It says Northern Rock will be classified as a public financial corporation from October 9, 2007 because the public sector has the power to control the collapsed bank’s general corporate policy. While the BoE’s loan is outstanding Northern Rock requires permission before undertaking most business activities.
The ONS says this move should not be confused with ‘nationalisation’ which refers to public ownership.
Shadow chancellor George Osborne says classifying Northern Rock as a public financial corporation adds more than £70bn to the national debt which breaches Gordon Brown’s sustainable investment rule by raising public debt to more than 42 per cent of GDP.
He says: “Gordon Brown has staked his reputation for competence on meeting his own fiscal rules. Today those rules have been blown to pieces as a result of his economic incompetence. Brown has effectively saddled every taxpayer with a second mortgage as a result of his mishandling of the Northern Rock crisis.”
Liberal Democrat shadow chancellor Vince Cable says the announcement means the Government will have to be honest about the huge debt that taxpayers are currently owed.
He says: “The impact on the national accounts may prove embarrassing, but at least in the short term it ensures that the Chancellor can’t use his absurd bonds proposal to hide the true impact of bailing out Northern Rock. We must now have a rational debate about who should own Northern Rock – ensuring that all taxpayer loans are repaid with interest.”