The Treasury’s plans were hotly debated in the third reading of the bill in the House of Commons last night.
Lib Dem Shadow Chancellor Vince Cable believes the exclusion of the fund, which holds 40 per cent of the bank’s best assets, is designed to protect bond holders and leave taxpayers with the poor quality assets – unsecured loans and high risk mortgages.
In a letter to Alistair Darling today Cable said: “The confusion last night surrounding the Granite issue was such that I and my front bench colleagues did not support the Government on the third reading and I believe that my Lords colleagues will equally be unable to give support unless the Granite issue is satisfactorily resolved.”
He said he appreciated the “legal complexity” and questions about Granite’s offshore tax status and charitable activities. But he claimed that unless the Treasury U-turns to include Granite in the nationalisation or convincingly explains why the fund has been excluded he cannot support the bill.
Conservative Shadow Chancellor George Osborne said: “Now everyone knows that the way Northern Rock and Granite will operate under nationalisation leaves the taxpayers saddled with all the bad debts, with Granite taking the best mortgages. This is further proof that under the Government’s plans, the taxpayer comes last. That is why in the House of Commons yesterday and in the House of Lords today we are opposing the nationalisation of Northern Rock.”