The Lib Dems threatened to withdraw their support for the bill to nationalise the stricken bank yesterday after discovering the Treasury did not plan to include the Granite fund, which holds 40 per cent of the banks best assets, in the nationalisation.
Shadow Chancellor Vince Cable wrote to Alistair Darling demanding he either include the fund or thoroughly and convincingly explain why it was not being nationalised.
He says the exclusion of the fund is a ploy to protect bond holders and leave taxpayers with Northern Rock’s poor quality assets – unsecured loans and high risk mortgages.
But Cable was unsatisfied with Darling’s reply which read: “There would be no benefit to the taxpayer in seeking to bring Granite into public ownership and the existence of Granite is no barrier to the onward sale of Northern Rock.”
Cable says: “It is clear that many of Northern Rock’s best assets have already been hived off to Granite. It is now critical that there is a full independent audit of the quality of Northern Rock’s remaining assets to determine how many of these are dodgy unsecured loans.
“Despite some reassurances from the Chancellor, the Government has still failed to make clear what the relationship between Northern Rock and Granite will be in the future. We cannot have a situation whereby Northern Rock continues to push high quality mortgages into Granite while taxpayers are left with a far less reliable group of assets in return for their money.”
He says confidence in the nationalisation of Northern Rock is dependent on the Government being able to demonstrate that the best interests of taxpayers is being served.