Rock and the dithering and mistakes that Gordon Brown has made, but it has really affected their view of Britain as a place to come and invest.""If you speak to people around the world who are connected with financial services, they have not only noticed what we've been doing with Northern Rock and the dithering and mistakes that Gordon Brown has made, but it has really affected their view of Britain as a place to come and invest."
But Mr Cable, the Lib Dems' treasury spokesman, said: "The government's made the right decision.But Mr Cable, the Lib Dems' treasury spokesman, said: "The government's made the right decision.
"It's taken five months to get there, but it is clearly preferable to take this bank into temporary public ownership rather than have a bad private sale to somebody like Sir Richard Branson, under which the taxpayer would continue to have all the risks and the liabilities, and a private owner would take all the benefit."It's taken five months to get there, but it is clearly preferable to take this bank into temporary public ownership rather than have a bad private sale to somebody like Sir Richard Branson, under which the taxpayer would continue to have all the risks and the liabilities, and a private owner would take all the benefit.
"So they've gone to the right place, and frankly I don't see what the other alternatives are."So they've gone to the right place, and frankly I don't see what the other alternatives are.
"The Conservatives are criticising, but as I understand it, they want to have the bank run by the Bank of England, which is nationalisation by another name.""The Conservatives are criticising, but as I understand it, they want to have the bank run by the Bank of England, which is nationalisation by another name."
However, Mr Cable said he expected Sir Richard will want some form of compensation for the money spent on building up Virgin's bid for the stricken bank.However, Mr Cable said he expected Sir Richard will want some form of compensation for the money spent on building up Virgin's bid for the stricken bank.